By Cydney Posner

Yes, if the Business Roundtable and U.S. Chamber of Commerce have their way, according to the Washington Post.  According to the Post, the case was filed with the U.S. Court of Appeals for the D.C. Circuit, "which has been friendly to suits to overturn SEC rules." The case, which is being handled by Eugene Scalia (son of Antonin) and Amy Goodman of Gibson, Dunn, contends that "the SEC failed to properly assess how the use of the rule by special interests could create significant costs for companies, shareholders and the economy." The SEC responded that the rule is "both lawful and in the best interests of the public and shareholders. The commission will, of course, carefully consider and timely respond to the motion for a stay."

The Council of Institutional Investors is reported to be planning to make a filing with the court defending the rule. Corporate Counsel reports that the two trade groups have also asked the SEC to stay implementation of its rules until the D.C. Circuit has resolved the case. If the SEC does not act (response requested by October 5), then they will file a motion for a stay with the court.

In the petition for review and related documents, the Chamber and Roundtable contend that the rule is arbitrary and capricious (in violation of the Administrative Procedures Act) and otherwise not in accordance with law, that the SEC failed to adequately assess the rule's impact on efficiency, competition and capital formation (as required by the Exchange Act), exceeds the SEC's authority and violates issuers' rights under the 1st and 5th amendments. In adopting the rule, the trade groups argue that the SEC made a number of errors:

  • Erred in appraising the costs and other adverse consequences that proxy access would impose, particularly with respect to costly election contests resulting from nominations by special interest groups;
  • Gave inadequate weight to the motives of nominating shareholders (e.g., it didn't even mention the word "unions");
  • Claimed to be empowering shareholders, but actually barred the holders of the majority of shares from acting to override the rule;
  • Claimed to be effectuating state law rights, but rendered "effectively moot" existing state laws, such as Delaware's, regarding proxy access; and
  • Violated the first amendment by forcing companies to carry election-related speech that their boards oppose.

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