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Lovenheim v. Iroquois Brands, Ltd

    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.

    Facts. Plaintiff wanted to insert a proposal to determine whether a supplier of pate de fois gras force-fed the geese n order to enlarge the livers. The pate represented less than .05 percent of Defendants sales, and the product operated at a loss. Therefore Defendants wanted to omit the proposal. Defendants believed that only a proposal related to economic purposes are required to be accepted per Rule 14a-8(c)(5), and that the 5% threshold was not exceeded. Plaintiff argued that material social issues that were relevant to the business would not fit under the Rule’s exception.

    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.


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