2015 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-6-2015

Trinity Wall Street v. WalMart Stores Inc

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PRECEDENTIAL 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

________________

No. 14-4764 

________________

TRINITY WALL STREET 

v. 

WAL-MART STORES, INC., 

 Appellant 

 ________________

Appeal from the United States District Court 

for the District of Delaware 

(D.C. Civil Action No. 1-14-cv-00405) 

District Chief Judge: Honorable Leonard P. Stark 

________________

Argued April 8, 2015 

Before: AMBRO, VANASKIE, 

and SHWARTZ, Circuit Judges

(Opinion filed: July 6, 2015) 
2 

Theodore J. Boutrous, Jr., Esquire (Argued) 

Gibson Dunn 

333 South Grand Avenue 

Los Angeles, CA 90071 

Philip A. Rovern, Esquire 

Matthew E. Fisher, Esquire 

Angela C. Whitesell, Esquire 

Potter, Anderson & Corroon 

1313 North Market Street, 6th Floor 

Wilmington, DE 19801 

Adam H. Offenhartz, Esquire 

Aric H. Wu, Esquire 

Gibson Dunn 

 200 Park Avenue, 47th Floor 

New York, NY 10166 

 Counsel for Appellant 

Christopher M. Foulds, Esquire 

Joel E. Friedlander, Esquire (Argued) 

Jeffrey M. Gorris, Esquire 

Friedlander & Gorris 

222 Delaware Avenue, Suite 1400 

Wilmington, DE 19801 

 Counsel for Appellee 

Robert A. Long, Jr., Esquire 

Keir D. Gumbs, Esquire 

David B. H. Martin, Esquire 

Reid Hooper, Esquire 
3 

Ali Mojibi, Esquire 

Covington & Burling LLP 

850 10th Street, N.W., One City Center 

Washington DC 20001 

Stacy Linden, Esquire 

Peter Tolsdorf, Esquire 

American Petroleum Institute 

1220 L Street, N.W. 

Washington, DC 20005 

 

 Counsel for Amicus Appellants 

 American Petroleum Institute, Business Roundtable, 

 Chamber of Commerce of the United States of 

 America, 

Cory Andrews, Esquire 

Richard A. Samp, Esquire 

Washington Legal Foundation 

2009 Massachusetts Avenue, N.W. 

Washington, DC 20036 

 Counsel for Amicus Appellant 

 Washington Legal Foundation 

Richard L. Wyatt, Jr., Esquire 

Neil K. Gilman, Esquire 

Steven M. Haas, Esquire 

Scott H. Kimpel, Esquire 

J. Steven Patterson, Esquire 

Hunton & Williams LLP 

2200 Pennsylvania Avenue, N.W. 

Washington, DC 20037 
4 

Linda Kelly, Esquire 

Patrick Forrest, Esquire 

National Association of Manufacturers 

733 10th Street, N.W., Suite 700 

Washington, DC 20001 

 Counsel for Amicus Appellant 

 National Association of Manufacturers 

William B. Chandler, III, Esquire 

Bradley D. Sorrels, Esquire 

Ian R. Liston, Esquire 

Wilson, Sonsini, Goodrich & Rosati, P.C. 

222 Delaware Avenue, Suite 800 

Wilmington, DE 19801 

Gideon A. Schor, Esquire 

Wilson, Sonsini, Goodrich & Rosati, P.C. 

1301 Avenue of the Americas, 40th Floor 

New York, NY 10019 

Deborah R. White 

Retail Litigation Center, Inc. 

1700 North Moore Street, Suite 2250 

Arlington, VA 22209 

 Counsel for Amicus Appellant 

 Retail Litigation Center Inc. 

Paul J. Lockwood, Esquire 

Elisa M.C. Klein, Esquire 

Skadden, Arps, Slate, Meagher & Flom LLP 
5 

920 North King Street 

One Rodney Square, P.O. Box 636 

Wilmington, DE 19801 

Brian V. Breheny, Esquire 

Hagen J. Ganem, Esquire 

Skadden, Arps, Slate, Meagher & Flom LLP 

1440 New York Avenue, N.W. 

Washington, DC 20005 

Darla C. Stuckey, Esquire 

Society of Corporate Secretaries 

 and Governance Professionals, Inc. 

240 West 35th Street 

New York, NY 10001 

 Counsel for Amicus Appellant 

 Society of Corporate Secretaries and 

 Governance Professionals Inc. 

Jeffrey W. Golan, Esquire 

Lisa M. Port, Esquire 

Barrack, Rodos & Bacine 

2001 Market Street 

3300 Two Commerce Square 

Philadelphia, PA 19103 

 Counsel for Amicus Appellee 

 Robert F. Kennedy Center for Justice & Human Rights 

Maureen Barden, Esquire 

4220 Spruce Street 

Philadelphia, PA 19104 
6 

Richard J. Davis, Esquire 

415 Madison Avenue, 11th Floor 

New York, NY 10017 

 Counsel for Amicus Appellees 

 Mark Barden, Jacqueline Barden, Ian Hockley, 

 Nicole Hockley, Bill Sherlach, Leonard Pozner, 

 Veronique Pozner, Gilles Rousseau, 

 Law Center to Prevent Gun Violence 

Rolin P. Bissell, Esquire 

John J. Paschetto, Esquire 

Benjamin Potts, Esquire 

Young, Conaway, Stargatt & Taylor 

1000 North King Street, Rodney Square 

Wilmington, DE 19801 

 Counsel for Amicus Appellee (Corporate and 

 Securities Law Professors): Lynn Stout, Jayne 

 Barnard, William A. Birdthistle, Norman D. Bishara, 

 Margaret M. Blair, Douglas M. Branson, James D. 

 Cox, Michael B. Dorff, Lisa M. Fairfax, Tamar 

 Frankel, Brandon L. Garrett, Kent Greenfield, 

 Daniel J.H. Greenwood, Jon Hanson, Thomas Lee 

 Hazen, Robert C. Hockett, Robert J. Jackson, Jr., 

 Lyman Johnson, Renee M. Jones, Thomas W. Joo, 

 Donald C. Langevoort, Patricia A. McCoy, Donna M. 

 Nagy, Lisa H. Nicholson, Charles R.T. O’Kelley, 

 Saule T. Omarova, Stefan J. Padfield, Alan R. 

 Palmiter, Frank Partnoy, Brian J.M. Quinn, Margaret 

 V. Sachs, Cindy A. Schipani, Jennifer Taub, Kelly Y. 

 Testy, Cheryl L. Wade, David H. Webber, Cynthia 

 Williams, Adam Winkler. 
7 

________________

OPINION OF THE COURT 

________________

AMBRO, Circuit Judge

Table of Contents

I. INTRODUCTION ............................................................. 8

II. FACTS & PROCEDURAL HISTORY .......................... 10

A. Trinity Objects to Wal-Mart’s Sale of Assault Rifles. 10

B. Trinity’s Shareholder Proposal. .................................. 12

C. Wal-Mart Seeks a No-Action Letter from the SEC. ... 16

D. Trinity Takes its Fight to Federal Court: Round One. 18

E. Round Two. ................................................................. 21

III. REGULATORY BACKGROUND ................................. 25

A. The Proxy Statement ................................................... 25

B. Proxy Solicitation ........................................................ 26

C. Shareholder Proposals ................................................. 27

D. Exclusion of Shareholder Proposals ............................ 28

E. SEC Interpretive Releases on the “Ordinary Business” 

Exclusion ..................................................................... 31

1. The 1976 Proposing Release ................................. 32

2. The 1976 Adopting Release................................... 32

3. The 1982 Proposing Release ................................. 34

4. The 1983 Adopting Release................................... 34

5. The 1997 Proposing Release ................................. 35

6. The 1998 Adopting Release................................... 37

IV. ANALYSIS ..................................................................... 38

A. Trinity’s Proposal Relates to Wal-Mart’s Ordinary 

Business Operations. ................................................... 39

1. What is the subject matter of Trinity’s proposal? . 39
8 

2. Does Wal-Mart’s approach to whether it sells 

particular products relate to its ordinary business 

operations? ............................................................. 45

B. Trinity’s Proposal Does Not Focus on a Significant 

Policy Issue that Transcends Wal-Mart’s Day-to-Day 

Business Operations. ................................................... 47

1. Does Trinity’s proposal raise a significant social 

policy issue? ........................................................... 48

2. Even if Trinity’s proposal raises a significant 

policy issue, does that issue transcend Wal-Mart’s 

ordinary business operations? ................................ 50

V. CONCLUSION ............................................................... 59

I. INTRODUCTION 

“[T]he secret of successful retailing is to give your 

customers what they want.” Sam Walton, SAM WALTON:

MADE IN AMERICA 173 (1993). This case involves one 

shareholder’s attempt to affect how Wal-Mart goes about 

doing that. 

Appellant Wal-Mart Stores, Inc., the world’s largest 

retailer, and one of its shareholders, Appellee Trinity Wall 

Street—an Episcopal parish headquartered in New York City 

that owns Wal-Mart stock—are locked in a heated dispute. It 

stems from Wal-Mart’s rejection of Trinity’s request to 

include its shareholder proposal in Wal-Mart’s proxy 

materials for shareholder consideration. 

Trinity’s proposal, while linked to Wal-Mart’s sale of 

high-capacity firearms (guns that can accept more than ten 

rounds of ammunition) at about one-third of its 3,000 stores, 

is nonetheless broad. It asks Wal-Mart’s Board of Directors 

to develop and implement standards for management to use in 
9 

deciding whether to sell a product that (1) “especially 

endangers public safety”; (2) “has the substantial potential to 

impair the reputation of Wal-Mart”; and/or (3) “would 

reasonably be considered by many offensive to the family and 

community values integral to the Company’s promotion of its 

brand.” Standing in Trinity’s way, among other things, is a 

rule of the Securities and Exchange Commission (“SEC” or 

“Commission”), known as the “ordinary business” exclusion. 

17 C.F.R. § 240.14a-8(i)(7) (“Rule 14a-8(i)(7)”). As its name 

suggests, the rule lets a company omit a shareholder proposal 

from its proxy materials if the proposal relates to its ordinary 

business operations. 

Wal-Mart obtained what is known as a “no-action 

letter” from the staff of the SEC’s Division of Corporate 

Finance (the “Corp. Fin. staff” or “staff”), thus signaling that 

there would be no recommendation of an enforcement action 

against the company if it omitted the proposal from its proxy 

materials. See Wal-Mart Stores, Inc., SEC No-Action Letter, 

2014 WL 409085, at *1 (Mar. 20, 2014). Trinity thereafter 

filed suit in federal court, seeking to enjoin Wal-Mart’s 

exclusion of the proposal. See Trinity Wall Street v. WalMart Stores, Inc., --- F. Supp. 3d ----, No. 14-405-LPS, 2014 

WL 6790928 (D. Del. Nov. 26, 2014). The core of the 

dispute is whether the proposal was excludable under the 

ordinary business exclusion. Although the District Court 

initially denied Trinity’s request, it handed the church a 

victory on the merits some seven months later by holding 

that, because the proposal concerned the company’s Board 

(rather than its management) and focused principally on 

governance (rather than how Wal-Mart decides what to sell), 

it was outside Wal-Mart’s ordinary business operations. WalMart appeals, seeking a ruling that it could exclude Trinity’s 

proposal from its 2015 proxy materials and did not err in 

excluding the proposal from its 2014 proxy materials. 
10 

Stripped to its essence, Trinity’s proposal—although 

styled as promoting improved governance—goes to the heart 

of Wal-Mart’s business: what it sells on its shelves. For the 

reasons that follow, we hold that it is excludable under Rule 

14a-8(i)(7) and reverse the ruling of the District Court.1

 

II. FACTS & PROCEDURAL HISTORY 

Public companies publish and circulate a proxy 

statement in advance of their annual shareholders’ meeting. 

The statement “includes information about items or initiatives 

on which the shareholders are asked to vote[.]” Apache Corp. 

v. Chevedden, 696 F. Supp. 2d 723, 727 (S.D. Tex. 2010) 

(citation omitted). It can also include shareholder 

proposals—a device that allows shareholders to ask for a vote 

on company matters. Predictably, companies don’t easily 

surrender control of their proxy statement and often lean on 

an SEC rule to justify excluding a given shareholder proposal. 

But doing so can trigger a protracted legal battle that escalates 

from an exchange of views before the SEC to a federal 

lawsuit. This is one such case. 

A. Trinity Objects to Wal-Mart’s Sale of Assault 

Rifles. 

Trinity’s roots extend back centuries. Its St. Paul’s 

Chapel is the oldest public building in continuous use in New 

York City and is where George Washington worshipped after 

his first inauguration. In 1705, the church was the beneficiary 

of the lower Manhattan farm of Queen Anne of England, 

instantly making it very wealthy. 

