Shareholder Activists Win Again in Fight Over Proxy Proposals

Shareholder Activists Win Again in Fight Over Proxy Proposals tacvbo/flickr

Shareholder activists John Chevedden and James McRitchie have notched another win in their continuing campaign with a handful of companies who they claim are using the courts, rather than the Securities and Exchange Commission, in an effort to exclude shareholder proposals from proxy statements.

As Broc Romanek noted Tuesday on his site, thecorporatecounsel.net, the most recent case against Chevedden and McRitchie, which was brought by Chipotle, was dismissed in U.S. District Court in Colorado. A third defendant, Myra Young, was also named in the suit.

The Chipotle decision marks the third time that judges have ruled in favor of Chevedden and his colleagues. The first two involved EMC, in Massachusetts, and Omnicom, in New York’s Southern District.

In all three cases, the companies first had to establish standing, which appears to have tripped them up.

Chipotle offered the court three reasons it should have standing: the potential that the defendants would file suit against the company if their proposal was excluded from an upcoming proxy; the threat that other shareholders would sue; and the possibility that the SEC would launch an enforcement action.

Chevedden and his fellow defendants argued that they had explicitly agreed not to sue Chipotle, and that the other two causes for standing were “too speculative to pass constitutional muster.”

In his decision, which is available at thecorporatecounsel.net, Judge William J. Martínez agreed with how his counterparts in in New York and Massachusetts had ruled in the earlier cases.

Martinez wrote, “the Court finds more persuasive the reasoning of the District Courts of the Southern District of NewYork and the District of Massachusetts, both of which rejected the same proposed injuries Plaintiff cites here as too speculative to be ‘certainly impending.’”

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