## Facts

- New York City Employees’ Retirement System (NYCERS) owned shares of Apache Corporation (Apache).
- NYCERS submitted a shareholder proposal for inclusion in Apache’s proxy statement for the upcoming annual meeting.
- The proposal asked Apache to adopt equal employment opportunity policies barring discrimination based on sexual orientation and gender identity.
- NYCERS’s requested policy extended beyond internal employment practices to cover employee benefits, company advertising, the sale of goods and services, and charitable contributions.
- Apache declined to include the proposal in its proxy materials.
- Apache filed suit in federal court seeking a declaratory judgment that it was permitted to exclude the proposal under SEC Rule 14a-8.

## Issues

1. Whether Apache could properly exclude NYCERS’s shareholder proposal under SEC Rule 14a-8(i)(7) as relating to Apache’s ordinary business operations.
2. What weight, if any, a court should give SEC staff no-action letters when assessing excludability under Rule 14a-8.

## Decision

- The court entered judgment for Apache and declared that Apache was permitted to omit NYCERS’s proposal from its proxy materials under Rule 14a-8(i)(7).
- The court characterized the proposal as targeting day-to-day operational matters—particularly personnel and related practices—and as prescribing detailed implementation choices rather than presenting a general policy question for shareholder vote.
- The court treated the proposal’s reach into benefits, advertising, sales practices, and charitable giving as further evidence that the proposal sought direction over ordinary business decisions reserved to management.
- The court considered SEC staff no-action letters as potentially persuasive guidance, but not controlling authority.

## Legal Principles

- Under SEC Rule 14a-8(i)(7), a company may exclude a shareholder proposal that relates to the company’s ordinary business operations.
- A proposal may be excludable when it seeks to control operational decisionmaking or sets detailed directions on how management must conduct routine functions, including employment-related practices and other day-to-day business judgments.
- Even when a proposal addresses a topic with social or ethical overtones, it may still fall within Rule 14a-8(i)(7) if, as drafted, it functions as operational instruction rather than a general policy matter for shareholder consideration.
- SEC staff no-action letters are informal staff views and do not bind courts, though courts may treat them as persuasive when consistent with Rule 14a-8’s text and SEC guidance.

## Conclusion

The court held that Apache could exclude NYCERS’s proposed equal employment opportunity policy from its proxy materials because the proposal, as drafted, sought detailed direction over routine business matters—including employment-related practices and related operational areas—and therefore fit within the Rule 14a-8(i)(7) ordinary business exclusion; SEC staff no-action letters could inform the analysis but were not binding on the court.


Apache Corp. v. New York City Employees' Retirement System, 621 F. Supp. 2d 444 (2008)