 

1

 Because of the time-sensitive nature of this appeal, we were 

unable to give a full rationale for a ruling on the date we 

entered judgment in favor of Wal-Mart. This opinion does 

so. 
11 

The story isn’t much different today. Trinity continues 

to be one of the wealthiest religious institutions in the United 

States, with a balance sheet of over $800 million in assets and 

real estate valued at approximately $3 billion. See Letter 

from Trinity Wall Street CFO Accompanying Trinity’s 2013 

Financial Statements (undated), available at

https://www.trinitywallstreet.org/sites/default/files/miscellane

ous/LetterfromtheCFOaccompanyingthe2013FinancialStatem

ents.pdf. Its strong financial footing, according to Trinity, 

empowers it to “pursue a mission of good works beyond the 

reach of other religious institutions.” Trinity Br. 16. Part of 

that mission is to reduce violence in society. 

Alarmed by the spate of mass murders in America, in 

particular the shooting at Sandy Hook Elementary School in 

December 2012, Trinity resolved to use its investment 

portfolio to address the ease of access to rifles equipped with 

high-capacity magazines (the weapon of choice of the Sandy 

Hook shooter and other mass murderers). Its principal focus 

was Wal-Mart. 

During its review of Wal-Mart’s merchandising 

practices, Trinity discovered what it perceived as a major 

inconsistency. Despite the retailer’s stated mission to “make 

a difference on the big issues that matter to us all,” Trinity Br. 

11, it continued in some states to sell the Bushmaster AR-15 

(a model of assault rifle). Trinity also perceived Wal-Mart as 

taking an unprincipled approach in deciding which products 

to sell. For example, despite its position on the AR-15, WalMart does not sell adult-rated movie titles (i.e., those rated 

NC-17) or similarly rated video or computer games. Nor 

does it sell to children under 17 “‘R’ rated movies or ‘Mature’ 

rated video games.” Trinity Br. 12. Wal-Mart also doesn’t 

sell “music bearing a ‘Parental Advisory Label’” because of 

concerns about the music containing “strong language or 

depictions of violence, sex, or substance abuse.” Id. And 
12 

apparently due to safety concerns, it has stopped selling (1) 

handguns in the United States; (2) high-capacity magazines 

separate from a gun; and (3) guns through its website. Trinity 

Br. 13. Trinity attributes these perceived inconsistencies to 

the “lack of written policies and Board oversight concerning 

its approach to products that could have momentous 

consequences for both society and corporate reputation and 

brand value[.]” Trinity Br. 16.2

 

B. Trinity’s Shareholder Proposal. 

Trinity pressed Wal-Mart to explain its continued sale 

of the Bushmaster AR-15. Wal-Mart’s response was as 

follows: 

There are many viewpoints on this topic and 

many in our country remain engaged in the 

conversations about the sale and regulation of 

certain firearms. In areas of the country 

where we sell firearms, we have a long 

standing commitment to do so safely and 

 

2

 In its brief and again at oral argument, Wal-Mart answered 

Trinity’s characterization of its sales practices and referred us 

to its “Safe and Compliant Product Policy” and its “Product 

Safety and Compliance” division, which “administers 

programs to identify, mitigate, and monitor risks associated 

with general merchandise.” Reply Br. 4. Wal-Mart also 

noted that a Board Committee is already tasked with 

“reviewing the Company’s reputation with external 

constituencies and recommending to the Board any proposed 

changes to the Company’s policies, procedures, and programs 

as a result of such review.” Id. (citing J.A. 47) (alterations 

omitted). 

 
13 

responsibly. Over the years, we’ve been very 

purposeful about finding the right balance 

between serving hunters and sportsmen and 

ensuring that we sell firearms responsibly. 

Wal-Mart’s merchandising decisions are 

based on customer demand and we recognize 

that most hunters and sportsmen use firearms 

responsibly and wish to continue to do so . . . . 

While there are some like you, Rev. Cooper, 

who ask us to stop selling firearms, there are 

many customers who ask us to continue to sell 

these products in our stores. 

J.A. 255–56. 

Unmoved, Trinity drafted a shareholder proposal 

aimed at filling the governance gap it perceived. The 

proposal, which is the subject of this appeal, 

provides: 

			Resolved: 

Stockholders request that the Board 

amend the Compensation, Nominating 

and Governance Committee charter . . . 

as follows: 

“27. Providing oversight concerning 

[and the public reporting of] the 

formulation and implementation of . . . 

policies and standards that determine 

whether or not the Company should 

sell a product that: 
14 

1) especially endangers public safety 

and well-being; 

2) has the substantial potential to 

impair the reputation of the Company; 

and/or 

3) would reasonably be considered by 

many offensive to the family and 

community values integral to the 

Company’s promotion of its brand.” 

J.A. 268. 

 The narrative part of the proposal makes 

clear it is intended to cover Wal-Mart’s sale of 

certain firearms. It provides that the 

oversight and reporting is intended to cover 

policies and standards that would be 

applicable to determining whether or not the 

company should sell guns equipped with 

magazines holding more than ten rounds of 

ammunition (“high capacity magazines”) 

and to balancing the benefits of selling such 

guns against the risks that these sales pose to 

the public and to the Company’s reputation 

and brand value. 

Id. 

The proposal also included a supporting statement 

asserting in relevant part that 

[t]he company respects family and community 

interests by choosing not to sell certain 
15 

products such as music that depicts violence 

or sex and high capacity magazines separately 

from a gun, but lacks policies and standards to 

ensure transparent and consistent 

merchandizing decisions across product 

categories. This results in the company’s sale 

of products, such as guns equipped with high 

capacity magazines, that facilitate mass 

killings, even as it prohibits sales of passive 

products such as music that merely depict 

such violent rampages. 

. . . . 

While guns equipped with high capacity 

magazines are just one example of a product 

whose sale poses significant risks to the public 

and to the company’s reputation and brand, 

their sale illustrates a lack of reasonable 

consistency that this proposal seeks to address 

through Board level oversight. This 

responsibility seems appropriate for the 

Compensation, Nominating and Governance 

Committee, which is charged with related 

responsibilities. 

J.A. 268–69.3

 

 

3

 In this context, the proposal is similar to that of a 

shareholder proposal submitted to Wal-Mart in December 

2000 to halt its sale of “handguns and their accompanying 

ammunition, in any way (e.g.[,] by special order).” Wal-Mart 

Stores, Inc., SEC No-Action Letter, 2001 WL 253625, at *1 

(Mar. 9, 2001). Like Trinity, the submitting shareholder 

maintained that it was “inappropriate for a ‘family store’ to 
16 

The purpose of the proposal, as explained by 

the Reverend James H. Cooper, Trinity’s Rector, is 

to 

allow[] the company to make a transparent 

choice considering both the business and 

ethical (community impact) aspects of the 

matter. Anti-violence concerns can be 

broadly considered, including for example the 

sale of video games glorifying violence, as 

well as other merchandising decisions that are 

inconsistent with the well-being of the 

community and/or Wal-Mart’s brand value 

and desired reputation. 

Trinity Br. 18–19 (citation omitted). 

C. Wal-Mart Seeks a No-Action Letter from the SEC.4

On January 30, 2014, Wal-Mart notified Trinity and 

the Corp. Fin. staff of its belief that it could exclude the 

 

sell handguns in any way.” Id. at *4. As here, the Corp. Fin. 

staff issued a no-action letter allowing Wal-Mart to exclude 

the proposal from its proxy materials because it related to its 

“ordinary business operations (i.e., the sale of a particular 

product).” Id. at *6. 

4

 In the words of the SEC, a “no-action letter is one in which 

an authorized staff official indicates that the staff will not 

recommend any enforcement action to the Commission if the 

proposed transaction described in the incoming 

correspondence is consummated.” Procedures Utilized by the 

Division of Corporate Finance for Rendering Informal 

Advice, Release No. 6,253, 1980 WL 25632, at *1 n.2 (Oct. 

28, 1980). 
17 

proposal from its 2014 proxy materials under Rule 14a8(i)(7). Trinity predictably disagreed, stating that its proposal 

didn’t “meddl[e] in ordinary course decision-making” but 

focused on “big picture oversight and supervision that is the 

responsibility of the Board.” J.A. 280. In support of that 

assertion, Trinity offered three reasons why its proposal was 

not excludable: 

1. [it] addresses corporate governance 

through Board oversight of important 

merchandising policies and is 

substantially removed from 

particularized decision-making in the 

ordinary course of business; 

2. [it] concerns the Company’s standards 

for avoiding community harm while 

fostering public safety and corporate 

ethics and does not relate exclusively 

to any individual product; and 

3. [it] raises substantial issues of public 

policy, namely a concern for the safety 

and welfare of the communities served 

by the Company’s stores. 

J.A. 280. Trinity also touted the proposal as: not dictating 

“the specifics of how that Board oversight will operate or 

how best to report publically on the policies being followed 

by the Company and their implementation,” J.A. 281; not 

seeking to “determine what products should or should not be 

sold by the Company,” id.; allowing policy development “not 

by shareholders, but by management, using its knowledge and 

discretion,” id.; and addressing “the ethical responsibility of 

the Company to take account of public safety and well-being, 
18 

and the related risks of damage to the Company’s reputation 

and brand,” J.A. 283. 

On March 20, 2014, the Commission’s Corp. Fin. staff 

issued a “no-action” letter siding with Wal-Mart. It noted that 

“there appears to be some basis for [Wal-Mart’s] view that 

[it] may exclude the proposal under rule 14a-8(i)(7), as 

relating to [its] ordinary business operations[,]” because 

“[p]roposals concerning the sale of particular products and 

services are generally excludable under [the rule].” Wal-Mart 

Stores, Inc., SEC No-Action Letter, 2014 WL 409085, at *1 

(Mar. 20, 2014). Consequently, the staff would “not 

recommend enforcement action to the Commission if 

Walmart [sic] omits the proposal from its proxy materials in 

reliance on rule 14a-8(i)(7).” Id. 

Because no-action letters are not binding—they reflect 

only informal views of the staff and are not decisions on the 

merits—Trinity’s proposal still had life. 

D. Trinity Takes its Fight to Federal Court: Round 

One. 

On April 1, 2014, and just 17 days before Wal-Mart’s 

proxy materials were due at the printer, Trinity filed a 

declaratory judgment action against Wal-Mart in the District 

of Delaware. It sought a declaration that “Wal-Mart’s 

decision to omit the proposal from [its] 2014 Proxy Materials 

violates Section 14(a) of the 1934 Act and Rule 14a-8.” 

Trinity, 2014 WL 6790928, at *2 (internal citation omitted). 

The relief it requested was twofold: 

1. A permanent injunction to prevent 

Wal-Mart from excluding its proposal 

from its 2015 proxy materials; and 
19 

2. A preliminary injunction to prevent it 

from printing, issuing, filing, mailing 

or otherwise transmitting proxy 

materials in connection with its 2014 

Annual Meeting that do not contain the 

shareholder proposal submitted by 

Trinity. 

Id. 

Because of the April 17 deadline, the District Court 

held an emergency hearing on Trinity’s preliminary 

injunction request. At the hearing the Court described 

Trinity’s burden as “heavy,” the remedy it was seeking as 

“extraordinary,” and the time frame within which it had to 

rule as “highly expedited.” Id. It didn’t help Trinity’s cause 

that the SEC had already sided with Wal-Mart. 

It’s very clear that the SEC has had 

hundreds of opportunities to consider 

questions like this. I have not. While the 

SEC may only have a few hours or whatever 

to put into each of these, I have roughly the 

same amount of time. You come to what 

you know is an extremely busy court. We 

have given this expedited attention. It comes 

to us with a no action conclusion from the 

SEC staff . . . You come to me, you have the 

burden [of] asking for extraordinary relief, 

and I need to find that it’s likely that at the 

end of the trial, whenever we get there, I’m 

going to disagree with the SEC staff. 

Id. at *3 (brackets omitted). 
20 

Viewing the proposal as one dealing “with guns on the 

shelves and not guns in society,” the Court, in a ruling from 

the bench, held that the proposal related to an “ordinary 

business matter” and was thus excludable under Rule 14a8(i)(7). Id. It explained that 

[t]he proposal [] expressly and . . . 

importantly states that the requested 

“oversight and/or reporting is intended to 

cover policies and standards that would be 

applicable [to] determining whether or not 

the company should sell guns equipped with 

magazines holding more than 10 rounds of 

ammunitions, high capacity magazines.” 

And I tried to emphasize it’s my added 

emphasis on “sell.” 

. . . .

While the specific proposal is crafted as one 

directed solely to policy and oversight and 

therefore arguably arises in the difficult and 

seemingly novel perhaps intersection 

between ordinary business . . . on the [one] 

hand [and corporate governance] on the 

other hand, ultimately I’m not persuaded 

that I’m likely to conclude at the end of the 

day on the merits that it therefore does not 

fall within the exception given the rule for 

ordinary business. 
21 

Id. (emphases omitted). The Court also gave weight to the 

SEC’s “expertise” and “lengthy experience” involving proxy 

contests. Id.5

 

Although the favorable ruling allowed Wal-Mart to 

exclude Trinity’s proposal from its 2014 proxy materials, it 

had not yet prevailed on the merits. 

