UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) INTERFAITH CENTER ON ) CORPORATE RESPONSIBILITY, et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 21-1620 (RBW) ) UNITED STATES SECURITIES ) AND EXCHANGE COMMISSION, ) ) Defendant. ) )

MEMORANDUM OPINION

Interfaith Center on Corporate Responsibility, James McRitchie, and As You Sow—

collectively, the “plaintiffs”—bring this civil action pursuant to the Administrative Procedure

Act (“APA”), 5 U.S.C. §§ 701–06, alleging that the defendant, the United States Securities and

Exchange Commission (“Commission”), promulgated amendments to Commission Rule 14a-8 in

violation of the APA. See generally Complaint (“Compl.”), ECF No. 1. Currently pending

before the Court are (1) the plaintiffs’ motion for summary judgment, see Plaintiffs’ Motion for

Summary Judgment at 1 (“Pls.’ Mot.”), ECF No. 16; and (2) the defendant’s cross-motion for

summary judgment, see Cross-Motion for Summary Judgment at 1 (“Def.’s Mot.”), ECF No. 22.

Upon careful consideration of the parties’ submissions, 1 the Court concludes that it must grant

1 In addition to the filings already identified, the Court considered the following submissions in rendering its decision: (1) the Plaintiffs’ Memorandum of Points and Authorities in Support of Motion for Summary Judgment (“Pls.’ Mem.”), ECF No. 16; (2) the Combined Memorandum in Support of Defendant’s Cross-Motion for Summary Judgment and in Opposition to Plaintiffs’ Motion for Summary Judgment (“Def.’s Mem.”), ECF No. 22-1; (3) the Plaintiffs’ Reply in Support of Motion for Summary Judgment and Opposition to Defendant’s Cross-Motion for Summary Judgment (“Pls.’ Reply”), ECF No. 27; (4) the Joint Appendix (“Joint App’x”), ECF No. 29; (5) the Brief of Council of Institutional Investors as Amicus Curiae in Support of Plaintiffs’ Motion for Summary Judgment (“Institutional Investors Br.”), ECF No. 31; (6) the Brief of the Shareholder Commons as Amicus Curiae in Support of Plaintiffs (“Shareholder Commons Br.”), ECF No. 23; (7) the Brief of Amicus Curiae The Chamber of (continued . . .) the defendant’s cross-motion for summary judgment and deny the plaintiffs’ motion for

summary judgment.

I. BACKGROUND

This case concerns a rule addressing the corporate proxy statement process promulgated

by the Commission under Section 14 of the Securities Exchange Act (“Exchange Act” or “Act”).

The proxy statement process “allows a [corporate] shareholder to vote without being physically

present at the annual meeting[ of a corporation].” Jill E. Fisch, From Legitimacy to Logic:

Reconstructing Proxy Regulation, 46 Vand. L. Rev. 1129–35 (Oct. 1993). In the early years of

corporate proxies, “it was necessary for shareholders to attend the annual meeting personally in

order to exercise their voting rights.” Id. at 1134. However, “[t]he development of large, widely

held corporations rendered th[e in-person] requirement problematic[, which] led to the

development of the [now federally recognized] proxy voting process.” Id. “Although state law

originally restricted the use of proxies, their use grew necessary as corporations became unable

to secure sufficient shareholder presence to meet the quorum requirements.” Id. at 1135.

“Eventually, state statutes addressed proxy voting and expressly protected the right of

shareholders to vote by proxy.” Id.

A. Statutory and Legal Background

The wide acceptance of corporate proxy process procedures did not come without

challenges. Thus, in 1934, when Congress enacted Section 14 of the Securities Exchange Act,

see

Stat. 881 (codified as amended at 15 U.S.C. § 78a–77pp), partially to

(. . . continued) Commerce of the United States of America in Support of Defendant’s Cross-Motion for Summary Judgment and in Opposition to Plaintiffs’ Motion for Summary Judgment (“Chamber of Com. Br.”), ECF No. 33; (8) the Plaintiffs’ Supplemental Memorandum on Count V of the Complaint (“Pls.’ Suppl. Mem.”), ECF No. 37; and (9) the Defendant’s Supplemental Memorandum (“Def.’s Suppl. Mem.”), ECF No. 38.

2 curb growing abuses of the proxy statement process, the Commission was authorized to

“prescribe as necessary or appropriate” any “rules and regulations[,]” to address this concern. 15

U.S.C. § 78n(a)(1). As the Commission has stated, the “[r]egulation of the proxy solicitation

process is one of the original responsibilities that Congress assigned [it.]” Concept Release on

the U.S. Proxy System, Release No. 29,340, Investment Company Act Release No. IC-29,340,

, *3 (July 14, 2010). Initially promulgated in 1942, Rule 14a-8

“general[ly governs the proxy process by] regulat[ing] the inclusion of shareholder proposals in

proxy materials[ or statements].” United Church Bd. for World Ministries v. Sec. & Exch.

Comm’n,

(D.D.C. 1985) (citing

.14a-8); see Exchange Act

Release No. 34,3347,

(Dec. 18, 1942) (codified as amended at

.14a-8). Rule 14a-8 is “structured in a question-and-answer format so that it is easier to

understand[,]”

.14a-8, and to clearly address “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[,]”

Over the years, the Commission has updated Rule 14a-8 to better address continued

concerns over abuses of the proxy process that lead to increased costs for both companies and

shareholders alike. In 1948, the Commission began adopting different bases for excluding

shareholder proposals “[i]n order to relieve [corporate] management[s] of harassment in cases

where such proposals are submitted for the purpose of achieving personal ends rather than for the

common good of the issuer[s] and [their] security holders[.]” Notice of Proposal to Amend

Proxy Rules, Release No. 34-4114 (July 6, 1948). For instance, in 1953, the Commission

amended the shareholder-proposal rule to allow companies to omit the names and addresses of

shareholder proponents to “discourage the use of th[e] rule by persons who are motivated by a

3 desire for publicity rather than the interests of the company and its security holders.” Notice of

Proposed Amendments to Proxy Rules, Release No. 34-4950 (Oct. 9, 1953). In 1954, in

response to concerns over the resubmission of proposals that received little support, the

Commission amended Rule 14a-8 to permit

that a proposal [ ] be omitted for a period of three years from the last previous submission if it was submitted within the previous five years and received less than [three percent] in the case of a single submission, less than [six percent] upon a second submission or less than [ten percent] upon a third or subsequent submission during such five year period.

Adoption of Amendments to Proxy Rules, Release No. 34-4979 (Jan. 6, 1954).

For decades, Rule 14a-8 did not place restrictions on the use of representatives and

allowed multiple shareholders to use the same representative—which proved to be another

avenue for potential abuse. See Adoption of Amendments Relating to Proposals by Security

Holders,

, 52,995–96 (Dec. 3, 1976) (“The Commission . . . has noted that in

recent years[,] several [shareholder] proponents have exceeded the bounds of reasonableness

either by submitting excessive numbers of proposals to [be voted on] or by submitting proposals

that are extreme in their length.”). Thus, beginning in 1976, the Commission began restricting

the number of proposals each shareholder could submit per meeting. See

In 1982, the Commission noted “an increase in the number of proposals used to harass

issuers into giving the proponent some particular benefit or to accomplish objectives particular to

the proponent[,]” Proposed Amendments to Rule 14a-8 Under the Securities Exchange Act of

1934 Relating to Proposals by Security Holders,

, 47,427 (Oct. 26, 1982),

when it began allowing the exclusion of shareholder proposals that were based on personal

grievances, see

. And, in 1983, in amending resubmission thresholds, the

Commission noted that commenters in support of the amendment

4 felt that it was an appropriate response to counter the abuse of the security holder proposal process by certain proponents who make minor changes in proposals each year so that they can keep raising the same issue despite the fact that other shareholders have indicated by their votes that they are not interested in that issue.

Amendments to Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by

Security Holders,

, 38,221 (Aug. 16, 1983). However, around this time, the

Commission acknowledged that it allowed “[shareholder-]proponents [to] [ ] aggregate[ their

holdings] in determining the includability of a proposal[ in proxy statements].” Amendments to

Rule 14a-8 Under the Securities Exchange Act of 1934 Relating to Proposals by Security

Holders,

, 38,219 n.5 (Aug. 23, 1983).

And finally, to ensure that proposals were only being presented by shareholders with a

significant stake in the corporation, a prior version of Rule 14a-8 required that,

[i]n order to be eligible to submit a proposal, [a shareholder] must have continuously held at least [two thousand dollars] in market value, or [one percent], of the company’s securities entitled to be voted on the proposal at the meeting for at least one year by the date [the shareholder] submit[s] the proposal.

Amendments to Rules on Shareholder Proposals,

, 29,119 (May 28, 1998).

1. New Rule 14a-8 Amendments

In November 2019, the Commission published a notice of proposed rulemaking that

recommended amendments to modernize its shareholder proposal rule. See generally Procedural

Requirements and Resubmission Thresholds Under Exchange Act Rule 14a-8,

(Dec. 4, 2019) (“Proposing Release”). The proposed amendments were developed as a

result of a roundtable discussion that included various experts on the proxy process, as well as

from comments from the public at large—both in support of and against modernizing the

shareholder proposal rules. See

. The notice consisted of several proposed

amendments to the proxy rules that affect shareholder ownership thresholds, shareholder

proposal submission requirements, and shareholder resubmission thresholds. See

,459–

5 60. First, the proposed amendment specific to Rule 14a-8(b) “establishes the eligibility

requirements a shareholder-proponent must satisfy to have a proposal included in a company’s

proxy statement.”

. To be eligible to submit a proposal under this proposed

amendment, a shareholder must continuously own at least

[(1) two thousand] of the company’s securities entitled to vote on the proposal for at least three years; [(2) fifteen thousand] of the company’s securities entitled to vote on the proposal for at least two years; or [(3) twenty-five thousand] of the company’s securities entitled to vote on the proposal for at least one year.

. The Commission noted that these new thresholds were necessary because the prior

threshold currently “does not strike the appropriate balance[.]”

“[The Commission]

believe[d] that holding [only two thousand dollars] worth of stock for a single year [as

previously permitted] does not demonstrate enough of a meaningful economic stake or

investment interest in a company to warrant the inclusion of a shareholder’s proposal in the

company’s proxy statement.”

Second, the Commission also proposed an amendment which “require[s] shareholders

that use a representative to submit a proposal for inclusion in a company’s proxy statement to

provide documentation attesting that the shareholder supports the proposal and authorizes the

representative to submit the proposal on the shareholder’s behalf.”

. If a

shareholder uses a representative, the shareholder would be required to submit documentation

that identifies or includes: (1) “the company to which the proposal is directed[,]” (2) “the annual

or special meeting for which the proposal is submitted[,]” (3) “the shareholder-proponent and the

designated representative[,]” (4) “the shareholder’s statement authorizing the designated

representative to submit the proposal and/or otherwise act on the shareholder’s behalf[,]” (5) “the

specific proposal to be submitted[,]” (6) “the shareholder’s statement supporting the proposal[,]”

and (7) “[a] sign[ature] and date[] by the shareholder.”

The Commission

6 believe[d] that these proposed amendments would help safeguard the integrity of the shareholder-proposal process and the eligibility restrictions by making clear that representatives are authorized to so act, and by providing a meaningful degree of assurance as to the shareholder-proponent’s identity, role, and interest in a proposal that is submitted for inclusion in a company’s proxy statement.

The Commission noted that this requirement would be “minimal” and is often already

included by shareholders-proponents in their proposals.

Third, the Commission proposed amending Rule 14a-8 to “require a statement from each

shareholder-proponent that he or she is able to meet with the company in person or via

teleconference no less than [ten] calendar days, nor more than [thirty] calendar days, after

submission of the shareholder proposal.”

. The Commission

believe[d] that this proposed eligibility requirement would encourage shareholders to engage with companies, and could facilitate useful dialogue between the parties by enabling the company to reach out directly to a shareholder-proponent to understand his or her concerns, potentially leading to a more mutually satisfactory and less burdensome resolution of the matter.

Fourth, the Commission proposed an amendment specific to Rule 14a-8(c) that would

“apply the one-proposal rule to ‘each person’ rather than ‘each shareholder’” so that “a

representative would not be permitted to submit more than one proposal to be considered at the

same meeting, even if the representative would be submitting each proposal on [his or her own

behalf, or on] behalf of different shareholders.”

. The Commission believed that

a shareholder submitting one proposal personally and additional proposals as a representative for consideration at the same meeting, or submitting multiple proposals as a representative at the same meeting, would constitute an unreasonable exercise of the right to submit proposals at the expense of other shareholders and also may tend to obscure other material matters in the proxy statement.

In proposing this fourth amendment, the Commission noted that it was “not intended to

prevent shareholders from seeking assistance and advice from lawyers, investment advisers, or

7 others to help them draft shareholder proposals and navigate the shareholder-proposal process.”

Nonetheless, “to the extent that the provider of such services submits a proposal, either as a

proponent or as a representative, it would be subject to the one-proposal limit and would not be

permitted to submit more than one proposal in total.”

Fifth, the Commission proposed amending Rule 14a-8(i)(12) to

replace the current [shareholder-proponent] resubmission thresholds of [three], [six], and [ten] percent with new thresholds of [five], [fifteen], and [twenty-five] percent, respectively, and add an additional provision to the rule that would allow companies to exclude proposals that have been submitted three or more times in the preceding five years if they received more than [twenty-five] percent, but less than [fifty] percent, of the vote and support declined by more than [ten percent] the last time substantially the same subject matter was voted on compared to the immediately preceding vote.

. The Commission noted that the above resubmission threshold increase and

momentum requirements “reflect[ed] [its] experience with shareholder proposals and are

intended to reduce the number of proposals eligible for resubmission that have little or no chance

of gaining meaningful, or majority, shareholder support while still providing shareholders with

the opportunity to build support for their proposals.”

,471–72.

The Commission stated that “the proposed amendments to Rule 14a-8[ were] [ ] informed

by [prior] public input [they] have received” and encouraged the submission of comments

through the notice-and-comment process in response to the proposed amendments.

.

In a footnote, the Commission revealed that “[it] received some non-public retail share

ownership data from a market participant who requested confidential treatment for the data.”

,498 n.245. The Commission noted that “[this] data provide[d] some information about

level and duration of ownership but d[id] not allow [the Commission] to identify those

shareholders that have submitted or are likely to submit shareholder proposals.”

