After less than a year under appeal, the US Court of Appeals for the Third Circuit released its opinion in Trinity Wall Street v. Walmart Stores, Inc., explaining that Walmart cannot be forced to allow shareholders to infringe on customers’s 2nd Amendment rights.
The path to this judgement began in April 2014, when NYC’s Trinity Church sued Walmart to force the retailer to allow shareholders “to vote on the ‘sale of high capacity guns’–i.e., guns which take ‘high capacity’ magazines–as well as ‘other potentially offensive products.'”
Trinity claimed “high capacity” magazines “enabled” gunmen at Newtown, Connecticut, and Aurora, Colorado, to carry out mass killings. And in November, US District Judge Leonard Stark ruled in Trinity’s favor. But Walmart appealed, and on April 8, the Third Circuit ruled in Walmart’s favor.
On July 6, the court released its full opinion, explaining why it ruled the way it did.
In the opinion published by The Wall Street Journal, the Third Circuit explained that a barrier to Trinity’s push was the Securities and Exchange Commission’s “‘ordinary business’ exclusion.” This exclusion “lets a company omit a shareholder proposal from its proxy materials if the proposal relates to its ordinary business operations.”
The Third Circuit went on demonstrate the difficulty of defining what an “‘ordinary business’ exclusion” is at all times, in all businesses. They showed that the meaning of the rule has been updated numerous times for clarification, but the last time an update took place was in the 1990s. The also pointed to the complexities of the relationship between “operational judgments” and day-to-day business and indicated that while this relationship is “not beyond shareholder comprehension,” very little of it might be grasped by the individual shareholder who sees only his or her part of the whole.
In light of these things, the Third Circuit ultimately ruled that oversight on these matters belongs to the Securities and Exchange Commission and admitted that the commission is highly unlikely to issue a clarification relating to the omission of shareholder input on the kinds of products Trinity targeted because even Congress has not yet acted in any substantial way against those products.
The court concluded:
We have no doubt that the Commission is equipped to collect “relevant data and views regarding the best direction for its regulatory policy.” 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).
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