E. Round Two. 

Wal-Mart thereafter moved to dismiss both counts of 

Trinity’s amended complaint. It contended that Trinity’s 

challenge to Wal-Mart’s exclusion of the proposal from the 

retailer’s 2014 proxy materials (count 1) was moot, see id. at 

*4, and the challenge to Wal-Mart’s “reasonably anticipated

2015 violation of Section 14(a) and Rule 14a-8” (count 2) 

wasn’t ripe, id. at *5 (emphasis added). The District Court 

granted Wal-Mart’s motion only in part. It disagreed on 

mootness, but agreed on ripeness. Most notably, however, 

and in direct tension with its earlier decision, the Court on 

summary judgment held that the proposal was not excludable 

under Rule 14a-8(i)(7). 

With more time to deliberate, the Court concluded 

that, although the proposal “could (and almost certainly 

would) shape what products are sold by Wal-Mart,” it is “best 

viewed as dealing with matters that are not related to WalMart’s ordinary business operations.” Id. at *8 (emphasis 

added). Thus Rule 14(a)-8 could not block its inclusion in 

Wal-Mart’s proxy materials. The Court fastened its holding 

 

5

 To be sure, the Court did not suggest that staff no-action 

letters get automatic deference; just that “under the 

circumstances, . . . some deference [was] merited.” J.A. 110 

(emphasis added). 

 
22 

to the view that the proposal wasn’t a directive to 

management but to the Board to “oversee the development 

and effectuation of a Wal-Mart policy.” Id. at *9. In this 

way, “[a]ny direct impact of adoption of Trinity’s proposal 

would be felt at the Board level; it would then be for [it] to 

determine what, if any, policy should be formulated and 

implemented.” Id. Stated differently, the day-to-day 

responsibility for implementing whatever policies the Board 

develops was outside the scope of the proposal. 

 In the alternative, the Court held that even if the 

proposal does tread on the core of Wal-Mart’s business—the 

products it sells—it “nonetheless ‘focuses on sufficiently 

significant social policy issues’” that “transcend[] the day-today business matters” of the company, making the proposal 

“appropriate for a shareholder vote.” Id. at *9 (brackets & 

emphasis omitted). Among the policy issues the District 

Court noted are “the social and community effects of sales of 

high capacity firearms at the world’s largest retailer and the 

impact this could have on Wal-Mart’s reputation, particularly 

if such a product sold at Wal-Mart is misused and people are 

injured or killed as a result.” Id.

The Court also found helpful how “Trinity [] carefully 

drafted its proposal . . . to not dictate what products should be 

sold or how the policies regarding sales of certain types of 

products should be formulated or implemented.” Id. at *10. 

It stressed the difference between Trinity’s proposal and the 

generally excludable proposals that ask a company to report 

on its “policies and reporting obligations regarding possible 

toxic and hazardous products offered for sale.” See id.

(“Each of these proposals requested policies or information—

such as information on the companies’ efforts to minimize 

exposure to toxic substances, attempts by the companies to 

secure supply chains, options for alternative safer products, 

and encouraging suppliers to reduce or eliminate harmful 
23 

substances—which directly impacted the ordinary business 

operations of the companies involved far more than Trinity’s 

proposal would directly impact Wal-Mart.”).6

Finally, the District Court addressed Wal-Mart’s 

secondary argument that Trinity’s proposal is excludable 

under Rule 14a-8(i)(3) for being “so inherently vague or 

 

6

 As to Wal-Mart’s reliance on the Corp. Fin. staff’s grant of 

its no-action request, “a factor to which the Court [] accorded 

significant weight at the preliminary injunction stage,” it 

declined to accord the staff’s action any weight because “[i]t 

is undisputed that the final determination as to the 

applicability of the ordinary business exception is for the 

Court alone to make.” Id. (citation omitted). It also 

explained the shift from its earlier ruling: 

At that earlier time Trinity was seeking 

“extraordinary relief” and the Court’s analysis 

was . . . rushed as well as truncated. In fact, a 

mere ten days passed between the filing of the 

motion and the oral argument and the Court’s 

ruling on it. Under the tight time constraints, 

the Court did not even permit full briefing on 

the preliminary injunction motion. As . . . 

noted at that time, “one hopes that if the case 

proceeds, I’ll at least have more time to reflect 

further on the argument.” Having now had 

the benefit of that time for reflection, as well 

as the invaluable assistance of additional 

briefing and oral argument, the Court sees the 

issues in the way it has explained here. 

Id. at *11. 
24 

indefinite that neither the stockholders voting on the proposal, 

nor the company in implementing the proposal (if adopted), 

would be able to determine with any reasonable certainty 

exactly what actions or measures the proposal requires.” Id.

at *11 (quoting SEC Staff Legal Bulletin No. 14B, 2004 WL 

3711971, at *4 (Sept. 15, 2004)). It acknowledged that “WalMart is undoubtedly correct that the ‘broad variety of 

products offered by [it] and the numerous customers, 

employees and communities around the world with whom [it] 

works’ mean that ‘there is no single set of ‘family and 

community values’ that would be readily identifiable as being 

‘integral to the company’s promotion of its brand.’” Id. 

(emphasis in original, bold omitted). But it doesn’t “follow 

from this that shareholders voting on the proposal, or the 

Committee in implementing it (if approved), would be unable 

to determine with reasonable certainty what the Committee 

needs to do.” Id. “Instead, it merely illustrates . . . that the 

[p]roposal properly leaves the details of any policy 

formulation and implementation to the discretion of the 

Committee, showing once more that [it] does not dictate any 

particular outcome or micro-manage Wal-Mart’s day-to-day 

business.” Id. 

Wal-Mart appeals from both of the Court’s holdings 

on the merits. 

The District Court had jurisdiction under 28 U.S.C. 

§ 1331 and 15 U.S.C. § 78aa. We have jurisdiction under 28 

U.S.C. § 1291. Trinity’s request to enjoin Wal-Mart from 

excluding the proposal from its 2015 proxy materials is ripe, 

as Trinity resubmitted its proposal for inclusion in WalMart’s 2015 proxy materials and Wal-Mart again rebuffed its 

request. We review the District Court’s order granting 

Trinity’s motion for summary judgment de novo. As it did 

below, Wal-Mart bears the burden of establishing as a matter 

of law that it properly excluded the proposal under an 
25 

exception to Rule 14a-8. See AFSCME v. Am. Int’l Grp., 

Inc., 462 F.3d 121, 125 (2d Cir. 2006). 

III. REGULATORY BACKGROUND 

A. The Proxy Statement 

A shareholder that is unable to attend a company’s 

annual meeting isn’t disenfranchised. It can vote its shares by 

proxy by empowering an attending shareholder to do so on its 

behalf. Vote by proxy has “become an indispensable part of 

corporate governance because the ‘realities of modern 

corporate life have all but gutted the myth that shareholders in 

large publicly held companies personally attend annual 

meetings.’” Amalgamated Clothing & Textile Workers Union 

v. Wal-Mart Stores, Inc., 821 F. Supp. 877, 881 (S.D.N.Y. 

1993) (brackets omitted) (quoting Stroud v. Grace, 606 A.2d 

75, 86 (Del. 1992)); see also Proposed Amendments to Rule 

14a-8, Exchange Act Release No. 19,135, 1982 WL 600869, 

at *2 (Oct. 14, 1982) (“1982 Proposing Release”) (noting that 

“with the increased dispersion of security holdings in public 

companies, the proxy solicitation process rather than the 

shareholder’s meeting itself [] [became] the forum for 

shareholder suffrage”). 

As discussed above, a public company that solicits 

proxies must distribute a proxy statement to each of its 

shareholders in advance of the annual shareholder meeting. 

The statement is an informational package that tells 

shareholders “about items or initiatives on which [they] are 

asked to vote, such as proposed bylaw amendments, 

compensation or pension plans, or the issuance of new 

securities.” Apache Corp., 696 F. Supp. at 727 (citation 

omitted). “The proxy card, on which the shareholder may 

submit its proxy, and the proxy statement together are the 

‘proxy materials.’” Id. (citing 17 C.F.R. § 2401.14a-8(j)). 
26 

B. Proxy Solicitation 

Through its proxy materials, a company solicits 

proxies—hence the term “proxy solicitation.” Congress, 

under the Securities Exchange Act of 1934, gave the SEC 

oversight of the proxy context. See 3 Thomas Lee Hazen, 

Treatise on the Law of Securities Regulation § 10.1[1] (6th 

ed. 2009) (describing the 1934 Act as a congressional 

response to the uptick of “great corporate frauds [that] had 

been perpetrated through management solicitation of proxies 

that did not indicate to the shareholders the nature of any 

matters to be voted upon”). “Section [] 14(a) of the [1934 

Act] renders unlawful the solicitation of proxies in violation 

of the SEC’s rules and regulations, which are codified at 17 

C.F.R. § 240.14a-1 et seq.” Amalgamated Clothing & Textile 

Workers Union, 821 F. Supp. at 881; see also J.I. Case v. 

Borak Co., 377 U.S. 426, 431 (1964) (“The purpose of 

§ 14(a) is to prevent management or others from obtaining 

authorization for corporate action by means of deceptive or 

inadequate disclosure in proxy solicitation.”). 

The SEC’s “proxy rules are concerned with assuring 

full disclosure to investors of matters likely to be considered 

at shareholder meetings.” Hazen at § 10.2[1]. To that end, 

the SEC adopted “Rule 14a-9, which prohibits ‘false or 

misleading’ statements made in any proxy statement, form of 

proxy, notice of meeting or other communication.” 

Amalgamated Clothing & Textile Workers Union, 821 F. 

Supp. at 882 (citing 17 C.F.R. § 240.14a-9(a)). It has 

interpreted the rule to “require companies to provide 

shareholders with the opportunity to submit proposals to 

management for inclusion in the corporation’s proxy 

materials.” Id.

To complement Rule 14a-9, the Commission 

promulgated Rule 14a-8 “to catalyze what many hoped would 
27 

be a functional ‘corporate democracy.’” Alan R. Palmiter, 

The Shareholder Proposal Rule: A Failed Experiment in 

Merit Regulation, 45 Ala. L. Rev. 879, 879 (1994). The rule 

mandates subsidized shareholder access to a company’s proxy 

materials, requiring “reporting companies . . . to print and 

mail with management’s proxy statement, and to place on 

management’s proxy ballot, any ‘proper’ proposal submitted 

by a qualifying shareholder.” Id. at 886; cf. Roosevelt v. E.I. 

Du Pont de Nemours & Co., 958 F.2d 416, 421 (D.C. Cir. 

1992) (R.B. Ginsburg, J.) (maintaining that Rule 14a-8’s 

“right to be informed” is complementary to but distinct from 

Rule 14a-9’s “ban on misleading statements in proxy 

solicitations”). The idea was to provide shareholders a way to 

“bring before their fellow stockholders matters of 

[shareholder concern]” that are “proper subjects for 

stockholders’ action under the laws of the state under which 

[the Company] was organized,” 1982 Proposing Release, 

1982 WL 600869, at *3, and to “have proxies with respect to 

such proposals solicited at little or no expense to the security 

holder,” id. at *2. 

C. Shareholder Proposals 

A primary means to urge corporate reform is the 

shareholder proposal, which “communicate[s] not only 

[shareholders’] interest[] in a company’s financial 

performance, but also their interests and preferences 

concerning a wide range of issues, such as the board’s 

structure and oversight of important policies, sustainability, 

and ethical performance.” Brief of amici curiae Corporate 

and Securities Law Professors 2. The hard part, however, is 

soliciting votes to pass a proposal—especially where the 

motivation is to raise awareness of a policy issue. See James 

R. Copeland, Getting the Politics Out of Proxy Season, Wall 

St. J., A11 (Apr. 23, 2015) (“Not one of the 1,150 shareholder 

proposals concerning social or policy issues since 2006 got 
28 

the support of a majority of voting shareholders over board 

opposition.”). 

A shareholder can garner support in one of two ways. 

It can “pay to issue a separate proxy statement, which must 

satisfy all the disclosure requirements applicable to 

management’s proxy statement.” Apache Corp., 696 F. Supp. 

2d at 727 (citation omitted). Or the shareholder can go the 

Rule 14a-8 route and have the company include its proposal 

(and a supporting statement) in the proxy materials at the 

company’s expense. See id. at 728. 

D. Exclusion of Shareholder Proposals 

Though the Rule 14a-8 option is financially 

advantageous, it does not “create an open forum for 

shareholder communication.” Palmiter at 886. Rule 14a-8 

restricts the company-subsidy to “shareholders who offer 

‘proper’ proposals.” Id. at 879; see also 17 C.F.R. § 240.14a8 (“This section addresses when a company must include a 

shareholder’s proposal in its proxy statement and identify the 

proposal in its form of proxy when the company holds an 

annual or special meeting of shareholders.”). A “proper” 

proposal is one that doesn’t fit within one of Rule 14a-8’s 

exclusionary grounds—which are both substantive and 

procedural. 

The procedural exclusions of the rule “protect the 

solicitation process without regard to a proposal’s content[.]” 

Palmiter at 886. For example, the proponent “must have 

continuously held at least $2,000 in market value, or 1%, of 

the company’s securities entitled to be voted on the proposal 

at the meeting for at least one year by the date [it] submit[s] 

the proposal.” 17 C.F.R. § 240.14a-8(b)(1). It can “submit 

no more than one proposal to a company for a particular 

shareholders’ meeting.” Id. at § 240.14a-8(b)(2)(i). And the 
29 

“proposal, including any accompanying supporting statement, 

may not exceed 500 words.” Id. at § 240.14a-8(d). 