As to this

deficiency of data regarding level and duration of ownership, the Commission “welcome[d]

8 empirical data to assist in estimating the number of excludable proponents under the proposed

thresholds, and . . . [data] that [would] allow [the Commission] to aggregate holdings to the

shareholder level, identify shareholders likely to submit shareholder proposals, and that span a

sufficiently long time period.”

. The Public Comment Period and the Broadridge Data

In response to the Commission’s notice, the proposed amendments garnered a significant

number of comments. See generally Certified List Describing the Record in Rulemaking

Proceedings Before the Securities and Exchange Commission, ECF No. 15 (listing over one

thousand comments submitted during the notice-and-comment period for the proposed

amendments). After the public comment period ended, a memorandum was released by the

Commission revealing that it had received data from Broadridge Financial Solutions, Inc.

(“Broadridge”), which contained “holding periods and other information for an enormous sample

of investor accounts[.]” Pls.’ Mem. at 12.

It was at that time that the Commission explicitly noted that on August 14, 2020, before

the public comment period ended, the Commission “placed a preliminary staff analysis and

memorandum from the Chief Economist” of the Commission that explained a data set provided

by Broadridge “in the public comment file” to allow the public the opportunity to comment on

and analyze the data. Def.’s Mem. at 10; see Procedural Requirements and Resubmission

Thresholds Under Exchange Act Rule 14a-8,

, 70,263–64 (Nov. 4, 2020)

(the “Final Rule”). 2 The Commission represents that “[the Broadridge] data set include[d]

account-level security holding information at U.S. companies that held annual shareholder

meetings from 2015 through 2017.” Def.’s Mem. at 9. On that same date, the Commission also

2 As the parties both note, Broadridge requested that the Commission not disclose its identity when it first submitted the data set for the Commission’s consideration. See Pls.’ Mot. at 12; Def.’s Mem. at 9.

9 provided to the public its own preliminary staff analysis—produced by the Commission’s Chief

Economist—that was conducted to “determine whether analysis of the [Broadridge] data could

reliably inform the Commission’s decision-making, including [by] assessing limitations in the

data and [the] assumptions regarding the data that would be necessary or appropriate as well as

its analytical value to the proposed rulemaking in light of those limitations and assumptions.” 85

Fed. Reg. at 70,268. Upon analyzing the data, the Commission’s Chief Economist concluded

that “it was [his] view that the preliminary draft analysis was not relevant to the economic

question central to the proposal and that the data had limitations that reduced its potential value

[to the Commission’s] analy[sis of its] [ ] proposal.” Joint App’x, Exhibit (“Ex.”) A1278

(Analysis of Data Provided by Broadridge Financial Solutions, Inc. by S.P. Kothari, Chief

Economist (Aug. 14, 2020) (“Kothari Memo”)) at 3. Thus, “[he] did not believe the analysis

would reliably inform consideration of the proposal.” Id., Ex. A1278 (Kothari Memo) at 3.

According to the Commission, the preliminary analysis of the Broadridge data set

received just two comments—relevant here, one which “asserted that the Commission should

have provided the [earlier] public notice of and an opportunity to comment on the [p]reliminary

[s]taff [a]nalysis in the Proposing Release.” 85 Fed. Reg. at 70,268. Although the Commission

received the data in August 2019, see Def.’s Mem. at 9, and it was briefly referenced in the

Proposing Release, see 84 Fed. Reg. at 66,498 n.245, the Commission nonetheless did not

provide any further opportunity to comment on the Chief Economist’s memorandum or the

preliminary staff analysis, see 85 Fed. Reg. at 70,268. It was the Commission’s conclusion that

“due to the significant limitations in the [Broadridge] data and the extent and nature of the

related assumptions that would be necessary to make use of it, neither the data set nor the

associated [p]reliminary [s]taff [a]nalysis could be used to reliably assess the potential impact of

10 [the] rule amendments on retail shareholders and accordingly, neither the [Broadridge] data nor

the related analysis were included in the Proposing Release.” Id.

3. The Final Rule

On November 4, 2020, the Commission adopted the Final Rule. See id. at 70,240. The

Commission noted that “[a]fter taking into consideration the [numerous] public comments, as

well as the feedback received as part of the Commission’s 2018 Roundtable on the Proxy

Process . . . [, it] [ ] adopt[ed] the amendments substantially as proposed with the exception of

the [m]omentum [r]equirement[.]” 3 Id. at 70,241. Thus, the Commission adopted the

resubmission threshold proposal which allows companies to exclude a shareholder proposal from

its proxy statement if the most recent vote occurred within the preceding three calendar years and

the most recent vote was:

[(1)] Less than [five] percent of the votes cast if previously voted on once; [(2)] Less than [fifteen] percent of the votes cast if previously voted on twice; or [(3)] Less than [twenty-five] percent of the votes cast if previously voted on three or more times.

Id. at 70,258. None of the other proposed amendments were altered or substantially changed.

See id. at 70,241. Overall, the Commission concluded that

[together, t]he amendments are intended to modernize and enhance the efficiency and integrity of the shareholder-proposal process for the benefit of all shareholders, including to help ensure that a shareholder-proponent has demonstrated a meaningful ‘economic stake or investment interest’ in a company before the shareholder may draw on company resources to require the inclusion of a proposal in the company’s proxy statement, and before the shareholder may use the company’s proxy statement to command the attention of other shareholders to consider and vote on the proposal.

3 The momentum requirement “would [have] allow[ed] companies to exclude proposals previously voted on by shareholders three or more times in the preceding five calendar years” under certain conditions. See 85 Fed. Reg. at 70,289. However, the Commission declined to adopt this requirement as it “would have imposed costs on shareholder-proponents and companies because it would have made the determination of shareholder proposal eligibility more complex.” Id. Accordingly, the plaintiffs do not challenge this requirement.

11 Id. at 70,241. After adopting all of the above identified amendments to the Final Rule, it went

into effect on January 4, 2021. See id. at 70,240.

B. Procedural Background

On June 15, 2021, the plaintiffs initiated this case, challenging the adopted amendments

to Rule 14a-8 and requesting that the Court “issue a permanent injunction and prohibit[] the

Commission from enforcing the [F]inal [R]ule[.]” Compl. at 47. The plaintiffs contend that the

Commission violated the APA in its promulgation of the amendments to Rule 14a-8 when it (1)

failed to conduct an adequate economic analysis, see id. ¶¶ 132–43, (2) imposed “sharp new

restrictions[,]” id. ¶ 145, on the aggregation of shareholdings and the utilization of

representatives, see id. ¶¶ 144–53, (3) acted in excess of its statutory authority provided to it

under the Securities and Exchange Act, see id. ¶¶ 154–61, (4) failed to comply with the APA, see

id. ¶¶ 162–67, and (5) provided pretextual justifications for the promulgation of the rule, see id.

¶¶ 168–71. In support of the Complaint, on September 20, 2021, the plaintiffs filed their motion

for summary judgment. See Pls.’ Mot. at 1–2. However, the plaintiffs only moved for summary

judgment on Counts I through IV of their Complaint and not Count V. See id. at 1.

In response to the plaintiffs’ motion, on November 19, 2021, the Commission filed its

combined cross motion for summary judgment and opposition to the plaintiffs’ motion for

summary judgment. See Def.’s Mot. at 1. And, the Commission represents that it moves for

summary judgment on all five counts of the plaintiffs’ Complaint. See id.; Def.’s Mem. at 43

n.12. Subsequently, on December 17, 2021, the plaintiffs filed a reply in support of their motion

for summary judgment. See Pls.’ Reply at 1. 4 On March 10, 2025, the parties appeared

remotely for a motion hearing regarding only Count V of the plaintiffs’ Complaint, see Minute

4 The Commission did not file a reply in support of their cross-motion for summary judgment.

12 (“Min.”) Entry (Mar. 10, 2025), which was only superficially addressed in footnotes of the

parties’ opposition and reply briefs, see Def.’s Mem. at 43 n.12; Pls.’ Reply at 25 n.7. Following

the hearing, on March 14, 2025, the parties filed supplemental memoranda to better explain their

respective positions regarding Count V of the Complaint. See Pls.’ Suppl. Mem. at 1; Def.’s

Suppl. Mem. at 1.

II. STANDARD OF REVIEW

A moving party is entitled to summary judgment “if the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(a). In the APA context, summary judgment is the mechanism for

deciding whether, as a matter of law, an agency action is supported by the administrative record

and is otherwise consistent with the standard of review under the APA. See, e.g., Citizens to

Preserve Overton Park, Inc. v. Volpe,

, 415–16 (1971). But, because the district

court’s role is limited to reviewing the administrative record, the typical summary judgment

standards set forth in Federal Rule of Civil Procedure 56 are not applicable. See Stuttering

Found. of Am. v. Springer,

(D.D.C. 2007). Rather, “[u]nder the APA,

it is the role of the agency to resolve factual issues to arrive at a decision that is supported by the

administrative record, whereas ‘the function of the district court is to determine whether or not as

a matter of law the evidence in the administrative record permitted the agency to make the

decision it did.’”

(quoting Occidental Eng’g Co. v. Immigr. & Naturalization Serv.,

, 769–70 (9th Cir. 1985)). In other words, “when a party seeks review of agency action

under the APA, the district judge sits as an appellate tribunal[,]” and “[t]he ‘entire case’ on

review is a question of law.” Am. Bioscience, Inc. v. Thompson,

(D.C. Cir.

2001).

13 The APA “sets forth the full extent of judicial authority to review executive agency

action for procedural correctness[.]” Fed. Commc’ns Comm’n v. Fox Television Stations, Inc.,

(2009) (citing Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def. Council,

Inc.,

, 545–49 (1978)). It requires a district court to “hold unlawful and set aside

agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with [the] law[,]”

(2)(A); “contrary to

constitutional right, power, privilege, or immunity[,]”

§ 706(2)(B); or “in excess of statutory

jurisdiction, authority, or limitations, or short of statutory right[,]” id. § 706(2)(C). “The scope

of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute

its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.

Auto. Ins. Co.,

(1983). “Nevertheless, the agency must examine the relevant

data and articulate a satisfactory explanation for its action including a ‘rational connection

between the facts found and the choice made.’”

(quoting Burlington Truck Lines v. United

States,

(1962)). However, the district “[c]ourt[] ‘will uphold a decision of less

than ideal clarity if the agency’s path may reasonably be discerned.’” Pub. Citizen, Inc. v. Fed.

Aviation Admin.,

(D.C. Cir. 1993) (quoting Bowman Transp., Inc. v. Ark.-

Best Freight Sys., Inc.,

(1974)).

III. ANALYSIS

The plaintiffs argue that “[t]he [Commission]’s amendments severely impair

shareholders’ access to the proposal process[,]” Pls.’ Mem. at 1, because

[t]hey dramatically increase the amount of stock a shareholder must own to submit a proposal, including a more than ten-fold increase for investments held for only one year. They make it much more difficult to resubmit a proposal that was submitted in an earlier year. And they arbitrarily prohibit shareholders from aggregating their holdings or relying on experienced and knowledgeable representatives to draft and submit proposals on their behalf,

14

Specifically, as noted earlier, the plaintiffs argue that “[the Commission] provide[d] a

[ deficient] economic analysis of the costs and benefits of the proposed rule” because “it made no

meaningful effort to analyze the number of proposals that would be excluded by its new

ownership requirements[.]”

In that regard, the plaintiffs believe the Commission wrongfully

“concealed th[e Broadridge] data from the public, belatedly disclosed it only after the comment

period ended, and then arbitrarily asserted that the data contained no useful information about

holding periods based on minor [concerns] that were both unfounded and inadequate to justify

the Commission’s decision.” Id. at 2. The plaintiffs also argue that “[t]he Commission’s cost-

benefit analysis was also deficient” because it “refused to quantify th[e] benefits [that the

commenters provided during the notice-and-comment period].” Id. at 2. Finally, the plaintiffs

argue that “the Commission imposed arbitrary limits on ownership aggregation and the use of

representatives.” Id. Consequently, the plaintiffs argue that “[t]he Commission’s rule was

arbitrary, capricious, and not in accordance with [the] law.” Id. Moreover, the plaintiffs contend

that “[t]he Commission also disregarded basic procedural requirements by concealing the [ ]

Broadridge data until long after the comment period ended, and it exceeded its authority by

intruding on state agency law without any statutory mandate to do so.” Id.

The Commission responds that the plaintiffs “primarily advance meritless challenges

predicated on purported shortcomings in the Commission’s economic analysis.” Def.’s Mem.

at 3. The Commission argues that it satisfied its obligation to consider and evaluate the potential

economic consequences of the final amendments and “reasonably explained why it determined

that it could not draw any more meaningful conclusions from plaintiffs’ preferred data.” Id.

Further, the Commission contends that it reasonably justified its decisions to prohibit

aggregation of holdings, to apply the one-proposal limit to representatives, and to better facilitate

15 engagement between companies and shareholder-proponents because each decision was based on

a “rationally determined [conclusion] that each would help to safeguard the integrity of the

shareholder-proposal process or advance other regulatory goals.” Id. Additionally, the

Commission argues that it acted within its statutory authority because “there is no serious risk

that [it] could federalize state agency law if it is permitted to limit the number of proposals a

representative may submit per meeting under the rule or condition eligibility on a proponent’s

willingness to engage in a discussion with the company.” Id. at 3–4.

The Court will first address whether the Commission wrongfully concealed the

Broadridge data, the Chief Economist’s memorandum and the preliminary staff analysis, or, at a

minimum, whether it should have allowed additional time for notice and comment regarding the

Broadridge data and those documents analyzing that data. The Court will then examine whether

the Commission’s economic analysis was arbitrary and capricious in regards to the impact the

Final Rule would have on the number of shareholder proposals, followed by whether the

Commission failed to adequately quantify the costs and benefits of adopting the Final Rule.

Finally, the Court will consider whether the Commission’s aggregation amendment regarding

shareholder ownership thresholds was arbitrary and capricious and whether the amendment

otherwise exceeds the Commission’s statutory authority.

