## Facts

- Peter C. Lovenheim owned 200 shares of Iroquois Brands, Ltd., a Delaware corporation importing and distributing food products, including pâté de foie gras.
- Lovenheim submitted a shareholder proposal requesting that the board form a committee to study the supplier’s foie gras production methods (including force-feeding geese), consult experts, report findings to shareholders, and consider discontinuing distribution if the method caused undue animal suffering.
- Iroquois planned to omit the proposal and supporting statement from its 1985 annual meeting proxy materials, invoking SEC Rule 14a-8(c)(5).
- The foie gras product line accounted for far less than 5% of Iroquois’s total assets, net earnings, and gross sales, and was reported to be unprofitable.
- Lovenheim sought a preliminary injunction requiring inclusion of the proposal, arguing the proposal was “significantly related” to Iroquois’s business because it raised ethical and social concerns tied to a company product.

## Issues

1. Whether Rule 14a-8(c)(5) allows a company to omit a shareholder proposal solely because the related operations fall below the rule’s 5% economic thresholds.
2. Whether a proposal can be “otherwise significantly related” to an issuer’s business based on qualitative ethical or social importance, despite minimal quantitative financial impact.
3. Whether the equitable factors for preliminary injunctive relief favored ordering inclusion of the proposal in the proxy materials for the upcoming shareholder meeting.

## Decision

- The court granted Lovenheim’s motion for a preliminary injunction.
- The court held Iroquois could not omit the proposal under Rule 14a-8(c)(5) because the rule is conjunctive: omission is permitted only when the operation is below 5% and the proposal is not otherwise significantly related to the issuer’s business.
- The court concluded the proposal was “otherwise significantly related” because it concerned a specific Iroquois business activity and raised significant ethical and social questions about animal cruelty.
- The court found irreparable harm in depriving the shareholder of a time-sensitive opportunity to communicate with other shareholders through the proxy process.
- The court found the balance of harms favored the shareholder, given the limited burden on Iroquois to include the proposal, and determined the public interest supported informed shareholder participation and the integrity of proxy solicitations.

## Legal Principles

- Under Rule 14a-8(c)(5), a company may omit a shareholder proposal only if the proposal relates to operations below the 5% thresholds and is not otherwise significantly related to the issuer’s business.
- “Significantly related” is not limited to economic materiality; qualitative considerations, including ethical and social policy implications connected to the issuer’s business activities, may establish significant relation.
- In proxy-rule disputes close to a shareholder meeting, exclusion of a proposal may constitute irreparable harm because the lost opportunity for shareholder communication and voting cannot be remedied after the meeting.
- The public interest in corporate suffrage and informed voting supports remedies that protect the federal proxy process when a shareholder shows a strong likelihood of success and limited countervailing burden on the issuer.

## Conclusion

The court ordered Iroquois to include Lovenheim’s animal-welfare-related proposal in its proxy materials, holding that Rule 14a-8(c)(5) does not permit omission based solely on economic insignificance and that significant ethical or social implications tied to a company’s business can satisfy the rule’s “otherwise significantly related” requirement.


Lovenheim v. Iroquois Brands, Ltd., 618 F. Supp. 554 (D.D.C. 1985)