## Facts

- Trinity Wall Street, a Wal-Mart shareholder, submitted a proposal for inclusion in Wal-Mart’s proxy materials.
- The proposal was styled as a charter amendment directing a board committee to oversee and publicly report policies and standards for deciding whether the company should sell products that (a) endanger public safety, (b) risk reputational harm, or (c) could be offensive to family and community values associated with the brand.
- Although the proposal did not name specific products, it was associated with concerns about Wal-Mart’s sale of certain high-capacity firearms.
- Wal-Mart sought to omit the proposal under SEC Rule 14a-8(i)(7), asserting it related to ordinary business operations (product selection and merchandising).
- SEC staff issued a no-action response indicating it would not recommend enforcement if Wal-Mart excluded the proposal.
- Trinity sued in the District of Delaware to compel inclusion of the proposal, alleging a violation of the federal proxy rules.
- The district court ultimately ruled for Trinity, reasoning the proposal focused on board-level oversight rather than day-to-day business decisions.
- Wal-Mart appealed.

## Issues

1. Whether the shareholder proposal could be excluded under SEC Rule 14a-8(i)(7) because it related to Wal-Mart’s ordinary business operations.
2. Whether courts should determine a proposal’s “subject matter” by its formal drafting (committee oversight/charter amendment) or by its practical effect (influencing product-selection decisions).
3. Whether the presence of significant social policy concerns removes a product-related proposal from the ordinary-business exclusion.

## Decision

- The Third Circuit reversed the district court and held Wal-Mart could exclude the proposal under Rule 14a-8(i)(7).
- The court determined the proposal’s substance concerned a retailer’s core management function: deciding what products to sell.
- The court held that framing the proposal as board or committee oversight did not change its subject matter for purposes of the ordinary-business exclusion.
- The court accepted that the proposal raised significant social policy issues but concluded the social-policy rationale did not override the ordinary-business character of the subject matter.
- The court gave weight to the SEC staff’s longstanding interpretive practice and no-action position supporting exclusion for similar product-selection proposals.

## Legal Principles

- Rule 14a-8(i)(7) permits exclusion of shareholder proposals that relate to a company’s ordinary business operations, particularly matters fundamental to day-to-day management.
- The ordinary-business inquiry focuses on the substantive nature and practical effect of the proposal, not merely the corporate body tasked with oversight or the proposal’s formal structure.
- For a retailer, product selection and merchandising decisions generally constitute ordinary business operations.
- The presence of significant social policy considerations does not, by itself, prevent exclusion when the proposal’s subject matter is squarely within ordinary business.
- Consistency with SEC interpretive guidance and staff no-action practice is relevant when applying Rule 14a-8(i)(7).

## Conclusion

The Third Circuit held that a shareholder proposal aimed at board-level standards for controversial products was excludable because, in substance, it sought to influence Wal-Mart’s product-selection decisions—an ordinary business matter under Rule 14a-8(i)(7), even when linked to social policy concerns.


Trinity Wall Street v. Wal-Mart Stores, Inc., 792 F.3d 323 (3d Cir. 2015)