A. Whether the Commission Should Have Earlier Disclosed the Broadridge Data, the Chief Economist’s Memorandum and Preliminary Staff Analysis or Reopened the Notice-and-Comment Period

The Court first considers whether the Commission should have earlier disclosed the

Broadridge data and allowed for the public to comment on the data despite the fact that the data

was not ultimately considered by the Commission in its decision to adopt the amendments to the

proxy rules. The plaintiffs argue that “[t]he Commission’s treatment of the Broadridge data [ ]

16 violated the APA’s procedural requirements [regarding making data available under

(b)(3) and (c)].” Pls.’ Mem. at 26. Specifically, the plaintiffs contend that “[t]he

Commission failed to comply with required procedures here because it revealed the critical

Broadridge data more than six months after the comment period closed, and only a month before

it issued its [F]inal [R]ule.”

The Commission responds that it satisfied its obligations under

the APA because “[it] ‘did not rely’ at all on the Broadridge data or [the] preliminary staff

analysis[ assessing the utility of the data].” Def.’s Mem. at 32 (quoting 85 Fed. Reg. at 70,268).

Under the APA, an agency must publish notice in the Federal Register of “either the

terms or substance of [a] proposed rule or a description of the subjects and issues involved[,]”

(b)(3), and “give interested persons an opportunity to participate in the

rule[-]making through submission of written data, views, or arguments[,]” see

§ 553(c).

Important, here, is the statutory requirement that an agency “identify and make available

technical studies and data that it has employed in reaching the decisions to propose particular

rules[.]” Owner-Operator Indep. Drivers Ass’n v. Fed. Motor Carrier Safety Admin.,

(D.C. Cir. 2007) (quoting Solite Corp. v. Env’t Prot. Agency,

(D.C.

Cir. 1991)). The “[d]isclosure of [studies or data such as] staff reports allows the parties to focus

on the information relied on by the agency and to point out where that information is erroneous

or where the agency may be drawing improper conclusions from it.” Am. Radio Relay League,

Inc. v. Fed. Commc’ns Comm’n,

(D.C. Cir. 2008) (citation omitted). This is

because “[p]ublic notice and comment regarding relied-upon technical analysis . . . are ‘[t]he

safety valves in the use of . . . sophisticated methodology.’”

(second alteration in original)

(quoting Sierra Club v. Costle,

, 397–98, 398 n.484 (D.C. Cir. 1981)).

By requiring the ‘most critical factual material’ used by the agency be subjected to informed comment, the APA provides a procedural device to ensure that

17 agency regulations are tested through exposure to public comment, to afford affected parties an opportunity to present comment and evidence to support their positions, and thereby to enhance the quality of judicial review.

(quoting Ass’n of Data Processing Serv. Orgs., Inc. v. Bd. of Governors of the Fed. Rsrv.

Sys.,

, 684 (D.C. Cir. 1984)).

“An agency commits serious procedural error when it fails to reveal portions of the

technical basis for a proposed rule in time to allow for meaningful commentary.” Conn. Light &

Power Co. v. Nuclear Regul. Comm’n,

, 530–31 (D.C. Cir. 1982). However, “the

[C]ourt will not set aside a rule absent a showing by the p[laintiff]s that they suffered prejudice

from the agency’s failure to provide an opportunity for public comment, . . . in sufficient time so

that the agency’s decisions . . . [may be] framed with . . . comment in full view[.]” Am. Radio

Relay League, Inc.,

(third alteration in original) (internal quotation marks and

citation omitted).

Here, the Commission clearly stated that “[it] did not rely on th[e Broadridge] data or [the

memorandum and preliminary staff] analysis in determining to propose the amendments.” 85

Fed. Reg. at 70,268; see Def.’s Mem. at 32. The plaintiffs contend that “[t]he Commission,

however, clearly relied on its Chief Economist’s analysis in determining whether the Broadridge

data contained meaningful information about holding periods.” Pls.’ Reply at 14 (emphasis

omitted). The plaintiffs further argue that “[t]he Commission analyzed and agreed with its Chief

Economist’s assessment and, on that basis, proceeded with its [ ] three-fold increase to

[ownership] holding periods even though it [allegedly] had no idea how many proposals the

increase would exclude.” Id. Thus, the critical question for the Court is whether the reliance on

the Chief Economist’s memorandum and the preliminary staff analysis of the Broadridge data,

18 but not on the data itself, shields the Commission from its notice and opportunity for public

comment obligations under the APA.

The Court concludes that the Commission should have timely revealed the Chief

Economist’s memorandum and the accompanying preliminary staff analysis, which would have

disclosed the Broadridge data, thereby at a minimum, providing the public adequate opportunity

to comment on it. This is because the Commission did “rely” on the memorandum and

preliminary staff analysis by concurring with the conclusions in them, even though it concluded

that the Broadridge data could not be used in assessing the adoption of the Final Rule. See 85

Fed. Reg. at 70,263 (“We concur with the conclusions of the Commission’s Chief Economist set

forth in the . . . memorandum accompanying the [p]reliminary [s]taff [a]nalysis[, despite the fact

that] . . . the data set . . . could [not] be used to reliably assess the potential impact of our rule

amendment on retail shareholders.” (emphasis added)). As the Commission represents, “as a

result of [the Broadridge data’]s significant limitations, neither the data set nor the associated

[p]reliminary [s]taff [a]nalysis could be used to reliably assess the potential impact of our rule

amendments on retail shareholders.” Id. However, the Commission could not, on the other

hand, use the preliminary staff analysis as support for its position that it could not rely on the

Broadridge data, without considering the analysis that caused it to reach that conclusion.

Accordingly, the Commission should not have withheld the Chief Economist’s memorandum

and preliminary staff analysis until when it did, thereby depriving the public of a complete

picture of the challenges it faced in quantifying the effects of the ownership thresholds on the

number of shareholder proposals that it otherwise projected would be submitted.

The District of Columbia Circuit in American Radio Relay League encountered a similar

question in assessing whether the agency in that case should have disclosed redacted portions of

19 its own internal staff analysis that it at least “rel[ied on] in part.”

. There, the

court opined that “[i]t appear[ed] to be a fairly obvious proposition that studies upon which an

agency relies in promulgating a rule must be made available during the rule[-]making [process]

in order to afford interested persons meaningful notice and an opportunity for comment.”

The redactions in American Radio Relay League “indicate[d] that a study’s core scientific

recommendations may [have] reveal[ed] the limitations of [the agency’s] own data and that its

conclusions may [have] reveal[ed] methodology or illuminate strengths and weaknesses of

certain data or the study as a whole.”

. In that case, the court remanded the case to the

agency to allow the public the opportunity to comment on the unredacted versions of the internal

studies on which the agency in part relied on when promulgating the rule that was at issue. See

.

Although not directly on point, the Court finds the reasoning in American Radio Relay

League persuasive and analogous for two primary reasons. First, “[i]t is not consonant with the

purpose of a rule-making proceeding to promulgate rules on the basis of inadequate data, or on

data that, [to a] critical degree, is known only to the agency.”

(second alteration in

original) (quoting Portland Cement Ass’n v. Ruckelshaus,

(D.C. Cir. 1973)).

Indeed, although “an agency’s determination is based upon a complex mix of controversial and

uncommented upon data and calculations, there is no APA precedent allowing an agency to

cherry-pick a study on which it has chosen to rely [or not rely] in part.”

(internal quotation

marks omitted) (quoting Solite Corp. v. Env’t Prot. Agency,

(D.C. Cir.

1991)). Thus, although the Commission represents that it did not directly rely on the Broadridge

data, the Chief Economist’s memorandum, or the preliminary staff analysis “in determining to

propose the amendments[,]” 85 Fed. Reg. at 70,268, because it opined significantly about those

20 documents, and subsequently included the memorandum and analysis in the public record, the

Commission seemingly conceded that the information included therein was relevant to its final

determination to substantially adopt the proposed amendments, at least to some degree, see, e.g.,

MCI Telecommc’ns Corp. v. Fed. Commc’ns Comm’n,

(D.C. Cir. 1995)

(“[A]n agency may not turn the provision of notice into a bureaucratic game of hide and seek.”);

see also Oceana, Inc. v. Ross,

(D.D.C. 2018) (“The use of a document to

justify an assertion or proposition indicates that the [agency] consulted and thought about—and

therefore considered—that document directly[.]”). Consequently, the Commission’s decision

regarding whether to ultimately rely on the Broadridge data in proposing the amendments could

only be arrived at by considering the memorandum and preliminary staff analysis which aided in

the evaluation of the economics of shareholder proposals on the proxy process.

Second, although Broadridge initially requested that its identity not be disclosed to the

public when it submitted its data to the Commission, “[i]n June 2020, Broadridge agreed to be

identified as the source of the data.” Joint App’x, Ex. A1278 (Kothari Memo) at 1 n.3. Because

the Commission was unable to disclose the data or the identity of Broadridge before June 2020—

two months before the Commission finally disclosed the Chief Economist’s memorandum and

the preliminary staff analysis in the public register—the reason for that delay should have been

made known to the public at that time. After all, “the ‘dialogue’ between administrative

agencies and the public ‘is a two-way street.” Northside Sanitary Landfill, Inc. v. Thomas,

(D.C. Cir. 1988) (quoting Home Box Off. v. Fed. Commc’ns Comm’n,

(D.C. Cir. 1977)). Therefore, as the plaintiffs and at least one commenter correctly

assert, “the Commission should have provided the public notice of and an opportunity to

comment on [both] the [p]reliminary [s]taff [a]nalysis [and the Chief Economist’s memorandum]

21 in the Proposing Release[,]” 85 Fed. Reg. at 70,268; see Pls.’ Reply at 14, or as soon as

practicable, rather than in the final weeks before the adoption of the Final Rule. See, e.g., CTS

Corp. v. Env’t Prot. Agency,

(D.C. Cir. 2014) (suggesting that the petitioner

should have “petitioned the [agency] for either reconsideration or a new rulemaking or [to]

reopen the notice-and-comment period” to afford the opportunity for public comment on a staff

analysis that was not ultimately used by the agency (internal citation omitted)). A timely

disclosure of the Broadridge data could possibly have provided an opportunity to better test the

Commission’s analysis of its purported deficiencies “through [more] exposure to public

comment, . . . thereby [] enhanc[ing] the quality of judicial review.” Am. Radio Relay League,

Inc.,

(internal quotation marks omitted).

Finally, the Court is unpersuaded by the Commission’s secondary argument that “[t]he

Chief Economist’s assessment does not implicate Section 553 because it was not ‘central’—or

even relevant—to the Commission’s decision to adopt the [amendments].” Def.’s Mem. at 33

(internal quotation marks omitted) (quoting Owner-Operator Indep. Drivers Ass’n,

). As the Court already indicated, supra Section III.A at 19, the Chief Economist’s

memorandum and the accompanying analysis were all “relevant” to some extent to the

Commission’s decision not to rely on the Broadridge data when it substantially adopted the

amendments from the Proposing Release in the Final Rule. Moreover, the Commission was

required to “identify and make available technical studies and data that it has employed in

reaching the decisions to propose particular rules.” Owner-Operator Indep. Drivers Ass’n,

. Whether the data was “central” to the Commission’s decision to promulgate the rule

is immaterial. See

(“[T]he agency[ has a] duty to identify and make available technical

studies and data that it has employed in reaching the decisions to propose particular rules[.]”

22 (internal quotation marks omitted)). Therefore, the Court concludes that the Commission should

have disclosed the Chief Economist’s memorandum and the preliminary staff analysis or

provided the public more time to address the documents, given the Commission’s stated

concerns with using the Broadridge data to inform its own analysis regarding the potential

impacts on the number of shareholder proposals that would result from the adoption of the

amendments.

Having concluded that the Chief Economist’s memorandum and the preliminary staff

analysis should have been disclosed earlier, the Court must now consider whether the

Commission committed “prejudicial error[,]”

, by not earlier disclosing that

information. As noted earlier, “the [C]ourt will not set aside a rule absent a showing by the

p[laintiff]s that they suffered prejudice from the agency’s failure to provide an opportunity for

public comment[.]” Am. Radio Relay League, Inc.,

(internal quotation marks

omitted). “The burden to demonstrate prejudicial error is on the party challenging agency

action.” Jicarilla Apache Nation v. U.S. Dep’t of Interior,

(D.C. Cir. 2010).

“To show that error was prejudicial, a plaintiff must ‘indicate with reasonable specificity what

portions of the documents it objects to and how it might have responded if given the

opportunity.’” Gerber v. Norton,

(D.C. Cir. 2002) (internal quotation marks

omitted) (quoting McLouth Steel Prods. Corp. v. Thomas,

, 1323–24 (D.C. Cir.

1988)).

Based on the existing record, the Court concludes that the Commission did not commit

prejudicial error by improperly withholding the Chief Economist’s memorandum and

preliminary staff analysis until the disclosure was made because “[n]o substantive challenges

which differ in kind from the original comments have been raised.” Fla. Power & Light Co. v.

23 United States,

, 772 (D.C. Cir. 1988). Here, the Commission did provide some

opportunity for public comment—albeit brief—and comments regarding the Broadridge data

were received and considered by the Commission. See Joint App’x, Ex. A1224 (Comment

Letter from Amy Borrus, Executive Director, Council of Institutional Investors, et al. (September

4, 2020) (“Borrus Letter”)) at 1 (explaining the commenter’s concerns with “the [eleventh]-hour

submission by the Chief Economist . . . long after the February 3, 2020, public comment

deadline” and the concerns with the figures provided therein); see also 85 Fed. Reg. at 70,268–69

(responding in detail to the Borrus Letter’s concerns regarding why the analysis and Broadridge

data were unusable). Because the plaintiffs’ core argument on this procedural issue was

addressed by the Commission in the Final Rule—viz., that “[t]he Commission [unlawfully]

concealed th[e Broadridge] data from the public,” Pls.’ Mem. at 2, and the Commission

explained why it did not rely on the data in promulgating the Final Rule, see 85 Fed. Reg. at

70,268–69, the Commission has satisfied its obligation to provide the public “opportunity to

address the staff [analysis] . . . [and] frame[] [its determination] with adversarial comment in full

view.” Nat’l Ass’n of Regul. Util. Comm’nrs. v. Fed. Commc’ns Comm’n,

(D.C. Cir. 1984).

