The Center News: February 2015

A Publication of the National Association of ManufacturerstheCenter for Legal Action

Center Perspectives

By Linda Kelly, Senior Vice President and General Counsel

Manufacturers are facing a growing number of threats with regard to corporate governance and shareholder activism. Each year, hundreds of shareholder proposals deluge public companies because the process for submitting these proposals has few restrictions and costs nothing. Securities and Exchange Commission (SEC) rules require that a public company include a shareholder proposal in its proxy statement free of charge if the shareholder owns $2,000 worth of company stock or one percent of the outstanding voting shares, whichever is less, for a period of one year—not a difficult standard to meet.

Shareholder activists range from large hedge funds to a relatively small number of gadflies and issue-focused investors who use the shareholder proposal process to push their social and political agendas; ordinary institutional investors bring only one percent of these proposals. The cumulative effect is a costly and time-consuming process in which minority activist shareholders use federal proxy rules to either realize a quick profit and/or force corporations, their shareholders and customers to adopt their personal social agendas.

A recent case in the federal Court of Appeals for the Third Circuit highlights the significance of the threat from activist shareholders. It also provided a vehicle for the Manufacturers' Center for Legal Action (MCLA) to weigh in on behalf of manufacturers. In Trinity Wall Street v. Wal-Mart Stores, Inc., a lower federal court overruled SEC staff to compel Wal-Mart to include a shareholder proposal in its proxy statement. The proposal sought greater board oversight over the products Wal-Mart sells, including a broad array of items that could allegedly endanger "public safety" or "well-being," have "the potential to impair the reputation" of the company and are "offensive" to "family and community values." The case raises the important question of whether the social agenda of a few shareholders should determine what products companies can or cannot sell. If the lower court's ruling is upheld, it may portend a seismic shift in how public companies are forced to do business, posing a threat to economic growth and competitiveness.

The MCLA will continue to seek ways to engage on behalf of manufacturers to push back on the trend of shareholder activism. If you are in-house counsel at a manufacturing member company and wish to assist us in this endeavor by participating in the MCLA Corporate Governance and Shareholder Activism Legal Issue Advisory Group, please contact me or Patrick Forrest, vice president and deputy general counsel.

MCLA in the Courts


Manufacturers Proceed with Challenge to EPA Boiler Rule: In our latest brief challenging the Environmental Protection Agency’s (EPA) regulation of boilers for area sources (the so-called Boiler GACT rules), the NAM reiterated that the energy assessment requirement is unlawful and that EPA has a duty to account for malfunctions when determining what the best performing sources can achieve. Additional briefing in this case will conclude in February.
More Information: American Chemistry Council v. EPA (U.S. Court of Appeals for the D.C. Circuit)

NAM Defends Portions of EPA Rule on Incinerators: The NAM and our industry coalition filed our main brief as intervenors opposing arguments from environmental groups against some of the EPA’s decisions. The NAM supported the EPA’s decision to defer regulation of some burners, its methodology to calculate emissions while taking into account variability, its use of 30-day averaging for continuous monitoring and its decision not to impose stricter regulations for various categories of already-regulated pollutants.

More Information: American Forest & Paper Ass’n v. EPA (U.S. Court of Appeals for the D.C. Circuit)

EPA Should Consider Costs in Utility Regulation: The NAM filed a brief supporting a challenge to the EPA’s Utility MATS regulation because the EPA did not consider costs of implementation in determining whether regulation of hazardous air pollutant emissions from electric generating units was appropriate and necessary under Section 112 of the Clean Air Act.  

More Information: Michigan v. EPA (U.S. Supreme Court)

NAM Supports Challenge to Minnesota Law Restricting Out-of-State Coal-Fired Electric Generation: The NAM filed a brief arguing that Minnesota’s law prohibiting the importation of electricity from new large energy facilities that would contribute to carbon dioxide emissions violates the Constitution’s Commerce Clause. The law exempts natural gas facilities, so its impact is on out-of-state coal-fired plants.

More Information: North Dakota v. Heydinger (U.S. Court of Appeals for the 8th Circuit)


Top Court to Hear Case on Fiduciary Liability: The NAM and other business organizations filed a brief focusing on whether retirement plan participants can challenge investment decisions by plan fiduciaries made more than six years before the suit was filed, if the decisions could have been reconsidered during that six-year window. This case could have a significant impact on the liability of plan fiduciaries.
More Information:Tibble v. Edison International (U.S. Supreme Court)

Expert Testimony

NAM Urges Pennsylvania Court to Reject "Any Exposure" Theory in Asbestos Case: The NAM filed a brief in the Pennsylvania Supreme Court urging it to reverse a trial court’s ruling that allowed expert testimony on causation without requiring an assessment of the dose required to cause injury or identifying how much exposure occurred.
More Information: Rost v. Ford Motor Co. (Pennsylvania Supreme Court)

Government Regulation

Manufacturers Seek to Protect Confidentiality of Internal Legal Investigations: The NAM joined other associations on a brief in a case involving an in-house investigation of potential False Claims Act violations and improper denial of attorney-client privilege.
More Information: In re Kellogg Brown & Root, Inc. (U.S. Court of Appeals for the D.C. Circuit)

Product Liability

NAM Seeks Review of Court Decision Finding Collective Liability without Proof of Causation: The NAM asked the Supreme Court to review a decision making all lead pigment manufacturers retroactively liable for injuries without proof their products actually caused any injuries.
More Information: American Cyanamid Co. v. Gibson (U.S. Supreme Court)

NAM Seeks To Reverse Seeming Unlimited Liability for Texas Property Owners: The NAM asked the Texas Supreme Court to review and reverse a lower court’s holding that could threaten property owners with virtually unlimited liability.

More Information: Occidental Chemical Corporation v. Jenkins (Texas Supreme Court)

Other News

Philadelphia Courts Still Frustrate Civil Justice Reform Advocates: As the American Tort Reform Association reports, Philadelphia’s Complex Litigation Center is seeing an explosion of new mass tort cases, many from out of state.

Questions or Comments?

Contact Senior Vice President & General Counsel Linda Kelly at

Related Tags: