462 F.3d 121
The American Federation of State, County & Municipal Employees (AFSCME) (P) is one of the nation's largest public service employee unions.
-Through its pension plan, AFSCME (P) holds 26,965 voting shares in defendant AIG (D).
-On December 1, 2004, AFSCME! (P) submitted to AIG for inclusion in the company's 2005 proxy statement a proposal that, if adopted by a majority of AIG (D) shareholders, would amend the bylaws to require AIG (D) to publish the names of shareholder nominated candidates for director positions together with any candidates nominated by AIG's (D) board of directors.
-AIG excluded the proposal from the company's proxy statement, and AFSCME (P) brought suit seeking an order compelling AIG (D) to include the proposal in its next proxy statement. The federal district court denied injunctive and declaratory relief and dismissed the plaintiff's case.
Should an agency's interpretation of an ambiguous regulation made at the tame the regulation was implemented or revised control unless that agency has offered sufficient reasons for its changed interpretation?
Under Rule 14a-8(i)(8), does a shareholder proposal 'relate to an election' if it seeks to amend the corporate bylaws to establish a procedure by which certain shareholders are entitled to include in the corporate proxy materials their nominees for the board of directors?
-A shareholder proposal does not relate to an election under the SEC’s rules for exclusion from a proxy statement if it seeks to amend the corporate bylaws to establish a procedure by which certain shareholders are entitled to include.
The Court of Appeals, held that:
1) Shareholder proposal that required corporation to include certain shareholded minated candidates for board of directors on corporate ballot could not be excluded from corporate proxy materials on basis that proposal “relates to an election,” and;
2) Interpretation of rule that Securities and Exchange Commission (SEC) advanced in its amicus brief, which conflicted with its prior statement which had been consistently applied for 16 years after rule had been substantively revised, did not merit usual deference that court normally would have reserved for agency's interpretation of its own regulations.
-The shareholder, a public service employee union, held numerous shares of the corporation's stock through its pension plan.
-It submitted a proposal for inclusion in a proxy statement that would amend the corporation's bylaws to require the corporation to publish the names of shareholder nominated candidates for director positions together with any candidates nominated by the board of directors.
-The corporation excluded the proposal from the proxy statement, and the shareholder filed suit. Relying on a recent Securities and Exchange Commission (SEC) interpretation of this rule, the district court found that the proposal was properly excluded from the proxy statement because it related to an election.
-On appeal, the court reversed. The court noted that the language of the rule was ambiguous and that the SEC had ascribed two different interpretations to this rule ne interpretation when the rule was published and the other interpretation about 16 years later. However, as the SEC did not offer sufficient reasons for its changed interpretation of the rule, the court held that the controlling interpretation was the one that was made when the regulation was implemented.
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