The rule’s substantive exclusions, by contrast, are “the 

most frequently used (and most litigated).” Palmiter at 890. 

They include (1) the “proper subjects” exclusion, which exists 

“[i]f the proposal is not a proper subject for action by 

shareholders under the law of the jurisdiction of the 

company’s organization,” 17 C.F.R. § 240.14a-8(i)(1); (2) the 

“false or misleading” exclusion, which allows companies to 

bar proposals that are too vague, id. at § 240.14a-8(i)(3); (3) 

the “substantially related” exclusion, which says that a 

proposal is excludable if it “relates to operations which 

account for less than 5 percent of the company’s total assets 

[and net earnings and gross sales] at the end of its most recent 

fiscal year . . . , and is not otherwise significantly related to 

the company’s business,” id. at § 240.14a-8(i)(5); and, most 

relevant for purposes of this opinion, (4) the “ordinary 

business” exclusion, which disallows a proposal that “deals 

with a matter relating to the company’s ordinary business 

operations,” id. at § 240.14a-8(i)(7). See Palmiter 890. 

If a company wants to invoke one of these grounds to 

exclude a proposal, the process is as follows. First, it must 

notify the shareholder in writing of the problem with the 

proposal within 14 days of receiving it and inform the 

shareholder that it has 14 days to respond. Id. at § 240.14a8(f)(1). If the company finds the shareholder’s response 

unpersuasive and still wants to exclude the proposal, it then 

must file with the Corp. Fin. staff the reasons why it believes 

the proposal is excludable no later than 80 days before the 

company files its proxy materials with the SEC. Id. at § 

240.14a-8(j)(1). In this letter, the company may also ask the 

staff for a no-action letter to support the exclusion of a 

proposal. See Donna M. Nagy, Judicial Reliance on 

Regulatory Interpretation in S.E.C. No-Action Letters: 
30 

Current Problems and a Proposed Framework, 83 Cornell L. 

Rev. 921, 939 (1998) (“Although Rule 14a-8 merely 

prescribes notification and filing requirements, virtually all 

companies that decide to omit a shareholder proposal seek a 

no-action letter in support of their decision.”). If the 

shareholder wants to respond, it can file a submission noting 

why exclusion would be improper. 17 C.F.R. § 240.14a-8(k). 

The staff will respond in one of two ways: (1) with a 

no-action letter, specifying that the company may omit the 

shareholder proposal under the exclusion(s) it relied on; or (2) 

that it is “unable to concur” with the company.7

 A 

shareholder dissatisfied with the staff’s response can, as 

Trinity did here, pursue its rights against the company in 

federal court.8

 

7

 “[B]efore the SEC staff makes a decision on Rule 14a-8 noaction requests, there are at least three levels of attorney 

review by a ‘task force’ dedicated to reviewing Rule 14a-8 

no-action requests[.]” See Wal-Mart Br. 37–38 (outlining 

layers of review); see also Apache Corp. v. New York City 

Emps.’ Ret. Sys., 621 F. Supp. 2d 444, 448 n.3 (S.D. Tex. 

2008) (describing no-action review process) (citing Thomas 

P. Lenke, The SEC No-Action Letter Process, 42 Bus. Law. 

1019, 1027–28 (1987)). 

8

 Although rare, the Commission itself may choose to review 

a no-action letter. Even then, its determination would become 

a final order only if it “impose[d] an obligation, den[ied] a 

right or fix[ed] some legal relationship as a consummation of 

the administrative process.” Amalgamated Clothing & 

Textile Workers Union v. S.E.C., 15 F.3d 254, 257 (2d Cir. 

1994) (citations & internal quotation marks omitted); see also 
31 

E. SEC Interpretive Releases on the “Ordinary 

Business” Exclusion 

The ordinary business exclusion has been called the 

“most perplexing” of all the 14a-8 bars. See Daniel E. 

Lazaroff, Promoting Corporate Democracy and Social 

Responsibility: The Need to Reform the Federal Proxy Rules 

on Shareholder Proposals, 50 Rutgers L. Rev. 33, 94 (1997). 

This stems from the opaque term “ordinary business,” which 

is neither self-defining nor consistent in its meaning across 

different corporate contexts. Neither the courts nor Congress 

have offered a corrective. Rather, and “[f]rom the beginning, 

Rule 14a-8 jurisprudence—both in quality and quantity—has 

rested almost exclusively with the [SEC] . . . .” Palmiter at 

880. In both its role as umpire and rule-maker, the SEC has 

provided various iterations of formal interpretive guidance.9

 

Because they inform our analysis, we discuss each in turn. 

 

Hazen, supra at §10.8[1][A][2] (noting that Commission 

review is appropriate only where it involves “matters of 

substantial importance and where the issues are novel or 

highly complex”). 

 

9

 Each of the SEC’s interpretive releases was adopted after 

notice and comment and thus merits our deference. As the 

Supreme Court has explained, “[j]ust as we defer to an 

agency’s reasonable interpretation of the statute when it 

issues regulations in the first instance, . . . the agency is 

entitled to further deference when it adopts a reasonable 

interpretation of the regulations it has put in force.” Fed. 

Express v. Holowecki, 552 U.S. 389, 397 (2008); see also 

Dep’t of Labor v. E. Associated Coal Corp., 54 F.3d 141, 147 

(3d Cir. 1995) (“We accord greater deference to an 
32 

1. The 1976 Proposing Release 

The Commission’s initial frustration with the ordinary 

business exclusion was management’s reliance on it to omit 

proposals “that involve matters of considerable importance to 

the issuer [i.e., the company] and its security holders.” 

Proposed Amendments to Rule 14a-8 Under the Securities 

Exchange Act of 1934 Relating to Proposals by Security 

Holders, Release No. 9,343, 1976 WL 160410, at *7 (July 7, 

1976) (“1976 Proposing Release”). It proposed two 

modifications to address this concern. The first was a textual 

alteration to clarify that a proposal is excludable “only if it 

deals with a ‘routine, day-to-day matter relating to the 

conduct of the ordinary business operations of the issuer.’” 

Id. at *8. (The rule’s then-extant language provided that a 

proposal was excludable if it consisted of a “recommendation 

or request that [] management take action on a matter relating 

to the conduct of the ordinary business operations of the 

issuer.” Id. at *7 (internal quotation marks omitted).) The 

second was a new standard to distinguish “routine” 

(excludable) from “important” matters (not excludable). See 

id. at *8. In the SEC’s view, management teams generally 

handle “mundane matters” while boards of directors are 

responsible for high level decision-making. It thus proposed 

the following standard: “Will it be necessary for the board of 

directors . . . to act on the matter involved in the proposal?” 

Id. If the answer was no, the proposal dealt with a routine 

business matter and was thus excludable. See id. 

2. The 1976 Adopting Release 

Commenters attacked the textual modification and new 

standard as unworkable. As to the new language, the 

 

administrative agency’s interpretation of its own regulations 

than to its interpretation of a statute.”) (citations omitted). 
33 

criticism was that many routine, day-to-day business matters 

“would necessarily deal with ordinary business matters of a 

complex nature that shareholders, as a group, would not be 

qualified to make an informed judgment on, due to their lack 

of business expertise and their lack of intimate knowledge of 

the issuer’s business.” Adoption of Amendments Relating to 

Proposals by Security Holders, Release No. 12, 999, 1976 

WL 160347, at *10 (Nov. 22, 1976) (“1976 Adopting 

Release”). It also “would be difficult to administer because 

of the subjective judgments that necessarily would be 

required in interpreting it.” Id. Regarding the new standard, 

the Commission relented to the criticism that “board practices 

relating to the delegation of authority to management 

personnel vary greatly, and there would, therefore, be no 

consistency in applying such a standard.” Id. at *11; see also 

id. (“The potential lack of consistency of the proposed 

standard is a fatal drawback, in the Commission’s view. And, 

since no other reasonable standard for making the requisite 

distinctions is readily apparent, the Commission believes that 

the provision would be difficult, if not impossible, to 

administer on a satisfactory basis.”). It thus opted for a tweak 

of the text of the exclusion and offered fresh interpretive 

guidance. 

For the former, it deleted any reference to 

management; the exclusion thus read, much like it does now, 

that a proposal is excludable if it “deals with a matter relating 

to the conduct of the ordinary business operations of the 

issuer.” Id. Regarding the new guidance, the SEC 

maintained that the exclusion should be “interpreted 

somewhat more flexibly than in the past” and reaffirmed that 

the term “ordinary business operations” has been wrongly 

interpreted to “include certain matters which have significant 

policy, economic or other implications inherent in them. For 

instance, a proposal that a utility company not construct a 

nuclear power plant has in the past been [wrongly] 
34 

considered” to be excludable. Id. Therefore, “proposals of 

that nature, as well as others that have major implications, 

will in the future be considered beyond the realm of an 

issuer’s ordinary business operations.” Id. 

3. The 1982 Proposing Release 

The SEC took a fresh look at the ordinary business 

exclusion in 1982 in reviewing the staff’s then-prevailing 

view on proposals that ask a company to (1) prepare a report 

to shareholders or (2) recommend that a special committee be 

formed to examine a particular area of its business. See 1982 

Proposing Release, 1982 WL 600869, at *17. The staff 

asserted that, as a category, such proposals were not 

excludable even if the subject matter of the report or 

examination involved an ordinary business matter because, in 

its view, a company doesn’t disseminate reports to 

shareholders or establish special committees as part of its 

ordinary business operations. See id. 

The SEC agreed to address the objection launched by 

commenters that the staff’s “interpretation [] rais[es] form 

over substance.” Id. It thus proposed for consideration 

“whether it would be more appropriate to consider in each 

instance whether the type of information sought by the 

proposal involves the ordinary business operations of the 

issuer and to disregard whether a proposal requests the 

preparation and distribution of a report or the formation of a 

special committee.” Id. 

4. The 1983 Adopting Release 

After notice and comment, the Commission formalized 

its adoption of the proposed “significant change in the staff’s 

interpretation” of the exclusion. Amendments to Rule 14a-8 

Under the Securities Exchange Act of 1934 Relating to 
35 

Proposals by Security Holders, Release No. 20,091, 1983 WL 

33272, at *7 (Aug. 16, 1983) (“1983 Adopting Release”)

(“Because [the staff’s] interpretation raises form over 

substance and renders the provisions of [the ordinary business 

exclusion] largely a nullity, the Commission has determined 

to adopt the interpretive change set forth in the Proposing 

Release.”). It thus directed the staff to “consider whether the 

subject matter of a special report or the committee involves a 

matter of ordinary business; where it does, the proposal will 

be excludable.” Id. 

5. The 1997 Proposing Release 

The SEC revisited the ordinary business exclusion in 

the late 1990s to tackle proposals “relating simultaneously to 

both an ‘ordinary business’ matter and a significant social 

policy issue.” Amendments to Rules on Shareholder 

Proposals, Release No. 39,093, 1997 WL 578696, at *12 

(Sept. 18, 1997) (the “1997 Proposing Release”). The 

interpretive snag was that the “fairly straightforward mission” 

of the rule was ill-suited to address contemporary social 

issues and “provided no guidance” on how to treat proposals 

raising such issues. Id. This difficulty showed itself when 

the staff allowed a company (Cracker Barrel Old Country 

Stores) to exclude a proposal that asked it to “prohibit 

discrimination on the basis of sexual orientation.” New York 

City Emps.’ Ret. Sys. v. S.E.C., 45 F.3d 7, 9 (2d Cir. 1995). 

In handling the proposal, the staff espoused the view, which 

the Commissioners of the SEC deemed untenable, that 

employment-related proposals—regardless whether they raise 

a social issue—are categorically excludable. See Cracker 

Barrel Old Country Store, Inc., SEC No-Action Letter, 1992 

WL 289095, at *1 (Oct. 13, 1992) (“[T]he Division has 

determined that the fact that a shareholder proposal 

concerning a company’s employment policies and practices 

for the general workforce is tied to a social issue will no 
36 

longer be viewed as removing the proposal from the realm of 

ordinary business operations of the registrant. Rather, 

determinations with respect to any such proposals are 

governed by the employment-based nature of the proposal.”). 

To end this practice, the SEC declared that “employmentrelated proposals focusing on significant social policy issues 

could not automatically be excluded under the ‘ordinary 

business’ exclusion.” 1997 Proposing Release, 1997 WL 

578686, at *13. And going forward, “the ‘bright line’ 

approach for employment-related proposals established by the 

Cracker Barrel position would be replaced by a case-by-case 

analysis that prevailed previously.” Id.

In a final note of guidance, the Commission 

summarized the two considerations that guide how to apply 

the ordinary business exclusion. “The first relates to the 

subject matter of the proposal. Certain tasks are so 

fundamental to management’s ability to run a company on a 

day-to-day basis that they could not, as a practical matter, be 

subject to direct shareholder oversight.” Id. at *14. 