Although the Court does not consider this untimely disclosure a mere “technical

argument,” Fla. Power & Light Co., 846 F.2d at 772, as the Commission’s notice and comment

obligations serve an important function in the rule-making process, it must nonetheless conclude

that the error was “[e]ssentially . . . rendered harmless[,]” Nat’l Ass’n of Regul. Util. Comm’rs,

73 F.2d at 1121, in light of the Commission addressing the concerns outlined in the comment

that was received, and additionally, the Commission’s “request[] that commenters submit data

that would allow the Commission to reliably assess the impact of the [amendment] proposal[ as

24 initially raised in the Proposing Release,]” 85 Fed. Reg. at 70,268; see 84 Fed. Reg. at 66,498

n.245 (inviting comments to better assess the impact on the number of shareholder proposals

rather than what was supplied in the “confidential” data later disclosed to have been supplied by

Broadridge). Accordingly, the Court concludes that even though the Commission erred by

withholding disclosure of the Chief Economist’s memorandum and the preliminary staff analysis

which both analyzed the Broadridge data, the error was harmless and, therefore, the Court must

decline to set aside the Final Rule on this basis.

B. Whether the Commission Conducted an Adequate Economic Analysis of the Impact of the Final Rule on the Number of Shareholder Proposals

The Court next considers whether the Commission conducted an adequate economic

analysis of the impact the Final Rule would have on the number of shareholder proposals that

would be submitted. On this issue, the plaintiffs argue that “[t]he Commission failed to conduct

any reasonable [economic] analysis” because it failed to understand “how many formerly eligible

proposals would be excluded by its more stringent ownership requirements.” Pls.’ Mem. at 20

(emphasis omitted). The plaintiffs further argue that because the Commission failed to quantify

the economic impact the rule amendment would have on the number of shareholder proposals,

despite having the ability to consider the Broadridge data, the adoption of the amendment was

arbitrary and capricious. See id. at 25. In response, the Commission argues that its economic

analysis was not arbitrary or capricious because its only requirement was to “determine as best it

c[ould] the economic implications of the rule, but it need not conduct a rigorous, quantitative

economic analysis of every cost and benefit.” Def.’s Mem. at 15 (internal quotation marks

omitted) (quoting Lindeen v. Sec. & Exch. Comm’n,

(D.C. Cir. 2016)).

“To survive review under the arbitrary and capricious standard, an agency must examine

the relevant data and articulate a satisfactory explanation for its action including a rational

25 connection between the facts found and the choice made.” Sierra Club v. Salazar,

(D.D.C. 2016) (Walton, J.) (quoting Tripoli Rocketry Ass’n v. Bureau of Alcohol,

Tobacco, Firearms & Explosives,

(D.C. Cir. 2006)). “When the [Securities and

Exchange] Commission engages in rulemaking under the Exchange Act [which] requires it to

consider ‘whether an action is necessary or appropriate in the public interest,’ it must also

consider ‘the protection of investors’ as well as ‘whether the action will promote efficiency,

competition, and capital formation.’” Nasdaq Stock Mkt. LLC v. Sec. & Exch. Comm’n,

(D.C. Cir. 2022) (quoting 15 U.S.C. § 78c(f)). Although “[a]n agency’s

duty to consider economic impacts does not necessarily require a precise cost-benefit analysis,”

id., “th[e District of Columbia Circuit] has recognized that the Commission ‘need not . . . base its

every action upon empirical data,” id. (quoting Chamber of Com. v. Sec. & Exch. Comm’n,

(D.C. Cir. 2005) (“Chamber I”)), “and [the Commission] may reasonably conduct

‘a general analysis based on informed conjecture,’”

(quoting Chamber I,

). In

other words, “the Commission [has a] statutory obligation to determine as best as it can the

economic implications of the rule it has proposed[.]” Bloomberg L.P. v. Sec. & Exch. Comm’n,

(D.C. Cir. 2022) (quoting Chamber I,

).

Here, the Commission “estimated the reduction in the number of shareholder proposals

assuming no change in shareholder-proponent behavior as a result of the rule amendments.” 85

Fed. Reg. at 70,270; see 84 Fed. Reg. at 66,497–99. In doing so, the Commission “only

estimate[d] the range, and not a precise number, of the reduction in shareholder proposals

associated with changes to the ownership thresholds because [it did] not have data on duration of

holdings for shareholder-proponents.” 85 Fed. Reg. at 70,270. The plaintiffs argue that “[t]he

Commission’s final rule [that] provides an ‘estimate of the percentage of excludable proposals’

26 as falling somewhere between [zero percent] and [fifty-six percent]—[is] an utterly

indeterminate range that provides no meaningful economic guidance at all.” Pls.’ Mem. at 23;

see 85 Fed. Reg. at 70,271 tbl. 1. Moreover, the plaintiffs contend that the conclusion reached

by the Commission “was false and contrary to the administrative record” because “[it] had

obtained [the Broadridge] data over a year earlier . . . showing holding periods for over

[twenty-eight] million retail accounts.” Pls.’ Mem. at 24. As explained in the preliminary staff

analysis, “[Commission] staff had found that similar increased ownership requirements would

result in a reduction in shareholder proposals of up to [seventy-eight percent].” Id.; see Joint

App’x, Ex. A1278 (Kothari Memo) at 1. Thus, the plaintiffs argue that “the Commission needed

to know how many formerly eligible proposals would now be excluded[,]” Pls.’ Mem. at 22

(emphasis omitted), in order to conduct an adequate economic analysis of the impact on the

number of shareholders, and it failed to do so because it failed to consider the Broadridge data.

See id. at 24.

For the following reasons, the Court concludes that the Commission adequately analyzed

the potential impact the proposed rule would have on the number of shareholder proposals. First,

the Commission’s analysis and conclusion is entitled to “deferen[ce because this] matter[]

implicat[es] predictive judgments.” Inv. Co. Inst. v. Commodity Futures Trading Comm’n,

(D.D.C. 2012) (quoting Rural Cellular Ass’n v. Fed. Commc’ns Comm’n,

(D.C. Cir. 2009)). The Commission considered adopting amendments that

had not previously existed, and thus lacked a substantial amount of data capturing ownership

duration beyond one year upon which it could rely. See 63 Fed. Reg. at 29,111–12

(implementing the prior rule requiring only two thousand dollars or one percent of ownership for

at least a year for a shareholder-proponent’s proposal to be included on a company proxy

27 statement); see also 84 Fed. Reg. at 66,498 n.245 (soliciting “empirical data to assist in

estimating the number of excludable proponents under the proposed thresholds, . . . aggregate

holdings to the shareholder level, identify shareholders likely to submit shareholder proposals,

and that span a sufficiently long time period.”). Because, “[the] agency [wa]s obliged to make

policy judgments where no factual certainties exist[ed,] [n]or w[ere] facts . . . provide[d to

support] [an] answer, [the Court’s] role is more limited; [the Court may therefore only] require

[ ] that the agency [ ] state [its reasoning] and go on to identify the considerations it found

persuasive.” Chamber I,

(quoting Bellsouth Corp. v. Fed. Commc’ns

Comm’n,

(D.C. Cir. 1999)). The Commission identified those

considerations, see 85 Fed. Reg. at 70,268 (indicating “[t]he magnitude of the overall reduction

will determine the magnitude of the benefits and costs [to the number of shareholder

proposals].”); id. at 70,267–72, and “determine[d] as best it c[ould] the economic implications of

the rule it [ ] proposed[,]” Chamber I,

.

Second, the Commission reasonably analyzed the amendments’ impact based on what it

concluded to be the proper data, and adequately explained the limitations of using that data. As

the Commission noted, “[it] chose to use ownership data specific to shareholder-proponents

(with no duration information beyond one year) rather than ownership data from a general pool

of shareholders [as the Broadridge data used] (with some additional duration information).”

Def.’s Mem. at 18–19; see 84 Fed. Reg. at 66,497 (“[The Commission] analyze[d shareholder-]

proponents’ ownership information using data from proxy statements[.]”); see also 85 Fed. Reg.

at 70,270–71 (adopting the methodology used in the Proposing Release to calculate the impact

on shareholder proposals). Although the Commission did “lack data on [the] proponents’

duration of ownership [ beyond the prior one year requirement],” 84 Fed. Reg. at 66,498,

28 sufficient to determine the number of proposals that would be excludable following the adoption

of the Final Rule, the Commission was able to “derive” the zero-to-fifty-six percent impact range

based upon “estimates of the percentage of currently eligible proposals[—at the time of the

Proposing Release—]that would be excludable by assuming that all or none of currently eligible

proponents satisfied the duration requirements[,]” Def.’s Mem. at 16–17; see 84 Fed. Reg.

at 66,497. In response, comments were received that provided general statistics on shareholder

duration, but the Commission noted that “it [wa]s difficult to infer duration of holdings of

shareholder-proponents from these [commenters and] studies [they identified] because they d[id]

not separately consider holdings of shareholders that already submitted or are likely to submit

shareholder proposals.” 85 Fed. Reg. at 70,270 n.320. Moreover, the Commission ultimately

opined that it

d[id] not expect the final amendments relating to the one-percent ownership threshold and shareholder engagement or the final amendment requiring certain documentation when using a representative to meaningfully impact the number of shareholder proposals included in companies’ proxy statements, because the one- percent ownership threshold currently is rarely utilized in light of the $2,000/one- year threshold and the majority of shareholders that submit a proposal through a representative already provide much of the documentation that is mandated by the final amendments, consistent with existing staff guidance.

Id. at 70,270–71 (emphasis added). Therefore, the Commission found that drawing conclusions

about the statistics provided by commenters “would [have] be[en] inherently speculative because

shareholder-proponents constitute[d] a very small[,] . . . non-random set of shareholders.” Id.

at 70,270 n.320.

Finally, the Commission adequately explained why it did not consider the Broadridge

data. The Commission specifically noted that

[it] was unable to determine with reasonable accuracy from the data set whether the snapshot of account holdings provided by Broadridge could be used to determine whether individual investors in fact met ownership and duration

29 thresholds under the current or revised eligibility requirements (and therefore was unable to determine with reasonable accuracy the potential impact), because the data set does not identify account holdings as of the deadline to submit a shareholder proposal or as of the annual meeting date.

Id. at 70,269. “Rather, [the Commission continued,] it only include[d] data points as of the

record date, which do not extend sufficiently in time to capture the minimum holding

requirements.” Id. While the plaintiffs contend that the Commission did not “meaningfully

estimate the impact of the rule’s significant increases to the required holding periods[,]” Pls.’

Mem. at 23, the Commission is not required to conduct such a rigorous analysis. See Lindeen,

. Rather, “[t]he agency’s job is to exercise its expertise to make tough choices

about which of the competing estimates [or available data sets] is most plausible, and to hazard a

guess as to which is correct, even if . . . the estimate [of the impact] will be imprecise.” Pub.

Citizen v. Fed. Motor Carrier Safety Admin.,

(D.C. Cir. 2004).

Thus, although the Commission noted that its “efforts to provide a quantitative analysis

[was] inherently limited[,]” 85 Fed. Reg. at 70,270, its ultimate decision to “estimate the range,

and not a precise number, of the reduction in shareholder proposals[,]” id., based on

extrapolating from the “limited data on duration of ownership from proxy statements or proof-of-

ownership letters,” 84 Fed. Reg. at 66,498, satisfies its statutory obligation, see 15 U.S.C.

§ 78c(f), to determine the economic impact on the number of shareholder proposals that would

result from adoption of the Final Rule. Accordingly, the Court concludes that the Commission’s

economic analysis adequately quantified the impact the Rule amendments would have on the

number of shareholder proposals that would be submitted.

C. Whether the Commission Adequately Quantified the Costs and Benefits of the Final Rule

30 The Court next considers whether the Commission adequately quantified the costs and

benefits to several different groups when it promulgated the Final Rule. The plaintiffs argue that

“the Commission’s [first flaw in its] cost-benefit analysis was its refusal to quantify the benefits

of shareholder proposals.” Pls.’ Mem. at 29. As support for their position, the plaintiffs argue

that although “[t]he Commission recognized that it was required to ‘quantify the costs, benefits,

and effects on efficiency’ of its rule if possible to do so—for ‘companies,’ ‘non-proponent

shareholders,’ and ‘proponents of shareholder proposals’ alike[,]” id. (quoting 85 Fed. Reg. at

70,263, 70,266–67), “the Commission quantified the impact only for the first category—

companies—and not the other two[,]” id. Thus, the plaintiffs contend, “[t]he result was a

nonsensical cost-benefit analysis where the Commission touted the supposed cost savings of its

rule for companies but had nothing to weigh those cost savings against.” Id. The Commission

responds that it “specifically ‘recognize[d] that shareholder proposals may bring benefits to

companies and that their shareholders and that the potential loss of those benefits resulting from

the exclusion of certain proposals that are not otherwise proposed by other shareholders would

be a cost of the rule.’” Def.’s Mem. at 22 (quoting 85 Fed. Reg. at 70,264). Moreover, “the

Commission [argues that it] reasonably explained that it ‘did not have the data necessary to

quantify [the costs or benefits] precisely,’ and thus its extensive qualitative discussion ‘fulfill[ed]

its statutory obligation to consider and evaluate potential costs and benefits.’” Id. at 20–21

(internal quotation marks omitted) (quoting Lindeen,

).

Courts “review [an agency’s] cost-benefit analysis deferentially.” Inv. Co. Inst.,

(quoting Nat’l Ass’n of Home Builders v. Env’t Prot. Agency,

(D.C. Cir. 2012)). Therefore, in reviewing agency cost-benefit analyses, “[a reviewing]

court is not to substitute its judgment for that of the agency[.]” Consumer Elecs. Ass’n v. Fed.

31 Commc’ns Comm’n,

(D.C. Cir. 2003) (quoting State Farm,

).

This is because “cost-benefit analyses epitomize the types of decisions that are most

appropriately entrusted to the expertise of an agency[.]” Off. of Commc’n of United Church of

Christ v. Fed. Commc’ns Comm’n,

, 1440 (D.C. Cir. 1983). “The Court’s role,

instead, is ‘to determine whether the decision was based on a consideration of the relevant

factors and whether there has been a clear error [of] judgment.’” Inv. Co. Inst.,

(citations and internal quotation marks omitted) (quoting Ctr. for Auto Safety v. Peck,

, 1342 (D.C. Cir. 1985)).

