The opinion of the court was delivered by: MICHAEL B. MUKASEY
MICHAEL B. MUKASEY, U.S.D.J.
The three plaintiffs are stockholders of defendant; in addition, plaintiff Stewart Austin is a business agent and plaintiffs Daniel J. Daly and Leonard Hoffman are shop stewards of Local 1-2, Utility Workers Union (the "Union"), which represents defendant's employees. They sue as shareholders only. Defendant supplies gas, electricity and steam to customers in the New York metropolitan area.
Plaintiffs would compel defendant to include in its proxy materials for the upcoming annual shareholders meeting a non-binding resolution endorsing the idea that defendant's employees should be allowed to retire after 30 years of service, regardless of age. Plaintiffs seek a preliminary injunction to put that proposal in the proxy materials, and a permanent injunction compelling defendant henceforth to accept for inclusion in its proxy materials all proposed shareholder resolutions,
(a) the specific and particular terms of which, are not mundane, ordinary, or concerned with the minutiae of operating the day-to-day business of Con Edison, and which are not disqualified or excepted by any other law or regulation; or
(b) which propose to alter the form or amount of compensation to executives, officers and/or employees of the corporation in a significant, noteworthy or extraordinary form or amount and which are not disqualified or excepted by any other law or regulation.
Defendant has moved for summary judgment dismissing the complaint. For the reasons set forth below, plaintiffs' motion for a preliminary injunction is denied, defendant's motion is granted, and the complaint is dismissed.
The few relevant facts are uncontested. On December 30, 1991, plaintiffs' counsel presented to defendant for inclusion in its proxy materials a proposed corporate resolution endorsing various changes in the pension rights of defendant's employees, most significant of which is one that would permit employees to retire with no actuarial reduction of their pension rights after 30 years of service, regardless of age. Under the current plan, the normal retirement age is 65, but employees may retire at or after age 60 if they meet the requirements of the so-called "rule of 75" -- i.e., if their age plus years of service equal or exceed 75. The pension plan changes outlined in the proposed resolution have been announced by the Union to be a goal in its upcoming contract negotiations with Con Edison. (Ortiz Aff. P7; Plaintiffs' Reply Mem. at 7)
On January 16, 1992, defendant wrote to the Securities and Exchange Commission stating its belief that the proposed resolution need not be included in the proxy materials, because the proposed resolution dealt merely with the company's day-to-day operations and because it was designed in essence to confer a benefit on and further a personal interest of its proponents that was not common to shareholders generally. Defendant sought assurance in a form referred to as a "no-action letter" that the SEC staff would not recommend that that agency sue to compel defendant to include the proposed resolution in the proxy materials. On February 6, 1992, plaintiffs' counsel opposed issuance of such a letter in an 8-page submission to the SEC. On February 13, 1992 the SEC staff issued the requested no-action letter because there was a basis for Con Edison's view that the proposed resolution dealt with a matter relating to the conduct of the company's ordinary business operations, i.e., general compensation issues. (Complaint Exh. D)
The no-action letter from the SEC left plaintiffs free to sue to compel inclusion of their proposal in Con Edison's proxy materials, which they did on March 4, 1992.
Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a), makes it unlawful for any person to solicit proxies with respect to a registered security in violation of SEC rules. Rule 14a-8(a), 17 CFR § 240.14a-8(a), directs as follows:
(a) If any security holder of a registrant [defined as the issuer of the securities in respect of which proxies are to be solicited -- 17 CFR § 240.14a-1(i)] notifies the registrant of his intention to present a proposal for action at a forthcoming meeting of the registrant's security holders, the registrant shall set forth the proposal in its proxy statement and identify it in its form of proxy and provide means by ...