First Lawsuit Challenging Proxy Access

The Business Roundtable and U.S. Chamber of Commerce have filed a lawsuit in the U.S. Court of Appeals for the D.C. Circuit to invalidate the SEC’s recently-adopted proxy access rules.  The lawsuit focuses specifically on Exchange Act Rule 14a-11 and the SEC’s failure to properly consider the rule’s effects on “efficiency, competition and capital formation” and to “engage in evidence-based” rulemaking.  The lawsuit alleges that the rules are arbitrary and capricious, violate the Administrative Procedure Act, violate companies' rights under the Constitution's 1st and 5th Amendments and will cost public companies “tens of millions of dollars.”  The complaint requests a stay of the effective date and implementation of the final rules until the court has ruled on the lawsuit. 

In a related press release, the U.S. Chamber’s Center for Capital Markets Competitiveness called the proxy access rules “special interest-driven” and voiced concern that proxy access “empowers unions and other special interests at the expense of the vast majority of retail shareholders.”  The Business Rountable invoked the hot button political issues of the financial crisis and job creation, saying that proxy access will “exacerbate the short-term focus that is now seen as one of the root causes of the financial crisis” and “undermine a company’s ability to grow and create jobs.”

Predictably, the SEC responded publicly with a statement that it “believe[s] the proxy access rules are both lawful and in the best interests of the public and shareholders.”  While the SEC also said it would “carefully consider and timely respond to the motion for a stay," we would be very surprised if the new rules are not here to stay.


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