Possible Reversal of Fortune for Bebchuk on Proxy Access

Pom Talk (New Proxy Rules Already Impacting Pending Litigation, 9/15/10) reports the SEC’s new proxy access rules, enacted on August 25, 2010 but not yet published in the Federal Register, have already found their way into court.

Based on the rule changes adopted by the SEC, the Second Circuit recently remanded Bebchuk v. Elec. Arts, Inc. to the Southern District of New York for reconsideration of its previous dismissal of the case.  We’ve previously commented on the new rules here and here.

The Electronic Arts matter arises from a proposal by Harvard law professor Lucian Bebchuk to amend the company bylaws and establish a procedure for the placement of shareholder proposals into company proxy materials.  Opponents of the proposal noted that it potentially ran afoul of the SEC proxy rules as they then existed:

Professor Bebchuk’s proposal is significant, in part, because it would enable a company’s shareholders to amend the bylaws to permit shareholders to submit director nominees for inclusion in the company’s proxy statement, even though proposals relating to the election of directors are excludable under Rule 14a-8, the SEC’s shareholder proposal rule.   Accordingly, the proposal represents an effort to gain “proxy access” – that is, access to a company’s proxy statement for the purpose of nominating directors.

The District Court agreed with that reasoning and granted EA’s motion to dismiss; holding that Bebchuk’s proposal was excludable under Rule 14a-8(i)(3) as contrary to the SEC’s proxy rules.  See Bebchuk v. Elec. Arts, Inc., No. 08-5842-cv (2d Cir. Sept. 13, 2010).  Now, nearly two years after that District Court dismissal, the Second Circuit has ruled that the SEC’s changes to the its proxy rules “may bear on the issues presented in this appeal” and the case should be remanded for reconsideration.

Addendum: Proxy access is now published. (Proxy Access: Today It’s Published in the Federal Register – March 15th is D-Day, The Corporate Counsel, 9/16/10).