Trinity Wall Street v. Wal-Mart Stores, Inc.

OPINION OF THE COURT

Table of Contents

I. INTRODUCTION.'.327

II. FACTS & PROCEDURAL HISTORY.328

A. Trinity Objects to Wal-Mart’s Sale of Assault Rifles.328

B. Trinity’s Shareholder Proposal.329

C. Wal-Mart Seeks a No-Action Letter from the SEC.330

D. Trinity Takes its Fight to Federal Court: Round One.331

E. Round Two.332

III. REGULATORY BACKGROUND. CO CO

A. The Proxy Statement. CO CO

B. Proxy Solicitation. 00 CO

C. Shareholder Proposals. CO CO

D. Exclusion of Shareholder Proposals . CO CO

E. SEC Interpretive Releases on the “Ordinary Business” Exclusion CO CO

*3271. The 1976 Proposing Release. CCO CO

2. The 1976 Adopting Release. 00 CO CO

3. The 1982 Proposing Release. OO CO CO

4. The 1983 Adopting Release. CO CO

5. The 1997 Proposing Release. CO CO

6. The 1998 Adopting Release. O ^ CO

IV. ANALYSIS.'. O ^ CO

A. Trinity’s Proposal Relates to Wal-Mart’s Ordinary Business Operations i — I ^ CO

1. What is the subject matter of Trinity’s proposal? . i — 1 ^ CO

2. Does Wal-Mart’s approach to whether it sells particular products relate to its ordinary business operations?. CO

B. Trinity’s Proposal Does Not Focus, on a Significant Policy Issue that Transcends Wal-Mart’s Day-to-Day Business Operations. CO err

1. Does Trinity’s proposal raise a significant social policy issue?. CO CJr

2. Even if Trinity’s, proposal raises a significant policy issue, does that issue transcend Wal-Mart’s ordinary business operations?. CO Os

V. CONCLUSION. .351

I. INTRODUCTION

“[T]he secret of successful retailing is to give your customers what they want.” Sam Walton, Sam Walton: Made In AmeR-ica 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 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. Wal-Mart Stores, Inc., 75 F.Supp.3d 617, 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 *328victory 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. Wal-Mart 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.

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.

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.trinity wallstreet.org/sites/default/files/ miscellaneous/Letterfromthe CFOaecompanyingthe2013FinancialStatem 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 *329matter 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, Wal-Mart does not sell adult-rated movie titles (ie., 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 á ‘Parental Advisory Label’ ” because of concerns about the music containing “strong language or depictions of violence, sex, or substance abuse.” Id. And 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 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 úse 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:

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 eom-*330munity 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 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

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 proposal from its *3312014 proxy materials under Rule 14a-8(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

8. [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 publicly 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, 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 “[proposals 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

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 *332seeking 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).

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 14a-8(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.

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 Wal-Mart’s ordinary *333business 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 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 “transcendí ] the day-to-day 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 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 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, *3342004)). It acknowledged that “Wal-Mart 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 [proposal 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 Wal-Mart’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 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.2d 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 — S(j)).

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 Securi*335ties 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. Barak Co., 377 U.S. 426, 431, 84 S.Ct. 1555, 12 L.Ed.2d 423 (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]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 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., All (Apr. 23, 2015) (“Not one of the 1,150 shareholder proposals concerning social or policy issues since 2006 got 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 *336to 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. § 240.14a-8 (“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 contend” Palmi-ter 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)(l). 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 “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)(l); (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 § 240.14a-8(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)(l). 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: 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 *337of 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 staffs response can, as Trinity did here, pursue its rights against the company in federal court.8

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.

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 [ie., 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.’ ” *338Id. 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 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] 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 staffs 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 ex-cludable even if the subject matter of the report or examination involved an ordinary *339business 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 staffs “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 staffs interpretation” of the exclusion. Amendments to Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by Security Holders, Release No. 20,091, 1983 WL 33272, at *7 (Aug. 16, 1983) (“1983 Adopting Release”) (“Because [the staffs] 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 bu