Furthermore, “in view of the complex nature of economic analysis typical in the

regulation promulgation process, [the plaintiffs’] burden to show error is high.” Nat’l Ass’n of

Home Builders,

. As to this factor, “[t]he APA imposes no general obligation

on agencies to produce empirical evidence[—r]ather, an agency has to justify its rule with a

reasoned explanation.” Stilwell v. Off. of Thrift Supervision,

(D.C. Cir.

2009). “Where an agency has acknowledged public comments regarding costs of the new rule

and concluded that such costs are ‘justified by gains in other areas,’ the agency has sufficiently

taken into consideration these facts.” Inv. Co. Inst.,

(quoting Owner-

Operator Indep. Drivers Ass’n,

).

In resolving this dispute between the parties, the Court will first address whether the

Commission adequately considered the costs of the Final Rule that would be incurred by

companies and shareholder-proponents before addressing whether the Commission adequately

considered the benefits of shareholder proposals.

1. Whether the Commission Properly Weighed the Cost Savings Data to Companies

The Court first considers whether the Commission properly weighed the cost savings data

impact on companies that would be affected by the Final Rule. The plaintiffs argue that it did

32 not, noting that “[t]he Commission solicited estimates from the public that resulted in an

extremely broad range of [cost-saving] estimates.” Pls.’ Mem. at 34. The plaintiffs contend that

“[t]he Commission then made no serious effort to scrutinize those numbers, instead simply

declaring that the cost savings would fall somewhere in that enormous range[,]” which “was an

abdication of [its] responsibility to conduct [a] meaningful analysis of the information it

received.”

The Commission responds that the plaintiffs’ “objection lacks merit” because

“[the p]laintiffs challenge the Commission’s analysis of direct cost-savings to companies, but do

not address the Commission’s discussion of other significant cost-savings.” Def.’s Mem. at 26.

In adopting the Final Rule, the Commission “use[d] the estimate of $18,982 . . . rounded

up to $20,000, as the lower bound for [its] direct cost estimates in the economic analysis[ for a

single shareholder proposal].” 85 Fed. Reg. at 70,274. The Commission then “use[d] $150,000

as the upper bound for [its] direct cost estimates in the economic analysis, which [it] believe[d]

represents a reasonable upper end of potential costs of processing a shareholder proposal[.]” Id.

Totaling all of the potential savings from the amendments collectively, the Commission

“estimate[d] that all Russell 3000 [Index 5] companies may experience an upper bound of annual

cost savings ranging from $1.16 million to $78.53 million per year, assuming no change in [the]

proponents’ behavior as a result of the final amendments.” Id. The Commission reached this

range based on the following calculations:

$332,400 = $20,000 ([citing] note 344) x 2% (i.e., minimum upper bound percentage of excludable proposals as a result of the amendments to Rules 14a- 8(b) and 14a-8(c)[)] . . . x 831 (i.e., all proposals submitted to be considered at 2018 shareholders’ meetings).

5 “The Russell 3000 Index measures the performance of 3,000 stocks” and is “designed to represent approximately 98% of investable U[nited ]S[tates] equities by market capitalization.” Russell US Indexes, FTSE Russell, https://www.lseg.com/en/ftse-russell/indices/russell-us#t-russell-3000 (last visited June 5, 2025).

33 $72.30 million = $150,000 ([citing] note 344) x 58% (i.e., maximum upper bound percentage of excludable proposals as a result of the amendments to Rules 14a- 8(b) and 14a-8(c)[)] . . . x 831 (i.e., all proposals submitted to be considered at 2018 shareholders’ meetings).

Id. at 70,274 n.347.

$831,000 = $20,000 ([citing] note 344) x 5% (i.e., upper bound percentage of excludable proposals as a result of the amendments to Rule 14a-8(i)(12)[)] . . . x 831 (i.e., all proposals submitted to be considered at 2018 shareholders’ meetings).

$6.23 million = $150,000 ([citing] note 344) x 5% (i.e., upper bound percentage of excludable proposals as a result of the amendments to Rule 14a-8(i)(12)[)] . . . x 831 (i.e., all proposals submitted to be considered at 2018 shareholders’ meetings).

Id. at 70,274 n.348. Adding together $332,400 and $831,000 equals $1.16 million, the low end

of the potential cost savings, while adding together $72.30 million and $6.23 million equals

$78.53 million, the higher end of the potential cost savings from the Final Rule amendments,

assuming there would be no change in the behavior of shareholder-proponents. See id.

at 70,274.

The plaintiffs argue that “[this] approach was an abdication of the Commission’s

responsibility to ‘make tough choices about which of the competing estimates is most plausible’

and to ‘hazard a guess as to which is correct.’” Pls.’ Mem. at 34 (quoting Bus. Roundtable v.

Sec. & Exch. Comm’n,

(D.C. Cir. 2011)). However, this again is a

misunderstanding of the Commission’s APA obligations, under which it is merely expected to

“justify its rule with a reasoned explanation.” Stilwell,

; see Nasdaq Stock Mkt.

LLC,

(“Th[e Circuit] has ‘never required anything more’ of an agency than to

weigh costs and benefits and to make ‘reasonable trade-offs[.]’” (quoting Covad Commc’ns Co.

v. Fed. Commc’ns Comm’n,

(D.C. Cir. 2006))). The Court concludes that the

Commission has done just that for several reasons. As the Commission pointed out, “the cost

34 estimates used in the economic analysis [we]re informed by the Commission’s decades-long

experience with Rule 14a-8 and the various forms of outreach on the proxy process that the

Commission has conducted over the years[,]” 85 Fed. Reg. at 70,273 n.338, such as “hosting the

Proxy Process Roundtable and soliciting public input on the Rule 14a-8 ownership thresholds[,]”

id. at 70,274 n.346; see id. at 70,245 n.63 (listing the company-commenters that provided the

Commission “estimates of the costs associated with a company’s receipt of a shareholder

proposal”); see also Chamber of Com. Br. at 4 (“Whether valid or frivolous, in the aggregate

shareholder proxy proposals cost companies, and ultimately other shareholders, tens of millions

of dollars each year.”). As the Commission contends, “[it] was ‘entitled to rely on these

representations by parties who were uniquely in a position to know’ the costs that they or their

members have previously incurred.” Def.’s Mem. at 29 (quoting Nat’l Ass’n of Regul. Util.

Comm’nrs,

). The Commission further noted that it was not “aware of

additional sources of information[, including comments from the public,] that would further

inform these cost estimates.”

at 28 (quoting 85 Fed. Reg. at 70,274 n.346).

The law in this Circuit does not conflict with the Commission’s position. For instance, in

Chamber I, the Circuit concluded that the range of costs estimated by the Commission was

legally permissible where “particular difficult[ies]” resulted in the Commission being able to

“determine only the range within which a[n affected entity]’s cost of compliance will fall,

depending upon how it responds to the condition [imposed by the new amendment at that time.]”

. And, in Business Roundtable, the Circuit ruled that the Commission’s proposed

amendment there was unlawful only because “it did nothing to estimate and quantify the costs it

expected companies to incur[,] nor did it claim estimating those costs was not possible, [as]

empirical evidence about expenditures . . . was readily available.”

. That is not

35 the case here, where the Commission “considered all of th[e] information thoroughly, leveraging

[their] decades of experience with Rule 14a-8, [to determine] . . . [that] the available information

[wa]s reliable and sufficient.” 85 Fed. Reg. at 70,274 n.346.

The Court is also unpersuaded by the plaintiffs’ argument that “the Commission failed to

grasp the significance of th[e] difference” between initial and resubmitted proposals which they

argue is a separate factor that should have been considered. Pls.’ Mem. at 36. Although the

Commission did acknowledge that the costs for initial proposals are generally higher than those

incurred for resubmitted proposals, see 85 Fed. Reg. at 70,272 n.332, it counterbalanced that

analysis by also opining that “resubmissions could be costlier than initial

submissions[ because] . . . companies might decide to challenge a resubmission or to make a

concession to the proponent in exchange for the proposal being dropped and incur the associated

costs following low support for the initial submission[,]” id. at 70,266 n.288. In any event, the

Commission correctly noted that it “did not receive any data—and [the] plaintiffs point to

none—enabling it to quantify a different upper bound estimate for resubmissions, let alone the

‘correct’ estimate” that would alter the cost range in any way. Def.’s Mem. at 30. Accordingly,

the Court must conclude that the Commission’s cost-benefit analysis of the cost savings to

companies upon the adoption of the Final Rule was reasonable.

2. Whether the Commission Properly Considered the Costs Incurred by Shareholder- Proponents

The Court next considers whether the Commission properly considered the costs that

would be incurred by shareholder-proponents due to the adoption of the Final Rule amendments.

The plaintiffs argue that “[t]he Commission acknowledged that its rule will require shareholders

either to purchase more shares to satisfy the increased ownership requirements or to hold the

stock for multiple years before submitting a proposal[,]” Pls.’ Mem. at 36, and “it admitted that

36 shareholders may have to ‘sell other assets to raise cash to buy shares or incur borrowing costs to

raise cash to buy shares[,]’” id. (quoting 85 Fed. Reg. at 70,278). The plaintiffs argue that

despite these recognitions, the Commission nonetheless failed “to quantify any of those costs.”

Id. The Commission responds that “[the p]laintiffs’ argument that [it] [ ] was required to

conduct a quantitative rather than qualitative analysis of the costs to shareholder-proponents”

fails because “[t]he Commission identified and discussed a variety of potential costs to

proponents” that satisfy its obligation to conduct a reasonable cost-benefit analysis. Def.’s Mem.

at 25. Again, the Commission is correct.

The Commission identified numerous potential costs that the Final Rule amendments

may impose on shareholders who desire to or actually submit proposals, but addressing the

essence of the plaintiffs’ arguments, the Court focuses on the costs imposed on shareholder-

proponents by the ownership requirement amendment. See Pls.’ Mem. at 36 (identifying costs

that will be incurred specifically in regard to the Final Rule’s new ownership threshold).

Engaging in a more qualitative, rather than quantitative discussion, the Commission first noted

that

costs may arise as a result of a currently eligible proponent either having to invest additional funds to immediately submit a proposal or having to wait to submit a shareholder proposal and thus forgo the potential benefits associated with the immediate inclusion of the proposal in a company’s proxy statement at the expense of other shareholders and the company.

85 Fed. Reg. at 70,277. The Commission further opined on the possible investments a

shareholder-proponent may have to make to satisfy the new ownership thresholds, observing that

“[a] shareholder-proponent that chooses to reallocate assets to meet the new ownership

thresholds may incur transaction costs to buy shares and, depending on the shareholder-

proponent’s liquidity, may incur transaction costs to sell other assets to raise cash to buy shares

37 or incur borrowing costs to raise cash to buy shares.” See id. at 70,278. But, the Commission

dismissed these concerns, noting that “a negligible number of shareholders [would] incur these

costs because, as discussed elsewhere in th[e Final Rule] release, most investors do not submit

proposals.” Id. The Commission also considered that the “amended ownership thresholds . . .

may deter proponents from submitting proposals[,]” but concluded that “the aggregate benefit to

all shareholders exceeds the cost to the proponent of submitting a proposal.” Id. at 70,277.

Ultimately, the Commission found that despite the attention given to the various potential costs,

“[it] lack[ed] sufficient data to quantify the[ possible effects] because [it] lack[ed] data on

[shareholder-]proponents’ portfolio holdings, investment preferences and resources.” Id.

at 70,278.

The Commission, as is its obligation under the APA, “provided substantial detail on the

benefits of the rule, and the reasons why quantification was not possible.” Cigar Ass’n of Am. v.

Food & Drug Admin.,

, 276 (D.D.C. 2020) (quoting Nicopure Labs, LLC v.

Food & Drug Admin.,

(D.D.C. 2017)); see supra Section III.C.1

(identifying the costs saved by companies and other shareholders by adopting the Final Rule).

And similarly, as the Court indicated, supra Section III.B, it appears that the Commission was

making a predictive judgment based upon the limited data available to it, which is entitled to a

considerable level of deference. See Inv. Co. Inst., 891 F. Supp. 2d at 186–87. Thus, the Court

cannot “substitute its judgment for that of the agency[,]” Consumer Elecs. Ass’n,

, where, as here, the Commission has reasonably explained all of the potential costs that

might result from the adoption of the Final Rule on shareholder-proponents. Furthermore, it is

significant that “[the p]laintiffs do not cite any relevant evidence that the Commission failed to

consider or that refutes its analysis.” Def.’s Mem. at 26.

38 Although the plaintiffs again identify Business Roundtable and Chamber I as support for

their arguments, see Pls.’ Reply at 4 (“Those precedents squarely foreclose the Commission’s

assertion that it need not perform a ‘quantified cost-benefit analysis.’” (quoting Def.’s Mem. at

15)), a plain reading of those cases does not support their position. In Business Roundtable, the

court concluded that the Commission “failed adequately to quantify . . . certain costs or to

explain why those costs could not be quantified.”

(emphasis added). So

importantly there, the Commission failed to adequately explain the basis for its position even

though “empirical evidence . . . was readily available[ to it].”

(emphasis added).

Similarly, in Chamber I, the Circuit concluded that the Commission’s cost-benefit analysis was

inadequate because it “readily could have estimated the cost to an [affected entity and such an]

estimate would be pertinent to its assessment of the effect the condition would have [had.]”

(emphasis added). The law in this Circuit is clear that “[t]he Court’s role . . . is to

determine whether the [Commission’s] decision was based on a consideration of the relevant

factors and whether there has been a clear error in judgment.” Inv. Co. Inst.,

(internal quotation marks omitted). Where, as here, the Commission concluded that it did

not have information “readily” available to aid in quantifying the costs affected parties will

sustain from the adoption of the Final Rule amendments, the Court may not disturb the

Commission’s analysis, provided that the Commission considered all “of the relevant factors[,]”

and thus, its qualitative analysis of the cost-benefits is sufficient to survive review under the

APA, see Lindeen,

(“[W]e do not require [the Commission] to conduct a

rigorous, quantitative economic analysis unless [a] statute explicitly directs it to do so.” (internal

quotation marks omitted)) (quoting Nat’l Ass’n of Mfrs. v. Sec. & Exch. Comm’n,

,

39 369 (D.C. Cir. 2014)); see also Nat’l Ass’n of Mfrs.,

(“An agency is not required

to measure the immeasurable[.]” (internal quotation marks omitted)). 6

Accordingly, the Court must conclude that the Commission considered the information

available to it and reasonably explained its decision in weighing the cost-benefits of its Final

Rule and its impact on shareholder-proponents.

3. Whether the Commission Reasonably Considered the Benefits of Shareholder Proposals

The plaintiffs’ final argument regarding the Commission’s cost-benefit analysis concerns

whether the Commission reasonably considered the benefits of shareholder proposals.

Specifically, the plaintiffs argue that the Commission “refus[ed] to quantify the benefits of

shareholder proposals” despite “a substantial [amount] of academic literature show[ing] that

shareholder proposals create value for corporations and their shareholders.” Pls.’ Mem. at 29

(citing 85 Fed. Reg. at 70,284–85). As the Court noted above, the Commission contends that

“[it] specifically ‘recognize[d] that shareholder proposals may bring benefits to companies and

their shareholders and that the potential loss of those benefits resulting from the exclusion of

certain proposals that are not otherwise proposed by other shareholders would be a cost of the

rule.’” Def.’s Mem. at 22 (emphasis omitted) (quoting 85 Fed. Reg. at 70,264).

Thus, while it “recognize[d] that shareholder proposals may bring benefits to companies

and their shareholders[,]” the Commission nonetheless stated that “to the extent that the [F]inal

[R]ule amendments may exclude proposals that may bring benefits to companies and their

shareholders, [it also] qualitatively describe[d] the cost that may arise.” 85 Fed. Reg. at 70,264.

6 The Court notes that other circuits have directly reached the same conclusion in upholding prior Commission cost- benefit analyses. See Chamber of Com. v. Sec. & Exch. Comm’n,

(5th Cir. 2023) (“We agree with the [Commission] that, as a general matter, it is not required to undertake a quantitative analysis to determine a proposed rule’s economic implications.”); Chamber of Com. v. Sec. & Exch. Comm’n,

(6th Cir. 2024) (“The qualitative assessment [that was conducted] was sufficient, given that the Commission lacked data enabling it to conduct a quantitative analysis.”).

40 The Commission “d[id] not focus on specific types of shareholder proposals or attempt to

quantify whether excluded proposals would have resulted in economically beneficial changes”

because “those evaluations are properly left to the company’s owners—the shareholders.”

Additionally, the Commission explained that “[the] regulation of shareholder proposals under

Rule 14a-8 has not been, nor [is] it [ ] under the final amendments, designed to judge the

economic value of any particular shareholder proposal, or intended to take a position on the

merits of any shareholder proposal topic.” Id. at 70,264–65.

The Commission acknowledged the perspectives of several commenters who discuss the

various benefits of shareholder proposals and information that was provided in support of their

perspectives. See Joint App’x, Ex. A84 (Letter from Tom Shaffner, Dec. 17, 2019 (“Shaffner

Letter”)) at 9–10 (estimating that environmental, social, and governance—or “ESG”—proposals

can add between $223.9 million and $129.7 billion in savings or value to Russell 3000 Index

companies); id., A816 (Letter from Interfaith Center on Corporate Responsibility, January 27,

2020 (“ICCR Letter”)) at 6–7 (“An influential 2003 study found that companies whose

governance provisions provided the strongest shareholder rights and lowest management

power . . . outperformed those with the weakest shareholder rights and highest management

power by . . . 8.5% per year.”); id., Ex. A1170 (Letter from Lucian Bebchuk, Feb. 3, 2020

(“Bebchuk Letter”)) at 5–6 (“[P]roposals receiving significant minority support have brought

many companies to change their practices with respect to disclosure of political spending and

disclosure of environmental and climate change effects.”); id., Ex. A1175 (Letter from As You

Sow, February 3, 2020 (“As You Sow Letter”)) at 6 (“Numerous studies support the conclusion

that the shareholder proposal process increases market valuation for companies, and there is

evidence in the record that inclusion of shareholder proposals from individual investors tends to

41 be associated with long-term value increases.” (emphasis omitted)). In sum, the plaintiffs argue

that the studies that have explained these potential benefits and other sources of information were

not properly considered by the Commission. See Pls.’ Mem. at 30–31.

For the following reasons, the Court agrees with the Commission that disregarding these

“readily available” studies was reasonable. See Def.’s Mem. at 23. Indeed, as the Commission

notes, it did “recognize that shareholder proposals may bring benefits to companies and their

shareholders and that the potential loss of those benefits . . . would be a cost of the rule.” Def.’s

Mem. at 22 (emphasis omitted) (quoting 85 Fed. Reg. at 70,264). In recognizing the potential

benefits, the Commission responded that it would be inappropriate to focus on any “particular

proposal” since it is the shareholders who ultimately “determine the value of a proposal to a

particular company.” 85 Fed. Reg. at 70,265. Rather, “the rule focuses on setting thresholds at

which it is appropriate for a shareholder proposal—regardless of its substance—to be included in

the company’s proxy materials at the expense of the other shareholders (directly and indirectly as

owners of the company)[.]” Id. Because the Commission considered these comments and

directly responded to some of them, it considered all of the factors as required to conduct a

reasonable qualitative analysis, even though it concluded that it could not rely on the comments

and studies provided to them by the several commenters. See Inv. Co. Inst.,

.

For example, in assessing specific commenters and the studies referenced by them, see,

e.g., Joint App’x, Ex. A84 (Shaffner Letter) at 9–11, the Commission stated that “this type of

study [does not] accurately predict[] the economic effects of the amendments because

[environmental, social, and governance or] [(‘]ESG[’)] policies could be implemented for

reasons other than the submission of shareholder proposals, including shareholder engagement

42 that does not involve the submission of shareholder proposals[,]” 85 Fed. Reg. at 70,284.

Moreover, “the studies cited by [Shaffner] [ ] do not provide evidence of a causal relation

between governance, environmental, and social provisions and firm value.” Id. As to this study

and others that the Commission responded to in its cost-benefit analysis, the plaintiffs “do not

[otherwise] identify any data that was before the [Commission] at the time of the [amendments’

adoption] that would have enabled it to quantify [the potential benefits of shareholder

proposals.]” Cigar Ass’n of Am., 480 F. Supp. 3d at 276. Because the Commission explained

that “there [were] significant methodological and empirical challenges to quantifying whether

excluded proposals would have resulted in economically beneficial changes to the [affected]

compan[ies,]” 85 Fed. Reg. at 70,265, the Court agrees that “[t]he Commission’s conclusion that

it could not draw reliable inferences from the studies was therefore reasonable[,]” Def.’s Mem.

at 23; see Chamber I,

(“[Where] the Commission made clear enough the

limitations of the stud[ies submitted], [ ] [courts] have no cause to disturb its ultimate judgment

that the stud[ies] w[ere] ‘unpersuasive evidence.’” (quoting Hüls Am. Inc. v. Browner,

(D.C. Cir. 1996)).

At bottom, the Commission’s cost-benefit analysis was required to determine only

“whether [its] action will promote efficiency, competition, and capital formation[,]” Nasdaq

Stock Mkt. LLC,

(quoting 15 U.S.C. § 78c(f)), and it did so through its

reasoning for the adoption of the Final Rule at issue here. Upon careful consideration of the

parties’ arguments, the Court does not find it necessary to disturb the Commission’s analysis of

the costs and benefits considered in adopting the Final Rule. Accordingly, the Court must

conclude that the Commission reasonably considered the potential benefits of shareholder

proposals.

43 D. Whether the Adoption of the Restrictions on Aggregation and Representatives Was Arbitrary and Capricious

The Court next considers the plaintiffs’ argument that the adoption of the Final Rule’s

restrictions on aggregation of shareholdings and the use of representatives were arbitrary and

capricious and not in accordance with the APA. Specifically, the plaintiffs argue that the

“Commission violated the Administrative Procedure Act by abandoning its longstanding policy

allowing aggregation of shareholdings and imposing arbitrary new restrictions on the use of

representatives[,]” while not “provid[ing] [ ] coherent justification[s] for any of those changes.”

Pls.’ Mem. at 38. In response, the Commission argues that its reasoning for adopting “policy

choices to prohibit aggregation of holdings, limit representatives to one proposal per meeting,

and require that proponents specify their availability to engage with the company” are “ignore[d]

or mischaracterize[d]” by the plaintiffs. Def.’s Mem. at 35. The Court will first address whether

the Commission’s adoption of the aggregation prohibition was arbitrary and capricious before

then making that assessment regarding the adoption of the shareholder representative

amendments.

1. Whether the Adoption of the Prohibition on Aggregating Ownership Shares Was Arbitrary and Capricious

On this issue, the plaintiffs argue that the Commission’s “sole justification for the

change” was arbitrary and capricious because it only stated “that ‘allowing shareholders to

aggregate their securities to meet the new thresholds would undermine the goal of ensuring that

each shareholder who wishes to use a company’s proxy statement to advance a proposal has a

sufficient economic stake or investment interest in the company.’” Pls.’ Mem. at 38 (quoting 85

Fed. Reg. at 70,248). The Commission responds that (1) the plaintiffs forfeited challenging the

aggregation issue because “issues not raised in comments before the agency are waived[,]”

Def.’s Mem. at 37 (quoting Covad Commc’ns Co.,

); and (2) the new restrictions

44 on aggregation and the use of representatives were introduced to guarantee that a representative

is not “the driving force . . . with only an acquiescent interest by the shareholder[,]”

As already noted, the Commission previously allowed shareholders to aggregate their

holdings to satisfy prior ownership thresholds. See 48 Fed. Reg. at 38,219 n.5. However, the

Commission’s prior allowance did not explain the rationale for doing so, and in considering

adoption of the Final Rule, the Commission revisited its prior position. Although the

Commission concluded that “allowing shareholders to aggregate their securities to meet the new

thresholds would undermine the goal of ensuring” that shareholder-proponents had “sufficient

economic stake or investment interest in the compan[ies in which they have ownership,]” the

Commission “recognize[d] [that the] limitation [under consideration] could affect the ability of

shareholders with smaller investments to submit shareholder proposals[.]” 85 Fed. Reg. at

70,248. Nonetheless, the Commission concluded that “each shareholder-proponent should have

a meaningful ownership stake in a company before being permitted to draw on company

resources to include a proposal in the company’s proxy statement as well as draw on the time,

attention, and other resources of non-proponent shareholders.” Id.

The Commission disagreed with those commenters’ position that “a group of

shareholders that collectively, but not individually, satisfies an ownership requirement is

functionally the same as a single shareholder that satisfies the requirement.” Id. The

Commission further disagreed with those commenters’ position which “suggested that

aggregated holdings are indicative of a long-term investment interest, [ ] or that a proposal

submitted by a group of shareholders aggregating their holdings is ‘more worthy of

consideration’ than a proposal submitted by a single shareholder.” Id. To the contrary, the

Commission found that

45 [c]onsistent with the views of several commenters, we believe that allowing shareholders to aggregate their securities to meet the new thresholds would undermine the goal of ensuring that each shareholder who wishes to use a company’s proxy statement to advance a proposal has a sufficient economic stake or investment interest in the company.

Id. Accordingly, the Commission concluded that this objective was achieved by requiring that

shareholder-proponents “satisfy one of the three ownership thresholds to be eligible to submit or

co-file a proposal.” Id. The Commission further added that “[s]hareholders whose shares are

held in joint tenancy may submit proposals individually or jointly. However, the one-proposal

limit will apply collectively to all persons having an interest in the same shares.” Id. at 70,248

n.88.

As an initial matter, the Court agrees with the Commission that commenters did not take

issue with proposals by shareholders with joint accounts during the notice-and-comment period

and that position is therefore waived. See Def.’s Mem. at 37 (“[T]his argument is waived

because neither [the] plaintiffs nor any other commenter raised it before the Commission[.]”);

see also Nat’l Wildlife Fed’n v. Env’t Prot. Agency,

(D.C. Cir. 2002) (“It is

well established that issues not raised in comments before the agency are waived and [ ] [c]ourts

[may] not consider them.”). And, “the [plaintiff]s cannot point to a single place in the record—

and [the Court] could not find one—in which anyone objected[,]” Covad Commc’ns Co.,

, to the Commission’s conclusion that shareholders may submit proposals

individually even if they hold shares in joint tenancy with another shareholder. Therefore, the

Court concludes that to the extent the plaintiffs are arguing that adopting the aggregation

prohibition was arbitrary and capricious because of the Commission’s position on shareholder-

proponents utilizing joint tenancy of ownership to meet the new ownership thresholds, that

46 argument was waived for purposes of the Court’s review of the Commission’s actions. See Nat’l

Wildlife Fed’n,

.

In regards to the plaintiffs’ other arguments concerning the aggregation prohibition, the

Court is equally unpersuaded. As noted previously, the Commission is not required under the

APA “to conduct or commission their own empirical or statistical studies.” Fed. Commc’ns

Comm’n v. Prometheus Radio Project,

(2021). Rather, the Commission is

required merely to “articulate[] a satisfactory explanation for its action[,] including a rational

connection between the facts found and the choice[s] made.” Lindeen,

(internal

quotation marks omitted) (second alteration in original). The Commission found that the

aggregation prohibition promotes the new ownership threshold because “allowing shareholders

to aggregate their securities to meet the new thresholds would undermine the goal of ensuring

that each shareholder who wishes to use a company’s proxy statement to advance a proposal has

a sufficient economic stake or investment interest in a company.” 85 Fed. Reg. at 70,248; see id.

at 70,241 (“The amendments are intended to modernize and enhance the efficiency and integrity

of the shareholder-proposal process for the benefit of all shareholders[.]”). Accordingly, the

Commission found that “[a]lthough the total dollar amount may be the same[,] . . . [it] d[id] not

believe that group ownership (where each member of the group does not individually satisfy one

of the ownership requirements) represents an equivalent economic stake or investment interest as

a single shareholder who satisfies the ownership requirements.” Id. at 70,248. Thus, the

Commission has complied with the APA by articulating its reasoning and showing a rational

connection between the facts found and the decision to adopt the prohibition on aggregation in

amending Rule 14a-8. See N. Am.’s Bldg. Trades Unions v. Occupational Safety & Health

Admin.,

(D.C. Cir. 2017) (“[A]s long as the agency’s path may reasonably be

47 discerned, [courts must] uphold the decision[.]”). Accordingly, the Court concludes that the

Commission’s adoption of the aggregation prohibition was not arbitrary nor capricious.

2. Whether the Adoption of the Amendment Restricting the Use of Representatives Was Arbitrary and Capricious or Otherwise Unlawful

The Court next considers whether the amendments adopted by the Commission regarding

the use of representatives by shareholder proponents were arbitrary and capricious. As to this

restriction, the plaintiffs take issue with two new amendments to Rule 14a-8: (1) “prohibit[ing]

multiple shareholders from engaging the same representative to submit proposals for the same

meeting[,]” and (2) “prohibit[ing] shareholders from relying on their representatives to discuss

their proposals with management, instead requiring shareholders to perform that task

themselves.” Pls.’ Mem. at 40 (citing 85 Fed. Reg. at 70,255–56). The plaintiffs also argue that

the new restrictions are “in excess of [the Commission’s] statutory jurisdiction, authority, or

limitations . . . because it effectively seeks to regulate traditional questions of state agency law”

in violation of the APA. Id. at 42 (quoting

(2)(C)). The Commission responds

that “[it] reasonably explained the risk of abuse [resulting from shareholder proponents seeking

to avoid the newly clarified one-proposal limit through the use of representatives] and rationally

determined that ‘permitting representatives to submit multiple proposals for the same

shareholders’ meeting can give rise to the same concerns’ that justif[ied] limiting shareholders to

one proposal per meeting.’” Def.’s Mem. at 38 (quoting 85 Fed. Reg. at 70,255). The

Commission further contends that “requiring the shareholder’s personal participation (either in

person or via teleconference) is appropriate because, in its view, ‘a shareholder-proponent who

elects to require a company to include a proposal in its proxy statement, requiring the company

and other shareholders to bear the related costs, should be willing and available to discuss the

proposal with the company and not simply rely on its representative to do so.’” Id. at 39

48 (quoting 85 Fed. Reg. at 70,254). The Commission also contends that it had the statutory

authority to promulgate both amendments because they “likewise fall squarely within the

Commission’s uncontested authority to shape the parameters of Rule 14a-8.” Id. at 41.

The Court will first consider whether the Commission had the statutory authority to

promulgate the representative amendments before then considering whether the adoption of the

representative amendments was arbitrary and capricious.

a. Whether the Commission Acted in Excess of Its Statutory Authority

As to whether the Commission acted in excess of its statutory authority by imposing the

representation limitation, the plaintiffs argue that “[s]tate agency law traditionally determines

whether multiple parties may engage the same representative or whether there is some numerical

limit on how many clients an agent may represent[,]” Pls.’ Mem. at 43 (citing Restatement

(Third) of Agency § 3.14 (2006)), and that “[s]tate agency law also determines the scope of a

representative’s authority to engage with someone on behalf of a client without the client’s

personal involvement[,]” id. (citing Restatement (Third) of Agency § 2.02). The plaintiffs

further argue that the Commission “conceded that principle . . . [by] acknowledging when

proposing its rule that ‘[s]tate law . . . governs shareholders’ ability to submit a proposal through

a representative.” Id. (quoting 84 Fed. Reg. at 66,474). Thus, the plaintiffs contend, Congress

did not “empower[] the [Commission] to rewrite those traditional state agency principles.” Id.

In response, the Commission contends that “[t]here is no risk that the Commission’s

authority to determine the contours of Rule 14a-8 could be used to ‘federalize’ a ‘substantial

portion’ of state agency law.” Def.’s Mem. at 41 (quoting Pls.’ Mem. at 42). Specifically, the

Commission argues that the “regulations adopted pursuant to the authority [it] invoked . . . would

apply only in the narrow context of shareholder-proposal submissions under Rule 14a-8.” Id.

49 The Commission therefore contends that it was not acting in excess of its statutory authority and

that the “plaintiffs [have] fail[ed] to identify any evidence that Congress intended to permit

overlap with state corporate law but not state agency law.” See Def.’s Mem. at 42.

Under the APA, the Court must “hold unlawful and set aside agency action, findings, and

conclusions” if they are found to be “in excess of statutory jurisdiction, authority, or limitations,

or short of statutory right[.]”

(2)(C). And under Section 14(a) of the Exchange

Act, the Commission is empowered to “prescribe as necessary or appropriate in the public

interest or for the protection of investors” rules that govern the solicitation of shareholder

proxies. 15 U.S.C. § 78n(a)(1). However, “the Exchange Act cannot be understood to include

regulation of an issue that is so far beyond matters of disclosure (such as are regulated under § 14

of the Act)[.]” Bus. Roundtable v. Sec. & Exch. Comm’n,

(D.C. Cir. 1990).

And, “it is not seriously disputed that Congress’s central concern was with disclosure[,]”

, because “[t]he 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[,]” id. (quoting J.I. Case Co. v. Borak,

(1964)).

For the following reasons, the Court agrees with the Commission that it acted within its

statutory authority when it promulgated the limits on the use of representatives. Indeed, merely

because parts of the Exchange Act may overlap with state agency law does not necessarily result

in a conflict where the Commission promulgates new rules on the same matter. See, e.g., Merrill

Lynch, Pierce, Fenner & Smith Inc. v. Manning,

, 391–92 (2016) (explaining that

state law securities actions “[could] raise issues coinciding, overlapping, or intersecting with

those under the [Exchange] Act itself”). The Commission originally adopted the one-proposal

limit as it applied to shareholder-proponents in 1976, and explained that “the submission of

50 multiple proposals by a single proponent ‘constitute[s] an unreasonable exercise of the right to

submit proposals at the expense of other shareholders’ and also may ‘tend to obscure other

material matters in the proxy statement of issuers, thereby reducing the effectiveness of such

documents.’” 85 Fed. Reg. at 70,255 (quoting 41 Fed. Reg. at 52,994). In promulgating the

Final Rule at issue here, the Commission clarified that the spirit of the one-proposal limit

“applies equally to representatives who submit proposals on behalf of shareholders they

represent” because such conduct by representatives “can give rise to the same concerns about the

expense and obscuring effect of including multiple proposals in the company’s proxy materials,

thereby undermining the purpose of the one-proposal limit.” Id.; see Bus. Roundtable,

. Although the representative limitation arguably overlaps with state agency law, as the

Commission explains, “Rule 14a-8 itself[, as enacted by Congress,] deals with matters [also]

regulated by state law[,]” Def.’s Mem. at 42, and thus, the clarification of the representative

limitation in the Final Rule cannot be understood to seek “to alter the clearly expressed intent of

Congress[,]” Bd. of Governors of the Fed. Rsrv. Sys. v. Dimension Fin. Corp.,

(1986); see Roosevelt v. E.I. Du Pont de Nemours & Co.,

(D.C. Cir. 1992)

(R.B. Ginsburg, J.) (“Congress [ ] entrusted to the [Commission] the prescription of rules and

regulations governing proxy solicitations ‘in the public interest or for the protection of

investors.’” (quoting Va. Bankshares v. Sandberg,

, 1086 n.1 (1991)). Where, as

here, the Commission has prescribed a rule under its clear authority to regulate the proxy

process, it cannot be said that “the [Commission]’s assertion of authority directly invades the

‘firmly established’ state jurisdiction over corporate governance and shareholder voting rights.”

Bus. Roundtable, 905 F.3d at 413 (quoting CTS Corp. v. Dynamics Corp. of Am.,

(1987)).

51 Here, the Commission has acted within its long-established statutory authority under

“Section 14(a) of the Exchange Act—which authorizes the Commission to promulgate rules,

governing ‘any person’ who ‘solicit[s] any proxy,’ that it finds ‘necessary or appropriate in the

public interest or for the protection of investors.’” Def.’s Mem. at 40; see 15 U.S.C. § 78n(a)(1)

(“[T]he Commission may prescribe as necessary or appropriate in the public interest or for the

protection of investors, to solicit or to permit the use of his [or her] name to solicit any proxy or

consent or authorization in respect of any security[ registered under the Act.]”); see also

.14a-8 (listing the circumstances where shareholder proposals may be excludable by

companies in their proxy statements). Indeed, the Commission’s representative restriction is

narrow and careful not to tread on the use of representatives beyond the offering of proposals by

shareholder-proponents seeking inclusion in company proxy statements. See 85 Fed. Reg. at

70,254 (“[S]hareholder-proponents may seek assistance and advice from lawyers, investment

advisers, or others to help them draft shareholder proposals and navigate the shareholder-

proposal process.”); id. at 70,256 (“The amendment is not intended to limit a representative’s

ability to present [a] proposal[] on behalf of multiple shareholders at the same shareholders’

meeting.”); id. (“[T]he substantive eligibility requirements of amended Rule 14a-8(c) will

appropriately address the [Commission’s] concerns . . . with respect to the one proposal limit,

and . . . the designation of a representative for the purpose of presenting a proposal at the

shareholder meeting [does not] raise[] similar concerns.”). Under this amendment in the Final

Rule, representatives are now—just as shareholder-proponents have been for decades—“subject

to the one-proposal limit and will not be permitted to submit more than one proposal in total to

the same company for the same meeting.” Id. The Commission promulgated the new

amendments at issue here pursuant to the authority granted to it under the Exchange Act, and

52 therefore, the Court concludes that the adoption of the representative restrictions falls within the

statutory authority of the Commission.

b. Whether the Commission’s Adoption of the Personal Engagement Amendment Was Arbitrary and Capricious

Having concluded that the Commission acted within its statutory authority in adopting

the representative restrictions, the Court next considers the plaintiffs’ position that “[t]he

Commission . . . failed to justify its new rule that shareholders must personally engage with

management rather than relying on their representatives to act on their behalf.” Pls.’ Mem. at 41.

Specifically, the plaintiffs argue that “[t]he Commission cannot impose additional costs and

inconvenience on certain shareholders[, as it has done through this amendment,] merely because

it thinks they should be willing to bear those costs[,]” as its position is essentially, “no

justification at all.” Id. The Commission contends that the plaintiffs “fail to engage with the

Commission’s rationale for that policy choice[,]” Def.’s Mem. at 38, arguing that “[it]

emphasized in response to comments raising these concerns, [that] representatives may

participate in any company-shareholder discussions—and nothing in the rule would prevent a

representative from speaking for the shareholder (and handling any subsequent discussions)[,]”

id. at 39.

The Commission justified its adoption of the shareholder engagement amendment

because it anticipated that it “w[ould] facilitate dialogue between shareholders and companies in

the shareholder-proposal process, and may lead to more efficient and less costly resolution of

these matters.” 85 Fed. Reg. at 70,252–53. The Commission explained that “a shareholder-

proponent who elects to require a company to include a proposal in its proxy statement, requiring

the company and other shareholders to bear the related costs, should be willing and available to

discuss the proposal with the company and not simply rely on its representative to do so.” Id.

53 at 70,254. Importantly, however, the Commission noted that “[t]he shareholder-proponent’s

representative also may participate in any discussions between the company and the

shareholder[,]” and “[t]hus, shareholder-proponents will be able to continue to seek and utilize

the assistance of a representative.” Id.

The Court finds that this amendment is reasonably justified by the Commission because it

is consistent with the Commission’s stated goals for adopting the Final Rule. As the Court

indicated, supra Section III.D.1, the Commission has rationally explained that it sought to

modernize the rules regarding shareholder proposals to ensure that shareholders have an

adequate economic stake in the proxy voting process. See id. at 70,241. In that same vein, the

Commission further explained that “early engagement [with shareholder-proponents] may help

avoid the time and expense of the no-action process[,]” whereby companies seek an opinion

from Commission staff on whether they are in compliance with the Commission’s rules. Id.

at 70,253. Additionally, “[a] shareholder-proponent’s representatives also may [still] participate

in any discussions between the company and the shareholder.” Id. at 70,254.

Moreover, for several reasons, the Court disagrees that the costs to shareholders resulting

from their personal involvement are outweighed by the other benefits of the amendment. First,

in a similar context regarding the representative limitation, the Commission explained that

“[w]hen a representative speaks and acts for a shareholder, there may be a question as to whether

the shareholder has a genuine and meaningful interest in the proposal, or whether the proposal is

instead primarily of interest to the representative, with only an acquiescent interest by the

shareholder.” Id. at 70,250. The concern regarding rogue representatives acting on their own

accord—rather than on behalf of shareholder-proponents—strikes at the heart of Rule 14a, the

purpose of which “is to prevent management or others from obtaining authorization for corporate

54 actions by means of deceptive or inadequate disclosure in the proxy solicitation process.” Borak,

; see

.14a-8 (“[I]n order to have [a] shareholder proposal included

on a company’s proxy card, and included along with any supporting statement in its proxy

statement, [a shareholder] must be eligible and follow certain procedures [outlined in Rule 14-

a8].”); see also Trinity Wall St. v. Wal-Mart Stores, Inc.,

(3d Cir. 2015)

(“[Rule 14a-8] mandates subsidized shareholder access to a company’s proxy materials[ and]

requir[es] ‘reporting companies . . . to print and mail with management’s proxy statement, and [ ]

place on management’s proxy ballot, any ‘proper’ proposal submitted by a qualifying

shareholder.’” (quoting Alan R. Palmiter, The Shareholder Proposal Rule: A Failed Experiment

in Merit Regulation,

, 886 (1994)) (emphasis added); cf. Amalgamated

Clothing & Textile Workers Union v. Wal-Mart Stores, Inc.,

(S.D.N.Y.

1993) (noting similarly that “Rule 14a-9 . . . prohibits ‘false or misleading’ statements made in

any proxy statement, form of proxy, notice of meeting or other communication” (quoting

.14a-9(a))). Thus, the Commission’s justification for ensuring engagement between

the shareholder-proponents themselves and company management is well-supported by the

record, and the associated costs to shareholder-proponents is outweighed by the benefit to all

shareholders. See Roosevelt,

(“It is obvious to the point of banality . . . that

Congress intended by its enactment of [S]ection 14 . . . to give true vitality to the concept of

corporate democracy.” (quoting Med. Comm. for Hum. Rights v. Sec. & Exch. Comm’n,

(D.C. Cir. 1970)).

To be sure, although “[s]hareholder-proponents will also be required to provide their

contact information” to companies and to make themselves available for a meeting with

management, 85 Fed. Reg. at 70,253, the Commission clarified that “the times [that the

55 shareholder-proponent chooses to meet] should be during the regular business hours of the

company’s principal executive offices[,]” id. “If the shareholder-proponent’s availability

changes, the company [need only be] notified and alternative date(s) and times(s) should be

provided to the company.” Id. Thus, the Court agrees with the Commission that “an indication

that the proponent has a genuine and meaningful interest in the proposal [that the shareholder-

proponent seeks to have included in a company’s proxy materials] and in the company, [are]

justif[ied by] the burdens associated with processing the proposal.” Def.’s Mem. at 39.