According to the SEC, examples of this “include the 

management of the workforce, such as the hiring, promotion, 

and termination of employees, decisions on production 

quality and quantity, and the retention of suppliers.” Id. Yet 

“proposals relating to such matters but focusing on significant 

social policy issues generally would not be considered to be 

excludable, because such issues typically fall outside the 

scope of management’s prerogative.” Id. “The second 

consideration relates to the degree to which the proposal 

seeks to ‘micro manage’ the company by probing too deeply 

into ‘matters of a complex nature that shareholders, as a 

group, would not be qualified to make an informed judgment 

on, due to their lack of business expertise and lack of intimate 

knowledge of the (company’s) business.’” Id. It comes into 

play where “the proposal seeks intricate detail, or seeks to 
37 

impose specific time-frames or methods for implementing 

complex policies.” Id.

6. The 1998 Adopting Release 

Yet again the SEC declined to modify the language of 

the rule, perhaps afraid to unleash unintended consequences. 

Although “the legal term-of-art ‘ordinary business’ might be 

confusing to some shareholders and companies,” it posited, 

the risk that practitioners “might misconstrue [a] revision[] as 

signaling an interpretive change” was too great to ignore. 

Amendments to Rules on Shareholder Proposals, Release No. 

23, 200, 1998 WL 254809, at *2 (May 21, 1998) (“1998 

Adopting Release”); see also id. (“Indeed, since the meaning 

of the phrase ‘ordinary business’ has been developed by the 

courts over the years through costly litigation and essentially 

has become a term-of-art in the proxy area, we recognize the 

possibility that the adoption of a new term could inject 

needless costs and other inefficiencies into the shareholder 

proposal process.”). It elected simply to reverse the staff’s 

1992 Cracker Barrel no-action letter, thus “return[ing] to a 

case-by-case analytical approach,” id. at *4, and commented 

that 

[w]hile we acknowledge that there is no 

bright-line test to determine when 

employment-related shareholder proposals 

raising social issues fall within the scope of 

the “ordinary business” exclusion, the staff 

will make reasoned distinctions in deciding 

whether to furnish “no-action” relief. 

Although a few of the distinctions made in 

those cases may be somewhat tenuous, we 

believe that on the whole the benefit to 

shareholders and companies in providing 

guidance and informal resolutions will 
38 

outweigh the problematic aspects of the few 

decisions in the middle ground. 

Id. It also reaffirmed that the term “ordinary business” 

continues to “refer[] to matters that are not necessarily 

‘ordinary’ in the common meaning of the word” and “is 

rooted in the corporate law concept providing management 

with flexibility in directing certain core matters involving the 

company’s business and operations.” Id. at *2 (emphasis 

added). 

With that background, we move to the merits of WalMart’s appeal. 

IV. ANALYSIS 

The principal issue we address is whether Trinity’s 

proposal was excludable because it related to Wal-Mart’s 

ordinary business operations. In doing so, we evaluate the 

District Court’s primary and alternative holdings. To repeat, 

it held that Trinity’s proposal doesn’t meddle in the nuts-andbolts of Wal-Mart’s business because it was a directive to the 

Board (rather than management) to set standards to guide 

certain merchandising decisions. And in the alternative the 

proposal is not excludable because it implicates a significant 

social policy—the sale of high-capacity firearms by the 

world’s largest retailer —that transcends Wal-Mart’s ordinary 

business. In this case (and we agree with the Commission 

that our determination counsels a case-by-case inquiry) we 

conclude that the proposal is excludable under the ordinary 

business proviso and that the significant social policy 
39 

intended by the proposal is here no exception to that 

exclusion.10 

A. Trinity’s Proposal Relates to Wal-Mart’s Ordinary 

Business Operations. 

We employ a two-part analysis to determine whether 

Trinity’s proposal “deals with a matter relating to the 

company’s ordinary business operations[.]” 17 C.F.R. 

§ 240.14a-8(i)(7). Under the first step, we discern the 

“subject matter” of the proposal. See 1983 Adopting Release, 

1983 WL 33272, at *7. Under the second, we ask whether 

that subject matter relates to Wal-Mart’s ordinary business 

operations. Id. If the answer to the second question is yes, 

Wal-Mart must still convince us that Trinity’s proposal does 

not raise a significant policy issue that transcends the nuts and 

bolts of the retailer’s business. 

1. What is the subject matter of Trinity’s proposal? 

Beginning with the first step, we are mindful of the 

Commission’s consistent nod to substance over form and its 

distaste for clever drafting. As it reaffirmed in the 1982 and 

1983 Releases, it matters little how a shareholder styles its 

proposal; the emphasis should always be on its substance. To 

 

10 A majority of the members of this panel (Judges Shwartz 

and Vanaskie) also hold that the proposal (which Trinity 

declined to divide into separate parts) is excludable for being 

unduly vague under Rule 14a-8(i)(3). I decline to join that 

holding. Wal-Mart’s vagueness objection was first raised in 

the District Court and not before the SEC in seeking a noaction letter. And before us it devoted little attention to the 

argument. I thus think it not prudent to reach the vagueness 

question in this instance. 
40 

illustrate its point, the SEC invoked the staff’s disparate 

treatment of two proposals where the Commission thought 

the outcome should have been the same: 

[T]he staff, in a letter to Castle & Cooke . . . 

agreed with the company that a proposal 

requesting that it alter its food production 

methods in underdeveloped countries could 

be excluded under [the ordinary business 

exclusion] since [it] specified the steps 

management should take to implement the 

action requested . . . . [Years later], 

however, the proponent instead asked the 

company to appoint a committee to review

foreign agricultural operations with 

emphasis on the balance between labor and 

capital intensive production. The staff 

refused to apply the rule to this provision 

because the appointment of a special 

committee to study the company’s foreign 

agricultural operations is a matter of policy. 

1982 Proposing Release, 1982 WL 600869, at *17 n.49 

(emphases added). In the SEC’s view, a directive to Castle & 

Cooke to alter its food production methods in underdeveloped 

countries was the functional equivalent of a request for 

committee review of those methods. See id. Because the 

staff concurred that the former was excludable, it should have 

reached the same result as to the latter. Thus, even though 

Trinity’s proposal asks for the development of a specific 

merchandising policy—and not a review, report or 

examination—we still ask whether the subject matter of the 

action it calls for is a matter of ordinary business. 

Applying that principle, we part ways with the District 

Court. We perceive it put undue weight on the distinction 
41 

between a directive to management and a request for Board 

action. In the District Court’s view, if the proposal had 

directed management to arrange its product assortment in a 

certain way, it would have been excludable. But because it 

merely asked the “Board [to] oversee the development and 

effectuation of a Wal-Mart policy,” it was not. Trinity, 2014 

WL 6790928, at *9 (emphasis and bold in original); see also 

id. (“Any direct impact of adoption of Trinity’s proposal 

would be felt at the Board level; it would then be for the 

Board to determine what, if any, policy should be formulated 

and implemented.”). The concern with this line of reasoning 

is that the SEC in its 1976 Adopting Release rejected the 

proposed bright line whereby shareholder proposals involving 

“matters that would be handled by management personnel 

without referral to the board . . . generally would be 

excludable,” but those involving “matters that would require 

action by the board would not be.” 1976 Proposing Release, 

1976 WL 160410, at *8. Thus, though the District Court’s 

rationale and holding are not implausible, we do not adopt 

them. 

Distancing itself from the District Court’s formal 

approach, Trinity argues that the subject matter of its proposal 

is the improvement of “corporate governance over strategic 

matters of community responsibility, reputation for good 

corporate citizenship, and brand reputation, none of which 

can be considered ordinary business,” Trinity Br. 39, and the 

focus is on the “shortcomings in Wal-Mart’s corporate 

governance and oversight over policy matters,” id. at 33. We 

cannot agree. As the National Association of Manufacturers 

points out, Trinity’s contention, like the District Court’s 

analysis, relies “on how [the proposal] is framed and to 

whom, rather than [its] substance.” Brief of amicus curiae

Nat’l Assoc. of Mfrs. 15. Contrary to what Trinity would 

have us believe, the immediate consequence of the adoption 

of a proposal—here the improvement of corporate 
42 

governance through the formulation and implementation of a 

merchandising policy—is not its subject matter. If it were, 

then, analogizing to the review context, the subject matter of 

a review would be the review itself rather than the 

information sought by it. See 1982 Proposing Release, 1982 

WL 600869, at *17. For example, under Trinity’s position, 

the subject matter of a proposal that calls for a report on how 

a restaurant chain’s menu promotes sound dietary habits 

would be corporate governance as opposed to important 

matters involving the promotion of public health. Yet that is 

the analysis the SEC disavowed in adopting the suggestions 

made in the 1982 Proposing Release. The subject matter of 

the proposal is instead its ultimate consequence—here a 

potential change in the way Wal-Mart decides which products 

to sell. Indeed, as even the District Court acknowledged, if 

the company were to adopt Trinity’s proposal, then, whatever 

the nature of the forthcoming policy, it “could (and almost 

certainly would) shape what products are sold by WalMart[.]” Trinity, 2014 WL 6790928, at *9. 

This view of the subject matter of Trinity’s proposal 

finds support in a well-established line of SEC no-action 

letters.11 The most instructive is the no-action letter issued to 

 

11 Wal-Mart argues that although no-actions letters are 

generally not entitled to deference, the staff’s no-action letter 

here is because it is “consistent with both the SEC’s guidance 

on Rule 14a-8(i)(7) and the SEC staff’s prior no-action 

letters.” Reply Br.13. Although we disagree with the view 

that the letter holds any persuasive value, we do give the 

staff’s body of no-action letters “careful consideration as 

‘representing the views of persons who are continuously 

working with the provisions of the statute [the regulation in 

our case] involved.” Donaghue v. Accenture Ltd., No. 03-

8329, 2004 WL 1823448, at *3 (S.D.N.Y. Aug. 16, 2004) 
43 

Sempra Energy in January 2012. The proposal there urged 

the Board “to conduct an independent oversight review each 

year of the Company’s management of political, legal, and 

financial risks posed by [its] operations in any country that 

may pose an elevated risk of corrupt practices.” Sempra 

Energy, SEC No-Action Letter, 2011 WL 6425347, at *2 

(Jan. 12, 2012). As Trinity does here, the proposing 

shareholder framed the subject matter of its proposal as 

targeting the company’s governance of a certain type of risk: 

“the political, legal, and financial risks” inherent in the 

company’s operations in countries “posing an elevated risk of 

corrupt practices,” id., which could ultimately trigger a 

Foreign Corrupt Practices Act prosecution. Cf. Trinity Br. 40 

(maintaining that its proposal addresses the governance of the 

“risks to society and Wal-Mart should a product, after it is 

sold, cause harm to [its] customers or its brand and 

reputation”) (quotation marks omitted). But, as here, the staff 

granted no-action relief because, “although the proposal 

requests the board to conduct an independent oversight 

review of Sempra’s management of particular risks, the 

underlying subject matter of these risks appears to involve 

ordinary business matters.” Sempra Energy, 2011 WL 

6425347, at *1; see also The Home Depot, Inc., SEC NoAction Letter, 2008 WL 257307, at *1, *2 (Jan. 25, 2008) 

(granting no-action relief where the proposal asked Home 

Depot’s Board to publish a report outlining the company’s 

product safety policies and describing what management is 

 

(brackets, citation & quotation marks omitted); see also Nagy

supra at 1002 (maintaining that whether “the staff has 

consistently maintained a particular regulatory interpretation 

in no-action letters over a long period of time is relevant” to 

whether the interpretation should merit some deference, as 

“consistent, longstanding staff positions may signal 

Commission approval of these positions”). 
44 

doing to address recent product safety concerns because it 

related to “Home Depot’s ordinary business operations (i.e., 

the sale of particular products)”); Family Dollar Stores, Inc., 

SEC No-Action Letter, 2007 WL 3317923, at *1 (Nov. 6, 

2007) (same where proposal asked for a report “evaluating 

Company policies and procedures for systematically 

minimizing customers’ exposure to toxic substances and 

hazardous components in its marketed products” because it 

relates to Family Dollar’s “ordinary business operations (i.e., 

sale of particular products)”); Walgreen Co., SEC No-Action 

Letter, 2006 WL 5381376, at *1 (Oct. 13, 2006) (same for 

proposal asking for a report “characterizing the extent to 

which the company’s private label cosmetics and personal 

care products lines contain carcinogens, mutagens, 

reproductive toxicants, and chemicals that affect the 

endocrine system and describing options for using safer 

alternatives,” because the subject matter of the proposal 

related to Walgreen’s “ordinary business operations (i.e., the 

sale of particular products)”).12 

The staff’s consistent focus on the underlying subject 

matter of a proposal is instructive. So too is Trinity’s failure 

to cite any authority for its view of the subject matter of its 

proposal. See Trinity Br. 37–42. For us, the subject matter of 

Trinity’s proposal is how Wal-Mart approaches 

 

12 In keeping with its emphasis on the subject matter of a 

proposal, the staff often denies no-action relief where the 

proposal merely calls for the Board to establish a committee 

to oversee risk generally. See, e.g., PepsiCo, Inc., SEC NoAction Letter, 2012 WL 542708, at *1 (Feb. 16, 2012) 

(denying no-action relief where the proposal merely asked the 

company to establish “a Risk Oversight Committee of the 

Board of Directors”). 
45 

merchandising decisions involving products that (1) 

especially endanger public-safety and well-being, (2) have the 

potential to impair the reputation of the Company, and/or (3) 

would reasonably be considered by many offensive to the 

family and community values integral to the company’s 

promotion of the brand. A contrary holding—that the 

proposal’s subject matter is “improved corporate 

governance”—would allow drafters to evade Rule 14a8(i)(7)’s reach by styling their proposals as requesting board 

oversight or review. See Reply Br. 10. We decline to go in 

that direction. 

