Brief Fact Summary. Plaintiff, Peter Lovenheim, sought a preliminary injunction against Defendant, Iriquois Brands, Ltd., in order to insert information in a proxy statement.
Synopsis of Rule of Law. Under Rule 14a-8(c)(5), a shareholder proposed resolution for a proxy statement can only be turned down when the proposal both concerns less than 5% of total earnings or assets, and when it is not significantly related to the business.
The Court defined the purpose of section 14(a) of assuring that shareholders exercise their right to control the important decisions which affect them in their capacity as stockholders and owners of the corporation.View Full Point of Law
Issue. The issue is whether a company could refuse a shareholder proposal for a proxy statement if the proposal concerned less than 5% of the business sales, and the proposal was not economically based.
Held. The court held that precedent demonstrated that Rule 14a-8(c)(5) would only omit proposals that were less than the minimum 5% of sales and not significantly related to the business. In this case, the pate issue was significant to its pate business regardless that it did not comprise greater than 5% of sales. Prior cases also demonstrated that Congress wanted to ensure that non-economic factors could be considered as relevant to the business.
Discussion. The court holds that both sections of Rule 14a-8(c)(5) need to be met. The ruling is consistent with the idea that not all decisions made by a corporation will be made solely along economic lines.