Shareholder Access Lawsuit Hurts Investors, Chamber Argues

Tuesday, April 21, 2009 - 8:00pm

Bebchuk v. Electonic Arts, Inc. lawsuit based on bad legal theory, bad public policy

WASHINGTON, D.C.—The U.S. Chamber's National Chamber Litigation Center (NCLC) today urged the federal Second Circuit Court of Appeals to dismiss a lawsuit that would allow activist shareholders to circumvent federal securities laws.

"The theory behind this lawsuit is nonsensical," said Robin Conrad, NCLC's executive vice president. "An SEC rule designed to protect investors should not be interpreted to completely undo the rule itself. When you look past all of the smoke and mirrors, the lawsuit only advances the special interests of a small minority of activist shareholders."

The plaintiff, Lucian Bebchuk, is a university professor known for his radical theories on corporate governance. Bebchuk claims that SEC Rule 14a-8 requires Electronic Arts to include in its proxy materials his proposed change to the company's bylaws that would allow minority shareholders to subsequently bypass SEC Rule 14a-8. If the lawsuit succeeds, companies could be forced to include in their proxy materials virtually all shareholder proposals.

"The lawsuit is based on a bad legal theory and an even worse public policy," said David Hirschmann, president of the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce. "If this lawsuit succeeds, companies can expect to be bogged down by endless proxy battles waged by every minority investor with an ax to grind or a pet cause to promote."

NCLC is the public policy law firm of the U.S. Chamber of Commerce that advocates fair treatment of business in the courts and before regulatory agencies.

The mission of the U.S. Chamber's Center for Capital Markets Competitiveness is to maintain and advance America's global leadership in capital formation by supporting capital markets that are the most fair, efficient, and innovative in the world.

The U.S. Chamber of Commerce is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

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