2. Does Wal-Mart’s approach to whether it sells 

particular products relate to its ordinary business 

operations? 

 Reaching the second step of the analysis, we ask 

whether the subject matter of Trinity’s proposal relates to 

day-to-day matters of Wal-Mart’s business. Wal-Mart says 

the answer is yes because, even though the proposal doesn’t 

demand any specific changes to the make-up of its product 

offerings—a point on which Trinity hangs its hat, see Trinity 

Br. 38 (“[The proposal] is not a ‘stop selling’ proposal. Nor 

does it require intricate reports on Wal-Mart’s products.”)—it 

“seeks to have a [B]oard committee address policies that 

could (and almost certainly would) shape what products are 

sold by Wal-Mart.” Reply Br. 9 (internal quotation marks 

omitted). That is, Trinity’s proposal is just a sidestep from “a 

shareholder referendum on how [Wal-Mart] selects its 

inventory.” Brief of amicus curiae the Nat’l Assoc. of Mfrs. 

at 11. And thus its subject matter strikes at the core of WalMart’s business. 

We agree. A retailer’s approach to its product 

offerings is the bread and butter of its business. As amicus

the National Association of Manufacturers notes, “Product 
46 

selection is a complicated task influenced by economic 

trends, data analytics, demographics, customer preferences, 

supply chain flexibility, shipping costs and lead-times, and a 

host of other factors best left to companies’ management and 

boards of directors.” Id. at 12; see also Brief of amicus 

curiae Retail Litig. Ctr., Inc. 11 (“The understanding of 

consumer behavior and careful tailoring of product mix is 

central to the success or failure of a given retailer.”). Though 

a retailer’s merchandising approach is not beyond shareholder 

comprehension, the particulars of that approach involve 

operational judgments that are ordinary-course matters. 

Moreover, that the proposal doesn’t direct 

management to stop selling a particular product or prescribe a 

matrix to follow is, we think, a straw man. See Trinity Br. 38; 

Trinity, 2014 WL 6790928, at *10 (“Trinity has carefully 

drafted its Proposal. . . . not [to] dictate which products 

should be sold or how the policies regarding sales of certain 

types of products should be formulated or implemented.”). A 

proposal need only relate to a company’s ordinary business to 

be excludable. Cf. 17 C.F.R. § 240.14a-8(i)(7) (exclusion is 

proper where a proposal deals with a matter “relating to the 

company’s ordinary business operations”) (emphasis added). 

It need not dictate any particular outcome. To make the point 

even clearer, suppose that Trinity’s proposal had merely 

asked Wal-Mart’s Board to reconsider whether to continue 

selling a given product. Though the request doesn’t dictate a 

particular outcome, we have no doubt it would be excludable 

under the SEC’s 1983 Adopting Release, as the action sought 

relates to Wal-Mart’s ordinary business operations. This is so 

even though it doesn’t suggest any changes. The same is true 

here. In short, so long as the subject matter of the proposal 

relates—that is, bears on—a company’s ordinary business 

operations, the proposal is excludable unless some other 

exception to the exclusion applies. 

 
47 

Failing all of this, Trinity retreats to friendlier territory. 

It contends that, even if the subject matter of its proposal 

concerns Wal-Mart’s ordinary business operations, it focuses 

on a significant and transcendent social policy issue: WalMart’s approach to the risk that the sale of a product can 

cause “harm to [its] customers or its brand and reputation.” 

Trinity Br. 40; see also id. at 44 (“There are various products 

especially dangerous to reputation, brand value, or the 

community that a family retailer such as Wal-Mart should 

carefully consider whether or not to sell, and the proposal 

addresses the transcendent policy issue of under what policies 

and standards and with what Board oversight Wal-Mart 

handles these merchandising decisions.”). We address that 

issue next. 

B. Trinity’s Proposal Does Not Focus on a Significant 

Policy Issue that Transcends Wal-Mart’s Day-toDay Business Operations. 

As discussed above, there is a significant social policy 

exception to the default rule of excludability for proposals 

that relate to a company’s ordinary business operations. For 

the SEC staff this means that when “a proposal’s underlying 

subject matter transcends the day-to-day business matters of 

the company and raises policy issues so significant that it 

would be appropriate for a shareholder vote, the proposal 

generally will not be excludable under Rule 14a-8(i)(7).” 

SEC Staff Legal Bulletin No. 14E, 2009 WL 4363205, at *2 

(Oct. 27, 2009). 

The difficulty in this case is divining the line between 

proposals that focus on sufficiently significant social policy 

issues that transcend a company’s ordinary business (not 

excludable) from those that don’t (excludable). Even the 

Commission admits that the social-policy exception “raise[s] 

difficult interpretive questions.” 1997 Proposing Release, 
48 

1997 WL 578696, at *13. No doubt that is because the 

calculus is complex. Yet we cannot sidestep what some may 

deem an unreckonable area. Thus we wade in. 

We think the inquiry is again best split into two steps. 

The first is whether the proposal focuses on a significant 

policy (be it social or, as noted below, corporate). If it 

doesn’t, the proposal fails to fit within the social-policy 

exception to Rule 14a-8(i)(7)’s exclusion. If it does, we reach 

the second step and ask whether the significant policy issue 

transcends the company’s ordinary business operations. 

1. Does Trinity’s proposal raise a significant social 

policy issue? 

We first turn to whether Trinity’s proposal focuses on 

a “sufficiently significant” policy issue like “significant 

[employment] discrimination.” 1998 Adopting Release, 1998 

WL 254809, at *4. The District Court said yes because the 

proposal at its core dealt with “the social and community 

effects of sales of high capacity firearms at the world’s largest 

retailer.” Trinity, 2014 WL 6790928, at *9. However, even 

Trinity concedes its proposal “is not directed solely to WalMart’s sale of guns.” Trinity Mot. for Summ. J. 17 (ECF No. 

38, filed Jun. 18, 2014). Rather it asks Wal-Mart’s Board to 

oversee merchandising decisions for all “products especially 

dangerous to reputation, brand value, or the community that a 

family retailer such as Wal-Mart should carefully consider 

whether or not to sell.” Trinity Br. 44. See also Brief of 

amici curiae Corporate and Securities Law Professors 14–15 

(arguing that the “ethical and social policy implications” of 

“[s]elling products that endanger public safety, Wal-Mart’s 

reputation, and [its] core values,” are “easily on par with 

employment discrimination, which the SEC’s 1998 Release 

deemed a sufficiently significant policy issue to warrant 

inclusion of shareholder proposals relating to it”). 
49 

 Wal-Mart, on the other hand, contends that neither the 

Commission nor its staff has ever countenanced “such a broad 

and nebulous concept of significant policy issue.” Reply Br. 

21. We disagree. True enough, the Commission has adopted 

what can only be described as a “we-know-it-when-we-see-it” 

approach, see Palmiter at 910 (describing the Commission’s 

“shifting approach to social/political proposals” as the “most 

dramatic and prominent example of SEC inconstancy” under 

Rule 14a-8). Yet it is hard to counter that Trinity’s proposal 

doesn’t touch the bases of what are significant concerns in 

our society and corporations in that society. Thus we deem 

that its proposal raises a matter of sufficiently significant 

policy. 

Our concurring colleague, Judge Shwartz, would allow 

Wal-Mart to exclude Trinity’s proposal because it doesn’t 

focus on the retailer’s sale of guns with high-capacity 

magazines. As she points out, it instead focuses on the 

broader issue of the company’s commitment to public safety 

through the sale of products that can be especially dangerous 

to the community. Concurring Op. at 6–7 (“The ‘public 

safety’ component of the proposal could cover many 

products, especially in light of the amount of products WalMart offers, and thus might require [it] to develop policies 

and standards for thousands of goods.”). And because this 

policy issue has the potential to bring “thousands” of products 

under its umbrella—not just guns with high-capacity 

magazines—it does not “as a whole ‘focus’” on a significant 

policy issue. Id. at 7 (alterations omitted). 

Our colleague also believes that the second and third 

parts of Trinity’s proposal do not raise issues of significant 

import. She claims that Wal-Mart’s management of risk to its 

brand value (the proposal’s second part) and its reputation as 

a family retailer (the third part) relate to matters that, “while 

certainly important to shareholders seeking a return on their 
50 

investment,” are “not of broad societal concern.” Concurring 

Op. at 7. Thus, she posits, these parts of the proposal relate to 

policy issues the exception doesn’t deem significant. The 

trouble is the social-policy exception—despite its name—is 

not so limited. 

The good news is we come to the ultimate conclusion 

of Judge Shwartz—that Trinity’s proposal is excludable under 

the ordinary business bar—but take a different path. We are 

more persuaded by the view that, because the proposal relates 

to a policy issue that targets the retailer-consumer interaction, 

it doesn’t raise an issue that transcends in this instance WalMart’s ordinary business operations, as product selection is 

the foundation of retail management. 

2. Even if Trinity’s proposal raises a significant 

policy issue, does that issue transcend WalMart’s ordinary business operations? 

To repeat, where “a proposal’s underlying subject 

matter transcends the day-to-day business matters of the 

company and raises policy issues so significant that it would 

be appropriate for a shareholder vote, the proposal generally 

will not be excludable under Rule 14a-8(i)(7).” SEC Staff 

Legal Bulletin No. 14E, 2009 WL 4363205, at *2 (Oct. 27, 

2009) (emphasis added). What this means is that, to shield its 

proposal from the ordinary business exclusion, a shareholder 

must do more than focus its proposal on a significant policy 

issue; the subject matter of its proposal must “transcend” the 

company’s ordinary business. See 1998 Adopting Release, 

1998 WL 254809, at *4. The Commission used the latter 

term, we believe, to refer to a policy issue that is divorced 

from how a company approaches the nitty-gritty of its core 

business. See SEC Staff Legal Bulletin No. 14E, 2009 WL 

4363205, at *3 (maintaining that CEO succession-planning 

“raises a significant policy issue regarding the governance of 
51 

the corporation that transcends the day-to-day business matter 

of managing the workforce”). Thus, and contrary to the 

position of our concurring colleague, we think the 

transcendence requirement plays a pivotal role in the socialpolicy exception calculus. Without it shareholders would be 

free to submit “proposals dealing with ordinary business 

matters yet cabined in social policy concern.” Apache Corp. 

v. New York City Emps.’ Ret. Sys., 621 F. Supp. 2d 444, 451 

n.7 (S.D. Tex. 2008) (rejecting the argument that “whether a 

proposal implicates significant social policy is the dispositive 

inquiry”). 

For major retailers of myriad products, a policy issue 

is rarely transcendent if it treads on the meat of 

management’s responsibility: crafting a product mix that 

satisfies consumer demand. This explains why the 

Commission’s staff, almost as a matter of course, allows 

retailers to exclude proposals that “concern[] the sale of 

particular products and services.” Rite Aid Corp., SEC NoAction Letter, 2015 WL 364996, at *1 (Mar. 24, 2015). On 

the other hand, if a significant policy issue disengages from 

the core of a retailer’s business (deciding whether to sell 

certain goods that customers want), it is more likely to 

transcend its daily business dealings. 

To illustrate the distinction, a proposal that asks a 

supermarket chain to evaluate its sale of sugary sodas because 

of the effect on childhood obesity should be excludable 

because, although the proposal raises a significant social 

policy issue, the request is too entwined with the 

fundamentals of the daily activities of a supermarket running 

its business: deciding which food products will occupy its 

shelves. So too would a proposal that, out of concern for 

animal welfare, aims to limit which food items a grocer sells. 

Cf., e.g., Amazon.com, Inc., SEC No-Action Letter, 2015 WL 

470145, at *1 (Mar. 27, 2015) (allowing Amazon to exclude 
52 

proposal that asked it to “disclose to shareholders any 

reputational and financial risks that it may face as a result of 

negative public opinion pertaining to the treatment of 

animals used to produce products it sells” because the 

“proposal relates to the products and services offered for sale 

by the company”); Papa John’s Int’l, Inc., SEC No-Action 

Letter, 2014 WL 7406254, at *1 (Feb. 13, 2015) (same for 

proposal that encouraged the pizza franchise to “expand its 

menu offerings to include vegan cheeses and vegan meats in 

order to advance animal welfare, reduce its ecological 

footprint, expand its healthier options and meet growing 

demand for plant-based foods”). 

By contrast, a proposal raising the impropriety of a 

supermarket’s discriminatory hiring or compensation 

practices generally is not excludable because, even though 

human resources management is a core business function, it is 

disengaged from the essence of a supermarket’s business. 

