Susman Godfrey L.L.P. Wins First-of-Its-Kind Judgment for Apache Against Shareholder Activist
March 12 2010 - 11:01AM
PR Newswire (US)
HOUSTON, March 12 /PRNewswire/ -- Susman Godfrey L.L.P. won a
declaratory judgment in favor of Apache Corporation and against
shareholder activist John Chevedden. Judge Lee Rosenthal of the
United States District Court for the Southern District of Texas
granted Apache's motion for declaratory judgment and held that
"Apache may exclude Chevedden's proposal from its proxy materials."
The case style is Apache Corporation v. John Chevedden, No.
4:10-cv-00076. Chevedden had submitted a purported shareholder
proposal to Apache and asked that it be included in Apache's proxy
materials. Apache believed that Chevedden's proposal was deficient
because he had not proven that he actually was one of the company's
shareholders. In its court papers, Apache described Chevedden as
"the single most persistent proponent or proxy of purported
shareholder proposals in history," whose proposals "have been the
subject of a whopping 953 SEC staff no-action letters." Apache's
lead trial lawyer, Geoffrey L. Harrison, a partner in the Houston
office of Susman Godfrey, said he was "thrilled with the court's
ruling, and impressed with the court's careful attention to the
important securities law issues raised." Harrison said: "This
obviously is a big win for Apache. It also is a big win for
responsible corporate governance." Harrison added that the court's
decision "should curtail the submission of proposals from those who
otherwise might pretend to be shareholders when, in fact, they are
not." Harrison said, "Apache's aggressive and successful litigation
approach here is a game-changer that very well may have a dramatic
impact on the way shareholders make proposals, and the way
companies respond to them. By winning this lawsuit, we have helped
Apache protect the sanctity of its proxy statement ballot for the
benefit of its true shareholders," Harrison added. Under S.E.C.
Rule 14a-8(b), in order to be eligible to submit a shareholder
proposal, a person or entity must be a shareholder and must have
held a certain amount of stock for certain amount of time. In its
court papers, Apache questioned whether Chevedden was an Apache
shareholder and claimed that it had "many compelling reasons to
distrust Chevedden's eligibility to submit his proposal." Indeed,
Judge Rosenthal found that there are "valid reasons" to believe
that Chevedden's offer of proof was "unreliable as evidence."
Chevedden tried to deflect the substantial body of evidence that
Apache presented by saying it was "irrelevant" and that "[m]aybe
Apache's lawyers can convert this into a spy novel or something."
Judge Rosenthal explained in her decision that "most Rule 14a-8
disputes are resolved cooperatively or through the no-action
process." Harrison agreed that's how it's usually done, and noted
that, to his knowledge, "this is the very first time that a company
has sought to exclude a purported shareholder proposal by taking
the proponent directly to court, without first seeking a no-action
letter from the SEC staff." Two years ago, Harrison won a similar
case for Apache and secured a ruling that Apache properly had
excluded from its proxy materials a proposal submitted by the New
York City Employees' Retirement System. In that prior case, Apache
v. NYCERS, 621 F.Supp.2d 444 (S.D. Tex. 2008), Apache had secured a
favorable no-action letter from the SEC staff before it filed suit
in federal court. In Apache's recent case against Chevedden, Judge
Rosenthal held that certain S.E.C. rules were "intended to 'give
true vitality to the concept of corporate democracy,' . . . that
does not necessitate a complete surrender of a corporation's rights
during proxy season." The court held that "Chevedden has failed to
meet Rule 14a-8(b)(2)'s requirements" and that "Apache may exclude
Chevedden's proposal from its proxy materials." DATASOURCE: Susman
Godfrey L.L.P. CONTACT: Geoffrey L. Harrison,
+1-713-653-7807,gharrison@susmangodfrey.com, or Chanler A. Langham,
+1-713-653-7839,clangham@susmangodfrey.com, both of Susman Godfrey
L.L.P. Web Site: http://www.susmangodfrey.com/
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