Accordingly, because the shareholder personal engagement amendment does not impose

costs that are outweighed by the benefits of the amendment, and the Commission has “articulated

a satisfactory explanation for its action[,] including a rational connection between the facts found

and the choice made[,]” Lindeen,

(citations and quotation marks omitted), the

Court must conclude that the adoption of the amendment was not arbitrary and capricious.

c. Whether Adoption of the Representation Limitation Was Arbitrary and Capricious

The plaintiffs argue that “[t]he Commission’s sole justification for prohibiting multiple

shareholders from engaging the same representative . . . does not explain why proposals should

be singled out for exclusion merely because two shareholders with different proposals happen to

use the same representative.” Pls.’ Mem. at 40. In sum, the plaintiffs argue that “the

Commission’s [representation] limitation is simply an arbitrary means of reducing the number of

proposals—a rule that singles out certain proposals for exclusion without any rational reason to

treat them less favorably than others.”

at 40–41. The Commission responds that it

“reasonably explained the risk of abuse [that could occur from circumventing the one-proposal

rule] and rationally determined that ‘permitting representatives to submit multiple proposals for

56 the same shareholders’ meeting can give rise to the same concerns’ that justify limiting

shareholders to one proposal per meeting.” Def.’s Mem. at 38 (quoting 85 Fed. Reg. at 70,255).

The Commission reasoned that “apply[ing] the one-proposal rule to ‘each person’ rather

than ‘each shareholder’ who submits a proposal[,]” 85 Fed. Reg. at 70,254, would curb “the

[long-held concern about the] possibility that some proponents may attempt to evade the new

limitations through various maneuvers, such as having other persons whose securities they

control submit . . . proposals each in their own names[,]” id. at 70,255 (quoting 41 Fed. Reg. at

52,996). To address this concern, “[u]nder the new rule, a shareholder-proponent will not be

permitted to submit one proposal in his or her own name and simultaneously serve as a

representative to submit a different proposal on another shareholder’s behalf for consideration at

the same meeting.” Id. at 70,256. “Likewise, a representative will not be permitted to submit

more than one proposal to be considered at the same meeting, even if the representative were to

submit each proposal on behalf of different shareholders.” Id. However, the Commission

clarified that “[t]he amendment is not intended to limit a representative’s ability to present

[a single] proposal[] on behalf of multiple [eligible] shareholders at the same shareholders’

meeting.” Id.

The Court concludes that the Commission has reasonably explained its justification for

the one proposal limit on representatives. The new amendment is not inconsistent with the

Commission’s prior concerns that the one proposal rule should “‘apply collectively to all persons

having an interest in the same securities (e.g., the record owner and the beneficial owner, and

joint tenants).’” Id. (quoting 41 Fed. Reg. at 52,996). Thus, “the Commission[, seeking] to

make ‘precautionary or prophylactic responses to perceived risks[,]’” Chamber I,

(quoting Certified Color Mfrs. Ass’n v. Mathews,

(D.C. Cir. 1976)), by

57 clarifying its prior rule is reasonably justified, see 85 Fed. Reg. at 70,255 (“[The Commission]

believe[s] permitting representatives to submit multiple proposals for the same shareholders’

meeting can give rise to the same concerns about the expense and obscuring effect of including

multiple proposals in the company’s proxy materials, thereby undermining the purpose of the

one-proposal limit.”). The Commission’s decision is further supported by its clarification that

“[t]he amendment is not intended to limit a representative’s ability to present proposals on behalf

of multiple shareholders at the same shareholders’ meeting.” Id. at 70,256. Indeed, the

Commission addressed the possible cost and concern of shareholder-proponents by indicating

that “[w]here multiple shareholders co-file a proposal, the company receives only one proposal

and, therefore, the submission does not raise the types of concerns that Rule 14a-8(c) is intended

to address.” Id. Moreover, as the Commission made clear, “a representative could still assist [a]

shareholder with drafting [a] proposal, advising on steps in the submission process, and engaging

with the company.” Id. Thus, the Court cannot conclude that the possible costs to shareholder-

proponents are not outweighed by the reasonably explained rationale for the amendment.

Accordingly, the Court concludes that the adoption of the amendment extending the one proposal

limit to representatives of shareholders was not arbitrary and capricious.

E. Count V: Pretextual Justification

Finally, the Court addresses Count V of the plaintiffs’ Complaint, which alleges that the

Commission’s stated rationale for adopting the Final Rule was pretextual justification for its

“true reason” of supporting “corporate management opposition to the substance of many types of

shareholder proposals, particularly those addressing environmental and social issues.” Compl.

¶ 171. In their summary judgment motion, the plaintiffs did not address this Count in their

Complaint, see generally Pls.’ Mem., and the Commission merely indicated in a footnote that

58 “[the p]laintiffs ha[d] waived arguments in their [C]omplaint not raised on summary judgment

(e.g., Count V)[,]” Def.’s Mem. at 43 n.12 (citing Pub. Emps. for Env’t Resp. v. Beaudreau,

(D.D.C. 2014)). In their reply brief, the plaintiffs respond—also in a

footnote—that “[they] do not seek summary judgment on Count V of the Complaint, but they

have not abandoned the claim either.” Pls.’ Reply at 25 n.7. The plaintiffs explain that “while

the [Commission] nominally moves for summary judgment on Count V, it offers no argument or

explanation as to why it is entitled to that relief.”

The plaintiffs opine that “[t]he

Commission has therefore forfeited the argument[ that they are entitled to summary judgment on

Count V,]”

(citing City of Waukesha v. Env’t Prot. Agency,

, 250 n.22 (D.C.

Cir. 2003)), and, accordingly, “[t]here is no proper basis for granting summary judgment to

either party on that claim[,]”

After the Court held a hearing as to Count V, the parties then

submitted supplemental briefing to better explain their respective positions. See generally Pls.’

Suppl. Mem.; Def.’s Suppl. Mem.

As an initial matter, whether the Commission properly moved for summary judgment

prior to the Court’s hearing regarding Count V is no longer a relevant inquiry because there now

exists a basis upon which the Court may consider whether summary judgment should be granted

to the defendant. Pursuant to Federal Rule 56(f),

[a]fter giving notice and a reasonable time to respond, the [C]ourt may: (1) grant summary judgment for a nonmovant; (2) grant the motion on grounds not raised by a party; or (3) consider summary judgment on its own after identifying for the parties material facts that may not be genuinely in dispute.

Fed. R. Civ. P. 56(f). Once the Court has provided the parties notice and a reasonable

opportunity to respond to a claim in a complaint, the typical summary judgment procedures

under Federal Rule 56(c) then apply. See Fed. R. Civ. P. 56(c). Here, the Court provided the

parties notice of its concern as to whether Count V was properly briefed, ordered a hearing to

59 hear arguments from the parties, see Min. Entry (Mar. 10, 2025), and then provided the parties a

reasonable amount of time—and the opportunity—to respond to the Court’s questions regarding

Count V when it ordered supplemental briefing, see Order at 1 (Mar. 10, 2025), ECF No. 36

(ordering the parties to supplement their arguments on Count V by March 14, 2025). Therefore,

the Court concludes that it can now assess whether summary judgment on Count V should be

granted.

1. Whether the Plaintiffs Abandoned Count V

As to the defendant’s abandonment position, the plaintiffs maintain that they have not

abandoned Count V. The plaintiffs argue that they “did not abandon or forfeit Count V merely

by moving for summary judgment on the other four counts.” Pls.’ Suppl. Mem. at 5. “Rather,

[the plaintiffs continue,] the decision to file only a partial summary judgment motion reflects the

unique nature of Count V[,]”

which the plaintiffs contend exists here because “[Count V]

raises factual disputes that are not amenable to summary judgment[,]”

On the other hand, the

Commission argues that “[c]ourt[s in this Circuit] routinely hold[] that claims raised in a

complaint but not pursued on summary judgment are abandoned[,]” Def.’s Suppl. Mem. at 2, and

that its abandonment position “is reinforced by the way the plaintiffs chose to litigate this

case[,]”

(noting that the parties represented to the Court “[p]ursuant to Local Rule 16.3(d) and

this Court’s General Order for Civil Cases” that “this matter can be most efficiently resolved

solely through the filing of dispositive motions”); see Joint Statement and Proposed Scheduling

Order (“Joint Statement”) at 1, ECF No. 12.

Based on these representations and the substance of the plaintiffs’ summary judgment

filing, the Court finds that the plaintiffs appear to have abandoned Count V of their Complaint.

Although the plaintiffs indicated in their motion that they were moving for summary judgment

on Counts I through IV, see Pls.’ Mot. at 1, the motion and its accompanying memorandum are

60 silent on their position regarding Count V, see generally Pls.’ Mem., and the plaintiffs did not

otherwise explain why they did not move for summary judgment on Count V until prompted to

do so by the defendant’s opposition and cross-motion. And, “[w]hile it is true that a party does

not abandon a claim by not briefing it in a partial motion to dismiss[,]” Pub. Emps. For Env’t

Resp.,

, on the other hand, as is the case here, “an issue raised in the

complaint but ignored at summary judgment may be deemed waived[,]”

(quoting Grenier v.

Cyanamid Plastics, Inc.,

(1st Cir. 1995)); Noble Energy, Inc. v. Salazar,

, 23 n.6 (D.D.C. 2010) (same).

In any event, the Court need not definitively decide whether the plaintiffs abandoned

Count V because for several reasons the plaintiffs have not carried their burden to show that the

Commission’s rationale for adopting the Final Rule amendments was a pretextual justification

for the factually unsupported reasons they advance, even after being afforded the opportunity to

do so by the Court. First, the law is clear that “in order to permit meaningful judicial review, an

agency must ‘disclose the basis’ of its action.” Dep’t of Com. v. New York,

(2019) (quoting Burlington Truck Lines, Inc. v. United States,

, 167–69 (1962)); see

Sec. & Exch. Comm’n v. Chenery Corp.,

(1943) (“[T]he orderly functioning of

the process of review requires that the grounds upon which the administrative agency acted be

clearly disclosed and adequately sustained.”). Typically, “in reviewing agency action, a court is

ordinarily limited to evaluating the agency’s contemporaneous explanation in light of the

existing administrative record.” Dep’t of Com.,

. This limitation “reflects the

recognition that further judicial inquiry into ‘executive motivation’ represents ‘a substantial

intrusion’ into the workings of another branch of [g]overnment and should normally be avoided.”

at 780–81 (quoting Arlington Heights v. Metro. Hous. Dev. Corp.,

, 268 n.18

61 (1977)). And, “a court may not reject an agency’s stated reasons for acting simply because the

agency might also have had other unstated reasons.” Id. at 781. However, there is a “‘narrow

exception to th[at] general rule’ that applies where the challengers to the agency’s action make a

‘strong showing of bad faith or improper behavior’ on the part of the agency.” Biden v. Texas,

(2022) (quoting Dep’t of Com.,

). “On a ‘strong showing of

bad faith or improper behavior,’ such an inquiry may be warranted and may justify extra-record

discovery.” Dep’t of Com.,

(quoting Overton Park,

).

Here, the plaintiffs have not made the requisite showing of bad faith or improper

behavior that would entitle them to the consideration of extra-record evidence as to Count V.

The plaintiffs argue that the Commission showed a “pattern of crediting anecdotal evidence from

corporate interests while downplaying the extensive empirical data that investors submitted[,]”

Pls.’ Suppl. Mem. at 1; however, “the agency’s subjective desire to reach a particular result [does

not] necessarily invalidate the result,” Dep’t of Com.,

(quoting Jagers v. Fed.

Crops Ins. Corp.,

, 1185–1186 (10th Cir. 2014)). The Commission was clear that

it adopted its amendments “for the benefit of all shareholders,” 85 Fed. Reg. at 70,241, as is its

obligation entrusted to it by Congress, and the rationale it provided in the Final Rule was

similarly clear, despite being at odds at times with the commentary provided by individual

investors. Alternatively, the Commission at times agreed with individual investors—for

instance, when it declined to adopt the momentum requirement in the Final Rule. See id. at

70,289 (recognizing the “imposed costs on shareholder-proponents and companies” when it

declined to adopt the momentum requirement).

Upon the Court affording the plaintiffs the opportunity to make a showing that the

Commission engaged in bad faith or improper behavior, the plaintiffs identified a single

62 comment by former Commissioner Allison Lee, who issued a statement in dissent in response to

the Commission’s vote on the Final Rule. See Comm’r Allison Herren Lee, Statement on the

Amendments to Rule 14a-8 (Sept. 23, 2020), https://tinyurl.com/4fkmje2c (“Lee’s Statement”).

However, the former Commissioner did not “question[] the majority’s motives” as the plaintiffs

suggested in their Complaint. Compl. ¶ 97. Rather, she expressed her “concern [ ] with the

majority’s policy choice in finalizing the[] [F]inal [R]ule[.]” Lee’s Statement. And, as both the

Supreme Court and this Circuit have concluded, policy choices are agency actions that courts

may not disturb. See Dep’t of Com.,

(“[A] court may not set aside an agency’s

policymaking decision solely because it might have been influenced by political considerations

or prompted by an [a]dministration’s [policy] priorities.” (quoting Sierra Club v. Costle,

(D.C. Cir. 1981)). Therefore, based on the existing administrative record, the

plaintiffs do not make a sufficient showing that supports the Court inquiring further beyond the

Commission’s stated reasons for adopting the Final Rule. See, e.g., Dallas Safari Club v.

Bernhardt,

, 538 (D.D.C. 2021) (“[T]he focal point for judicial review should

be the administrative record already in existence, not some new record made initially in the

reviewing court.” (quoting Camp v. Pitts,

(1973)). Accordingly, the Court

concludes that it must grant summary judgment to the Commission on Count V.

IV. CONCLUSION

For the foregoing reasons, the Court concludes that it must grant the Commission’s cross-

motion for summary judgment and deny the plaintiffs’ motion for summary judgment.

63 SO ORDERED this 5th day of June, 2025. 7

REGGIE B. WALTON United States District Judge

7 The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.

64