See Wal-Mart Stores, Inc., SEC No-Action Letter, 2004 WL 

326494, at *1 (Feb. 17, 2004) (denying no-action relief where 

proposal asked for a report documenting “the distribution of 

[] equity compensation by the recipient’s race and gender and 

discuss[ing] recent trends in equity compensation granted to 

women and employees of color”). The same goes for 

proposals asking for information on the environmental effect 

of constructing stores near environmentally sensitive sites. 

See, e.g., Jenny Staletovich, Developer Defends Walmart in 

Rare Forest, The Miami Herald (Sept. 12, 2014), available at 

http://www.miamiherald.com/news/local/environment/article

2092364.html.13 

 

13 Our concurring colleague says our suggested test is 

untenable for deciding whether a proposal fits within the 

social-policy exception because she believes our test requires 

that a proposal be “completely” divorced from a company’s 
53 

With those principles in mind, we turn to Trinity’s 

proposal. Trinity says it focuses on “both corporate policy 

and social policy”—specifically, the “transcendent policy 

issue of under what policies and standards and with what 

Board oversight Wal-Mart handles [] merchandising 

decisions” for products that are “especially dangerous to [the 

company’s] reputation, brand value, or the community.” 

Trinity Br. 44 (emphasis in original). “In an age of mass 

shootings, increased violence, and concerns about product 

safety,” Trinity argues, “the [p]roposal goes to the heart of 

Wal-Mart’s impact on and approach to social welfare as well 

as the risks such impact and approach may have to WalMart’s reputation and brand image and its community.” Id. at 

43. 

 

But is how a retailer weighs safety in deciding which 

products to sell too enmeshed with its day-to-day business? 

We think it is in this instance. As we noted before, the 

essence of a retailer’s business is deciding what products to 

put on its shelves—decisions made daily that involve a 

careful balancing of financial, marketing, reputational, 

competitive and other factors. The emphasis management 

places on safety to the consumer or the community is 

fundamental to its role in managing the company in the best 

interests of its shareholders and cannot, “as a practical matter, 

be subject to direct shareholder oversight.” 1998 Adopting 

 

ordinary business. Concurring Op. at 3. Nowhere do we 

suggest that to come within the exception a proposal must 

raise a policy issue that is completely unrelated to a day-today business matter. If that were so, then a proposal relating 

to a retailer’s discriminatory hiring practices would be 

excludable, as hiring is a fundamental business decision. We 

agree with the Commission that such a proposal is not 

excludable. 
54 

Release, 1998 WL 254809, at *4. Although shareholders 

perform a valuable service by creating awareness of social 

issues, they are not well-positioned to opine on basic business 

choices made by management. 

It is thus not surprising that the Corp. Fin. staff 

consistently allows retailers to omit proposals that address 

their product menu. For example, it has indicated that a 

proposal trying to stop a retailer from selling or promoting 

products that connote negative stereotypes is excludable. See, 

e.g., Federated Dep’t Stores, Inc., SEC No-Action Letter, 

2002 WL 975596, at *13 (Mar. 27, 2002) (allowing the 

retailer to omit a proposal asking for a report on its “efforts to 

identify and disassociate from any offensive imagery to the 

American Indian community in products, adverting [sic], 

endorsements, sponsorships and promotions”). It has done 

the same for proposals aiming to restrict a retailer’s 

promotion of products that pose a threat to public health, see 

e.g., Wal-Mart Stores, Inc., SEC No-Action Letter, 2002 WL 

833445, at *1 (Apr. 1, 2002) (agreeing with Wal-Mart that it 

could exclude a proposal asking it to explain “its rationale for 

not adopting in developing nations the same policies 

restricting the promotion and marketing of tobacco products 

as in the United States”); Walgreen Co., SEC No-Action 

Letter, 2006 WL 5381376, at *1–2 (Oct. 13, 2006) (same for 

proposal asking for a report regarding “the extent to which 

the company’s private label cosmetics and personal care 

product lines contain carcinogens, mutagens, reproductive 

toxicants, and chemicals that affect the endocrine system”), as 

well as those proposals targeting a retailer’s approach to 

product safety. See, e.g., Wal-Mart Stores, Inc., SEC NoAction Letter, 2008 WL 670182, at *1 (Mar. 11, 2008) (WalMart may exclude a proposal requesting a “report on the 

company’s policies on nanomaterial product safety”); The 

Home Depot, Inc., SEC No-Action Letter, 2008 WL 257300, 

at *2 (allowing company to exclude a proposal encouraging it 
55 

“to end its sale of glue traps because they are cruel and 

inhumane to the target animals and pose a danger to 

companion animals and wildlife”); The Home Depot, Inc., 

SEC No-Action Letter, 2008 WL 257307, at *7 (same for 

proposal asking for an “evaluation of company policies and 

practices relating to product safety”). 

For further support of the view that a policy issue does 

not transcend a company’s ordinary business operations 

where it targets day-to-day decision-making, we look to the 

difference in treatment of stop-selling proposals sent to 

retailers and those sent to pure-play manufacturers. A policy 

matter relating to a product is far more likely to transcend a 

company’s ordinary business operations when the product is 

that of a manufacturer with a narrow line. Here the staff often 

will decline a no-action request. See, e.g., Phillip Morris 

Companies, Inc., SEC No-Action Letter, 1990 WL 286063, at 

*1 (Feb. 22, 1990) (denying no-action relief as to proposal 

that requests the Board to amend the company’s charter to 

provide that it “shall not conduct any business in tobacco or 

tobacco products”); Sturm, Ruger & Co., Inc., SEC NoAction Letter, 2001 WL 258493, at *1 (Mar. 5, 2001) (same 

where proposal asks the Board to provide a report on 

company policies and procedures focused on reducing gun 

violence in the United States). 

 But the outcome changes where those same policy 

proposals are directed at retailers who sell thousands of 

products. See Wal-Mart Stores, Inc., SEC No-Action Letter, 

2001 WL 253625, at *6 (Mar. 9, 2001) (allowing Wal-Mart to 

exclude a proposal aimed at stopping its sale of handguns and 

accompanying ammunition[] in any way (e.g. by special 

order)” because it relates to “Wal-Mart’s ordinary business 

operations (i.e., the sale of a particular product)”); see also 

Rite Aid Corp., SEC No-Action Letter, 2009 WL 829472, at 

*1 (Mar. 26, 2009) (same for proposal asking for a report on 
56 

the company’s response “to rising regulatory, competitive and 

public pressures to halt sales of tobacco products”); Walgreen 

Co., SEC No-Action Letter, 1997 WL 599903, at *1 (Sept. 

29, 1997) (same for proposal requesting that Walgreen stop 

the sale of tobacco in its stores, as it “is directed at matters 

relating to the conduct of the Company’s ordinary business 

operations (i.e., the sale of a particular product)”). 

 

The reason for the difference, in our view, is that a 

manufacturer with a very narrow product focus—like a 

tobacco or gun manufacturer—exists principally to sell the 

product it manufactures. Its daily business deliberations do 

not involve whether to continue to sell the product to which it 

owes its reason for being. As such, a stop-selling proposal 

generally isn’t excludable because it relates to the seller’s 

very existence. Quite the contrary for retailers. They 

typically deal with thousands of products amid many options 

for each, precisely the sort of business decisions a retailer 

makes many times daily. Thus, and in contrast to the 

manufacturing context, a stop-selling proposal implicates a 

retailer’s ordinary business operations and is in turn 

excludable. Although Trinity’s proposal is not strictly a stopselling proposal, it still targets the same basic business 

decision: how to weigh safety risks in the merchandising 

calculus.14 

 

14 We recognize that in “extrapolat[ing] an interpretive 

rationale from a [line of] [] no-action letter[s], [we] risk[] 

setting a legal precedent based on a rationale that the SEC 

never in fact advocated.” Nagy at 1006. Fortunately, our 

word is not the last. If our interpretation is flawed, the 

Commission can issue new (binding) interpretative guidance 

to correct us. Cf. Levy v. Sterling Holding Co., LLC, 544 F.3d 

493, 502 (3d Cir. 2008) (explaining that a court of appeals is 

not free to ignore the SEC’s interpretation of one of its 
57 

 Trinity’s claim that its proposal raises a 

“significant” and “transcendent” corporate policy is likewise 

insufficient to fit that proposal within the social-policy 

exception to exclusion. See Trinity Br. 47. The relevant 

question to us is whether Wal-Mart’s consideration of the risk 

that certain products pose to its “economic success” and 

“reputation for good corporate citizenship” is enmeshed with 

the way it runs its business and the retailer-consumer 

interaction. We think the answer is yes. Decisions relating to 

what products Wal-Mart sells in its rural locations versus its 

urban sites will vary considerably, and these are 

quintessentially calls made by management. Wal-Mart serves 

different Americas with different values. Its customers in 

rural America want different products than its customers in 

cities, and that management decides how to deal with these 

differing desires is not an issue typical for its Board of 

Directors. Indeed, catering to “small-town America” is how 

Wal-Mart built its business. See Sam Walton, SAM WALTON:

MADE IN AMERICA 50 (1993) (“It turned out that the first big 

lesson we learned was that there was much, much more 

business out there in small-town America than anybody, 

including me, had ever dreamed of.”). And whether to put 

emphasis on brand integrity and brand protection, or none at 

all, is naturally a decision shareholders as well as directors 

entrust management to make in the exercise of their 

experience and business judgment. 

We also agree with Wal-Mart’s contention (and 

seemingly the position of the Corp. Fin. staff) that a company 

 

ambiguous rules even where the court of appeals had 

previously interpreted the rule and its interpretation is at odds 

with that of the Commission) (citing Nat’l Cable & 

Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 976 

(2005)). 
58 

can omit a shareholder proposal concerning its reputation or 

brand when what the proposal seeks is woven with the way 

the company conducts its business. Cf. FedEx Corp., SEC 

No-Action Letter, 2014 WL 2358714, at *1 (July 11, 2014) 

(allowing FedEx to omit a proposal that asked for a report 

addressing how the company “can better respond to 

reputational damage from its association with the Washington 

D.C. NFL franchise team name controversy” because it 

“relates to the manner in which FedEx advertises its products 

and services”); see also Equity Lifestyle Props., Inc., SEC 

No-Action Letter, 2012 WL 6723114, at *1 (Feb. 6, 2013) 

(same for proposal asking the Board to prepare a report on, 

among other things, “the reputational risks associated with the 

setting of unfair, inequitable and excessive rent increases that 

cause undue hardship to older homeowners on fixed 

incomes,” as “the setting of prices for products and services is 

fundamental to management’s ability to run a company on a 

day-to-day basis”); Bank of America Corp., SEC No-Action 

Letter, 2010 WL 4922465, at *1 (Feb. 24, 2010) (same for 

proposal asking Bank of America’s Board to publish a report 

describing the bank’s policy regarding the “funding of 

companies engaged predominantly in mountain top removal 

coal mining and an assessment of the policy’s efficacy in 

reducing [greenhouse gas] emissions and in protecting [its] 

reputation,” as it “addresses matters beyond the 

environmental impact of [its] project finance decisions, such 

as [its] decisions to extend credit or provide other financial 

services to particular types of customers”); Dean Foods Co., 

SEC No-Action Letter, 2007 WL 754960, at *1 (Mar. 9, 

2007) (same for proposal requesting that an independent 

committee of the Board “review the company’s policies and 

procedures for its organic dairy products and report to 

shareholders on the adequacy of the policies and procedures 

to protect the company’s brands and reputation and address 

consumer and media criticism,” because this concerns the 
59 

company’s “ordinary business operations (i.e., customer 

relations and decisions relating to supplier relationships)”). 

We thus hold that, even if Trinity’s proposal raises 

sufficiently significant social and corporate policy issues, 

those policies do not transcend the ordinary business 

operations of Wal-Mart. For a policy issue here to transcend 

Wal-Mart’s business operations, it must target something 

more than the choosing of one among tens of thousands of 

products it sells. Trinity’s proposal fails that test and is 

properly excludable under Rule 14a-8(i)(7). 

V. CONCLUSION 

 Although a core business of courts is to interpret 

statutes and rules, our job is made difficult where agencies, 

after notice and comment, have hard-to-define exclusions to 

their rules and exceptions to those exclusions. For those who 

labor with the ordinary business exclusion and a social-policy 

exception that requires not only significance but 

“transcendence,” we empathize. Despite the substantial 

uptick in proposals attempting to raise social policy issues 

that bat down the business operations bar, the SEC’s last 

word on the subject came in the 1990s, and we have no hint 

that any change from it or Congress is forthcoming. As one 

former SEC commissioner has opined, “it is neither fair nor 

reasonable to expect securities experts [like the Commission 

and its staff] to deduce the prevailing wind on public policy 

issues that have yet to be addressed by Congress in any 

decisive fashion.” Commissioner Criticizes Subjectivity, 

Inconsistency in SEC Review of Proposals, BNA Corp. 

Couns. Wkly., 2-3 (Mar. 31, 1993) (quoting remarks of 

Comm. Richard Y. Roberts). That remains true today. 

