Source: https://supreme.justia.com/cases/federal/us/404/403/
Timestamp: 2019-04-19 10:23:16+00:00

Document:
The Court of Appeals, overruling the contentions of the Securities and Exchange Commission (SEC), held that it had jurisdiction to review the SEC's "extremely dubious" determination not to oppose the Dow Chemical Co.'s refusal of respondent shareholder's request to include its proposal for a corporate charter amendment in Dow's proxy statement. Thereafter, Dow acquiesced in the request, and, at its annual meeting, less than 3% of the voting stockholders supported the respondent's proposal, as a result of which the company, under an SEC rule, may exclude the proposal from its proxy material for a three-year period.
Held: Since it is extremely doubtful that, at the end of that period respondent, will resubmit the proposal and Dow will refuse it, the case is now moot. Pp. 404 U. S. 405-407.
MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, WHITE, and BLACKMUN, JJ., joined. DOUGLAS, J., filed a dissenting opinion, post, p. 404 U. S. 407. POWELL and REHNQUIST, JJ., took no part in the consideration or decision of the case.
The Medical Committee for Human Rights acquired by gift five shares of stock in Dow Chemical Co. In March, 1968, the Committee's national chairman wrote a letter to the company expressing concern over its policy with respect to the production and sale of napalm. The letter also requested that there be included in the company's proxy statement for 1968 a proposal to amend Dow's Certificate of Incorporation to prohibit the sale of napalm unless the purchaser gives reasonable assurance that the napalm will not be used against human beings. Dow replied that the proposal was too late for inclusion in the 1968 proxy statement and for discussion at that year's annual meeting, but that it would be reconsidered the following year.
"If it clearly appears that the proposal is submitted by the security holder primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the issuer or its management, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes;"
"If the proposal consists of a recommendation or request that the management take action with respect to a matter relating to the conduct of the ordinary business operations of the issuer."
On July 8, 1970, the Court of Appeals held that the decision of the SEC was reviewable under § 25(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78y(a); that, while review of Dow's decision was clearly available in district court, review of the SEC's decision could also be obtained in a court of appeals; that the validity of the Commission's determination was extremely dubious, especially in light of its failure to state reasons supporting its conclusion; and that the case should be remanded to the Commission for reconsideration and a statement of reasons. 139 U.S.App.D.C. 226, 432 F.2d 659. The Commission petitioned for review here, and we granted certiorari on March 22, 1971. 401 U.S. 973.
its napalm resolution for inclusion in Dow's 1971 proxy statement. This time, Dow acquiesced in the Committee's request and included the proposal. At the annual stockholder's meeting in May 1971, Dow's shareholders voted on the Committee's proposal. Less than 3 of all voting shareholders supported it, and, pursuant to Rule 14a-8(c)(4)(i), 17 CFR § 240.14a-8(c)(4)(i), Dow may exclude the same or substantially the same proposal from its proxy materials for the next three years. We find that this series of events has mooted the controversy.
Respondent argues that it will continue to urge the adoption of the proposal and its inclusion in proxy statements, and that it is likely that Dow will reject inclusion in the future as it has in the past. It is true that, in permitting the proposal to be included in the 1971 proxy statement, Dow stated that it adhered to its opinion that the proposal might properly be omitted and that its inclusion was without prejudice to future exclusion. However, this does not create the controversy that is necessary for us to retain jurisdiction to decide the merits. Whether or not the Committee will actually resubmit its proposal or a similar one in 1974 is purely a matter of conjecture at this point, as is whether or not Dow will accept it. If Dow were likely to repeat its allegedly illegal conduct, the case would not be moot. See Walling v. Helmerich & Payne, 323 U. S. 37, 323 U. S. 43 (1944); United States v. W. T. Grant Co., 345 U. S. 629, 345 U. S. 632-633 (1953). However, in light of the meager support the proposal attracted, we can only speculate that Dow will continue to include the proposal when it again becomes eligible for inclusion, rather than to repeat this litigation. Thus, we find that "the allegedly wrongful behavior could not reasonably be expected to recur." United States v. Phosphate Export Assn., 393 U. S. 199, 393 U. S. 203 (1968). The case is therefore moot.
"[I]t is well settled that federal courts may act only in the context of a justiciable case or controversy." Benton v. Maryland, 395 U. S. 784, 395 U. S. 788 (1969).
"Our lack of jurisdiction to review moot cases derives from the requirement of Article III of the Constitution under which the exercise of judicial power depends upon the existence of a case or controversy."
Liner v. Jafco, Inc., 375 U. S. 301, 375 U. S. 306 n. 3 (1964); cf. Doremus v. Board of Education, 342 U. S. 429, 342 U. S. 434 (1952).
