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Rauchman v. Mobil Corp.

    Brief Fact Summary.

    Rauchman (Plaintiff) brought suit against Mobil Corp. (Defendant), claiming that his proposed amendment to the corporation’s bylaws had to be included in its proxy statement.

    Synopsis of Rule of Law.

    A corporation may refuse to include in its proxy statement a proposal to amend its bylaws to prevent a foreign citizen from becoming a board member.

    Facts.

    Rauchman (Plaintiff), owner of voting shares of Mobil Corp. (Defendant) stock, submitted a proposed bylaw amendment to be included in the proxy statement sent out for the information of shareholders.  The purpose of the amendment was to preclude a citizen of an OPEC [Organization of the Petroleum Exporting Countries] from becoming a member of the board of directors.  Defendant obtained a Securities and Exchange Commission (SEC) statement indicating no action would be taken if the proposal were excluded as it related to an election of a director to office.  The trial court granted defendant’s motion for summary judgment.  Plaintiff appealed.

    Issue.

    May a corporation refuse to include in its proxy statement a proposal to amend its bylaws to prevent a foreign citizen from becoming a board member?

    Held.

    (Engel, J.) Yes.  A corporation may refuse to include in its proxy statement a proposal to amend its bylaws to prevent a foreign citizen from becoming a board member.  Because Defendant had a director who was up for reelection and who was a citizen of Saudi Arabia, the proposal related to the election of a director and was properly excludable at the Defendant’s discretion.  There was, therefore, no factual issue in this case to be tried, and summary judgment was properly entered.  Affirmed.

    Discussion.

    In this case, the holding follows the language in SEC Rule 14a-8(c)(8).  This rule allows the corporation to exclude this type of proposals.  Corporations are not obligated to engage in “electioneering†when preparing proxy statements.  However, the corporation can include recommendations from the board regarding who should be elected.



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