We have no doubt that the Commission is equipped to 

collect “relevant data and views regarding the best direction 
60 

for its regulatory policy.” Nagy at 993. We thus suggest that 

it consider revising its regulation of proxy contests and issue 

fresh interpretive guidance. In the meantime, we hold here 

that Trinity’s proposal is excludable from Wal-Mart’s proxy 

materials under Rule 14a-8(i)(7). 
1 

SHWARTZ, Circuit Judge, with whom Judge VANASKIE 

joins as to Part III, concurring in the judgment. 

 I agree with the Majority that Wal-Mart may omit 

Trinity’s proposal from the company’s proxy materials. I 

write separately, however, for two reasons. First, while I 

agree with my colleagues that the proposal is excludable 

based on the ordinary business exclusion, I believe that the 

test that it has fashioned for determining when an exception 

to this exclusion applies may remove many company actions 

over which shareholders should have a say from shareholder 

oversight. Second, I write to explain that both the ordinary 

business and the vagueness exclusions support exclusion of 

the entire proposal.1

 

I 

 SEC Rule 14a-8 requires a public company to include 

a shareholder proposal “in its proxy statement . . . when [the 

company] holds an annual or special meeting of 

shareholders,” 17 C.F.R. § 240.14a-8, in recognition of the 

fact that, “with the increased dispersion of security holdings 

in public companies, the proxy solicitation process rather than 

the shareholder’s meeting itself ha[s] become the forum for 

shareholder suffrage,” Proposed Amendments to Rule 14a-8, 

Exchange Act Release No. 19135, 1982 WL 600869, at *2 

(Oct. 14, 1982) (the “1982 Proposing Release”). The rule thus 

 1

Trinity declined to omit any component of the 

proposal, Tr. of Oral Arg. at 39-40, and thus sought approval 

of the proposal in its entirety. Accordingly, each component 

of the proposal must be nonexcludable for it to comply with 

SEC Rule 14a-8. 
2 

“affords shareholders access to management proxy 

solicitations,” both “to sound out management views and to 

communicate with other shareholders on matters of major 

import.” Amalgamated Clothing & Textile Workers Union v. 

Wal-Mart Stores, Inc., 821 F. Supp. 877, 882 (S.D.N.Y. 

1993) (internal quotation marks, citation, and alteration 

omitted). Such access, however, is not unfettered. In 

addition to eligibility and procedural requirements, SEC Rule 

14a-8 is “limited by thirteen content-based exceptions,” id., 

two of which Wal-Mart argues apply here: Rule 14a-8(i)(7) 

and Rule 14a-8(i)(3). 

 Rule 14a-8(i)(7) allows a company to exclude 

proposals that “deal[] with a matter relating to the company’s 

ordinary business operations.” 17 C.F.R. § 240.14a-8(i)(7). 

The SEC has explained that the determination of whether a 

particular shareholder proposal implicates a company’s 

ordinary business operations “rests on two central 

considerations”: (1) whether the “subject matter” of the 

proposal involves “tasks . . . fundamental to management’s 

ability to run a company on a day-to-day basis”; and (2) “the 

degree to which the proposal seeks to ‘micro-manage’ the 

company by probing too deeply into matters of a complex 

nature upon which shareholders . . . would not be in a position 

to make an informed judgment.” Amendments to Rules on 

Shareholder Proposals, Release No. 23200, 1998 WL 254809, 

at *4-5 (May 21, 1998) (“1998 Adopting Release”). 

 There is an exception to this exclusion. Specifically, 

proposals “relating to” ordinary business operations “but 

focusing on sufficiently significant social policy issues . . . 

generally would not be considered excludable,” 

notwithstanding their relationship to ordinary business, 
3 

“because the proposals would transcend the day-to-day 

business matters and raise policy issues so significant that it 

would be appropriate for a shareholder vote.” Id. at *4. The 

Majority would limit proposals invoking the “significant 

social policy exception” to only those concerning matters that 

are “disengaged from the essence of” a company’s business, 

Maj. Op. at 52, and reads the 1998 Adopting Release to 

require a proposal that focuses on a significant social policy 

issue to be completely “divorced from how a company 

approaches the nitty-gritty of its core business,” Maj. Op. at 

50; see also id. (“[T]o shield its proposal from the ordinary 

business exclusion, a shareholder must do more than focus its 

proposal on a significant policy issue; the subject matter of its 

proposal must ‘transcend’ the company’s ordinary 

business.”). In my view, this reading is inconsistent with the 

plain text of the 1998 Adopting Release. 

The 1998 Adopting Release provides that, to avoid 

running afoul of the ordinary business exclusion, a proposal 

“relating to” a company’s ordinary business must “focus[] 

on” a “sufficiently significant social policy issue.” 1998 

Adopting Release, 1998 WL 254809, at *4. If it does, “it 

generally would not be considered excludable, because the 

proposal[] would transcend . . . day-to-day business matters.” 

Id. As this passage makes clear, whether a proposal focuses 

on an issue of social policy that is sufficiently significant is 

not separate and distinct from whether the proposal 

transcends a company’s ordinary business. Rather, a proposal 

is sufficiently significant “because” it transcends day-to-day 

business matters. Id. Thus, the SEC treats the significance 

and transcendence concepts as interrelated, rather than 

independent. 
4 

The 1998 Adopting Release also does not require that 

a proposal be “disengaged from the essence of” a company’s 

business, Maj. Op. at 52, such that a company is insulated 

from any submission relating to the “crafting [of] a product 

mix that satisfies consumer demand,” Maj. Op. at 51. Indeed, 

the 1998 Adopting Release expressly permits a shareholder to 

submit a proposal that relates directly to ordinary business 

matters, including “decisions on production quality and 

quantity, and the retention of suppliers,” so long as it 

“focus[es] on” an issue of “sufficiently significant social 

policy.” 1998 Adopting Release, 1998 WL 254809, at *4 

(acknowledging that “[c]ertain tasks,” including those related 

to production and suppliers, “are so fundamental to 

management’s ability to run a company on a day-to-day 

basis” that they are not “subject to direct shareholder 

oversight,” but recognizing that “proposals relating to such 

matters but focusing on sufficiently significant social policy 

issues” generally are not excludable). Thus, to “transcend” 

ordinary business, as that term is used in the 1998 Adopting 

Release, a proposal need not be divorced from ordinary 

business, as the Majority proposes, but instead must focus on 

a policy issue that in some “transcend[ent]” way trumps 

ordinary business in importance. See id.; see also Adoption 

of Amendments Relating to Proposals by Security Holders, 

Release No. 12999, 1976 WL 160347, at *11 (Nov. 22, 1976) 

(noting that proposals including “certain matters which have 

significant policy, economic, or other implications,” like “the 

economic and safety considerations attendant to nu[cl]ear 

power plants,” are “of such magnitude” that they should be 

“considered beyond the realm of an issuer’s ordinary business 

operations,” despite their relationship to such operations). 
5 

 In addition to conflicting with SEC guidance, the 

Majority’s test for the “significant social policy exception” to 

the ordinary business exclusion is inconsistent with the 

purpose of § 14 of the Securities Exchange Act of 1934, 15 

U.S.C. § 78a et seq. (the “Exchange Act”), and Rule 14a-8. 

When Congress enacted the Exchange Act, it sought to ensure 

“fair corporate suffrage.” J.I. Case Co. v. Borak, 377 U.S. 

426, 432 (1964). One way such suffrage is protected is 

through accurate proxy solicitations. Id. Congress authorized 

the SEC to generate rules that would advance this goal. See

15 U.S.C. § 78n. To this end, it promulgated Rule 14 to 

provide guidelines for shareholder proposals, including those 

that raise social issues. As the Commission noted in the 1998 

Adopting Release, “shareholder proposals on social issues 

may improve investor confidence in the securities markets by 

providing investors with a sense that as shareholders they 

have a means to express their views to the management of the 

companies in which they invest.” 1998 Adopting Release, 

1998 WL 254809, at *19. 

 The Majority’s test, insofar as it practically gives 

companies carte blanche to exclude any proposal raising 

social policy issues that are directly related to core business 

operations, undermines the principle of fair corporate suffrage 

animating Rule 14a-8: shareholders’ “ability to exercise their 

right—some would say their duty—to control the important 

decisions which affect them in their capacity as . . . owners of 

[a] corporation.” Med. Comm. for Human Rights v. SEC, 

432 F.3d 659, 681-82 (D.C. Cir. 1970) (footnote omitted). 

Section 14(a) of the Exchange Act ensures that “[a] 

corporation is run for the benefit of its stockholders and not 

for that of its managers,” SEC v. Transamerica Corp., 163 

F.2d 511, 517 (3d Cir. 1947), and “Congress intended by its 
6 

enactment of [§] 14 . . . to give true vitality to the concept of 

corporate democracy,” Med. Comm. for Human Rights, 432 

F.3d at 676. Permitting shareholders to vote on important 

social issues, including those that may be closely related to a 

company’s ordinary business, is consistent with these 

principles, and I would not interpret the ordinary business 

exclusion to prohibit it. 

II 

 All that said, Trinity’s proposal as written is 

excludable under the ordinary business exclusion because it 

lacks the focus needed to trigger the “significant social 

policy” exception. To qualify for this exception, Trinity’s 

proposal must focus on a significant policy issue. Trinity’s 

proposal asks the Board to amend the Committee charter to 

require that it create policies and standards for determining 

whether Wal-Mart should sell a product that: (1) “especially 

endangers public safety and well-being”; (2) “has the 

substantial potential to impair” Wal-Mart’s reputation; and/or 

(3) “would reasonably be considered by many to be offensive 

to the family and community values integral to” Wal-Mart’s 

brand. J.A. 268. Although the proposal states that it is for 

“determining whether or not [Wal-Mart] should sell guns 

equipped with magazines holding more than ten rounds of 

ammunition . . . and [for] balancing the benefits of selling 

such guns against the risk that these sales pose to the public 

and to [Wal-Mart’s] reputation and brand value,” J.A. 268, 

the full text shows that it is not directed solely to Wal-Mart’s 

sale of guns. 

The proposal has three separate components. The 

“public safety” component of the proposal could cover many 
7 

products, especially in light of the amount of products WalMart offers, and thus might require Wal-Mart to develop 

policies and standards for thousands of goods. While WalMart’s sale of guns with high-capacity magazines may raise a 

significant social policy issue concerning public safety, not all 

products that may fall within the proposal do so. Thus, while 

the first component of Trinity’s proposal may raise a 

significant issue of social policy, insofar as it touches on the 

sale of guns equipped with high capacity magazines, we 

cannot say that the proposal as a whole “focus[es] on” such 

an issue. 1998 Adopting Release, 1998 WL 254809, at *4. 

Accordingly, Trinity may not avail itself of the “significant 

social policy exception” to the ordinary business exclusion. 

 Similarly, the second and third components of the 

proposal could cover many products. They are also 

problematic for other reasons. The second component seeks 

standards for determining whether Wal-Mart should sell a 

product that may impair the company’s reputation. How 

Wal-Mart would like others to view it is a unique company 

interest, and while certainly important to shareholders seeking 

a return on their investment, it is not of broad societal 

concern. The third component, which asks the Board to 

consider whether the sale of a product would impact its brand, 

also focuses on matters of interest to the company but not 

society at large. Thus, these components cover matters 

relating to Wal-Mart’s ordinary business operations, do not 

present a social policy issue, and render the entire proposal 

excludable. 

III 
8 

There is an additional problem with the third 

component of the proposal: it is vague and thus excludable 

under Rule 14a-8(i)(3). Rule 14a-8(i)(3) permits a company 

to exclude shareholder proposals that are “so vague and 

ambiguous that the issuer and security holders would not be 

able to determine what action the proposal is contemplating,” 

1982 Proposing Release, 1982 WL 600869, at *13. The 

rationale for excluding a shareholder proposal that is “vague 

and ambiguous” is twofold: (1) shareholders are entitled to 

know the breadth of the proposal on which they are asked to 

vote; and (2) the company must be able to comprehend what 

actions or measures the proposal requires of it. See Dyer v. 

SEC, 287 F.2d 773, 781 (8th Cir. 1961); N.Y.C. Emps. Ret. 

Sys. v. Brunswick, 789 F. Supp. 144, 146 (S.D.N.Y. 1992). 

As previously stated, the third component of the 

proposal that asks the Committee to formulate policies and 

standards for the sale of products that “would reasonably be 

considered by many to be offensive to the family and 

community values integral to” Wal-Mart’s brand. J.A. 268. 

While Trinity argues that this component simply asks the 

Committee to consider whether a product may negatively 

impact its brand, the proposal, as written, measures that 

impact based upon what “many” view as “offensive” to 

“family and community values.” Trinity attempts to link 

these terms back to what Wal-Mart has said about its values, 

including the “Save Money, Live Better” tag line, but these 

buzz words fail to provide any concrete guidance as to what 

constitutes “many” or what “family values” should be 

considered. Thus, this component of the proposal does not 

inform the shareholders of the breadth of the subject on which 

they would be asked to vote nor does it make clear what the 

Company would be required to do if it were adopted. For this 
9 

reason, the proposal is also excludable under Rule 14a8(i)(3). 

IV 

 

 I therefore concur in the judgment.