Last week, on behalf of sixty corporate and securities law professors from thirty-eight law schools around the country, I filed an amici curiae brief in the case of Lucian Bebchuk vs. Electronic Arts, Inc.. The case is  now pending before the United States Appeals Court for the Second Circuit. The professors’ amici curiae brief is available here, and the names of the professors joining the brief are listed at the bottom of this post.

The case focuses on a shareholder proposal that was submitted by Lucian Bebchuk to Electronic Arts (EA). The proposal is precatory and recommends that the board submit to a shareholder vote a charter or bylaw amendment that, if adopted, would require the company (to the extent permitted by law) to include in the company’s proxy materials qualified proposals for a bylaw amendment. For a proposal to be qualified, the proposal would have to meet certain significant requirements, including being submitted by a shareholder(s) with more than 5% of the company’s stock. The proposal is available here.

EA excluded the proposal from the company’s ballot, and the case focuses on whether the SEC’s shareholder proposal rule (Rule 14a-8) allows the company to do so.

The case comes before Second Circuit on appeal from the District Court for the southern District of New York. The District Court accepted the position of EA in a brief bench ruling and sent the case to the Second Circuit. The transcript of the District Court’s hearing is available here. The opening brief filed in the appeal by Lucian Bebchuk’s counsel, Grant & Eisenhofer, is available here. A sense of the position that EA can be expected to present in the appeal can be obtained from the opening brief and reply brief EA submitted to the District Court, which are available here and here, as well as from the amicus curiae brief, available here, submitted to the District Court by the Chamber of Commerce.

The professors’ amici curiae brief, filed in support of the appellant’s position, focuses on two central arguments made by EA in defense of excluding the proposal:

(1) Inconsistency with the Proxy Rules Argument:

In its bench ruling, the District Court, accepting the position of EA and the Chamber, held that EA may omit the proposal as inconsistent with Rule 14a-8. The District Court viewed any provision in the certificate of incorporation or the bylaws that would limit the discretion of EA’s directors to control access to the issuer’s proxy statement as inconsistent with Rule 14a-8. The District Court held that Rule 14a-8 mandates that the discretion it provides to companies to omit certain proposals be exercised fully and solely by the company’s board. The Court stated that “it is clear… that the SEC understand[s] the company to be those who act for the company … And that is a small, relatively small group of people, like the board of directors, who have management discretion to run the business and affairs of the company. And it is they that must have this discretion.”

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