Accordingly, the judgment of the Court of Appeals is vacated, and the case is remanded to that court for dismissal.
But it is said that, because of the poor showing made by the proposal when finally submitted, Dow could refuse to resubmit it for three years under SEC proxy rules not at issue in this case. Ante at 404 U. S. 406. The Court suggests that it is "purely a matter of conjecture" that the proposal will again be submitted at the expiration of this period, and that Dow will attempt again to reject it. The Court seems to think that Dow's best strategy, given the proposal's poor showing, is to let it go to a vote, rather than undertake protracted litigation. Ibid.
and defendant companies represented to the court their intention not to revive the interlock. We disposed of this argument in summary fashion. "Such a profession does not suffice to make a case moot." Id. at 345 U. S. 633. Here, Dow has not even made the minimal representation we rejected in Grant, nor is it likely to do so.
"[a] case might become moot if subsequent events made it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur,"
Phosphate Export Assn., supra, at 393 U. S. 203, that is hardly the situation here.
enterprises be held to a higher standard than that of the "morals of the marketplace" which exalts a single-minded, myopic determination to maximize profits as the traditional be-all and end-all of corporate concern. The "public interest in having the legality of the practices settled, militates against a mootness conclusion." Grant, supra, at 345 U. S. 632.
There is no reason to assume Dow's antipathy to the inclusion of this shareholder proposal will be any less in 1974 than it is today. Perhaps Dow will adopt the advice given to it by the Court. But it is just as likely to decide its superior financial position makes continued litigation the preferable alternative, which may now be conducted under proxy rules more favorable to corporate management [Footnote 6] than are the present rules.
This case now joins a growing list of monuments to the present Court's abdication of its constitutional responsibility to decide cases properly within its jurisdiction. See, e.g., Picard v. Connor, ante, p. 404 U. S. 270, at 404 U. S. 278 (DOUGLAS, J., dissenting); North Carolina v. Rice, ante, p. 404 U. S. 244, at 404 U. S. 248 (DOUGLAS, J., dissenting statement); McClanahan v. Morauer & Hartzell, ante, p. 16, at 17 (DOUGLAS, J., dissenting). Once again, I dissent.
See also Walling v. Helmerich & Pane, 323 U. S. 37, where we held that a case involving the legality of "split-day contracts" under the Fair Labor Standards Act was not rendered moot by the defendant company's abandonment of the contracts during the litigation.
"Despite respondent's voluntary cessation of the challenged conduct, a controversy between the parties over the legality of the split-day plan still remains. . . . Respondent has consistently urged the validity of the split-day plan, and would presumably be free to resume the use of this illegal plan were not some effective restraint made."
Id. at 323 U. S. 43.
"The same reasoning [as that of the Walling Court] applies to the dispute between respondent and Dow over whether the latter is required to distribute to its shareholders the Committee's proposal. Dow continues to insist that it is not required to distribute the proposal, and even if it does so this year  and the proposal is defeated, Dow may reject it in future year."
First Reply Brief for Petitioner 5.
See, e.g., Miller, Toward the "Techno-Corporate" State. -- An Essay in American Constitutionalism, 14 Vill.L.Rev. 1 (1968); J. Galbraith, The New Industrial State (1967); A. Berle, Economic Power and the Free Society (1957).
"The recession of 1956 was in part due to the fact that the three principal automobile manufacturers, General Motors, Ford, and Chrysler, sold 8 million cars in the previous year. The National City Bank Economic Review estimated the 'normal' market for cars at the time at 6 million. The following year, the motorcar companies sold only 4 million cars, and, naturally, purchased far less from their suppliers of raw materials, glass, et cetera. The effect on employment was severe."
The Three Faces of Power 31 n. 2 (1967).
"(ii) consists of a recommendation, request or mandate that action be taken with respect to any matter, including a general economic, political, racial, religious, social or similar cause, that is not significantly related to the business of the issuer or is not within the control of the issuer."
Proposed amendment to Rule 14a-8(c)(2), Securities Exchange Act Release No. 9432, Dec. 22, 1971.
"on the ground that such proposal may involve economic, political, racial, religious, or similar issues, unless the matter or action proposed is not within the control of the issuer."
S. 4003, § 2, 91st Cong., 2d Sess. For the view that a corporation should be required to include any shareholder proposal which is a "proper subject" for shareholder action under applicable state law, see Chisum, Napalm, Proxy Proposals and the SEC, 12 Ariz.L.Rev. 463 (1970). See also Note, 84 Harv.L.Rev. 700 (1971).

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