The Court of Appeals, overruling the contentions of the
Securities and Exchange Commission (SEC), held that it had
jurisdiction to review the SEC's "extremely dubious" determination
not to oppose the Dow Chemical Co.'s refusal of respondent
shareholder's request to include its proposal for a corporate
charter amendment in Dow's proxy statement. Thereafter, Dow
acquiesced in the request, and, at its annual meeting, less than 3%
of the voting stockholders supported the respondent's proposal, as
a result of which the company, under an SEC rule, may exclude the
proposal from its proxy material for a three-year period.
Held: Since it is extremely doubtful that, at the end
of that period respondent, will resubmit the proposal and Dow will
refuse it, the case is now moot. Pp.
404 U. S.
405-407.
139 U.S.App.D.C. 226, 432 F.2d 659, vacated and remanded.
MARSHALL, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, STEWART, WHITE, and BLACKMUN, JJ.,
joined. DOUGLAS, J., filed a dissenting opinion,
post, p.
404 U. S. 407.
POWELL and REHNQUIST, JJ., took no part in the consideration or
decision of the case.
Page 404 U. S. 404
MR. JUSTICE MARSHALL delivered the opinion of the Court.
The Medical Committee for Human Rights acquired by gift five
shares of stock in Dow Chemical Co. In March, 1968, the Committee's
national chairman wrote a letter to the company expressing concern
over its policy with respect to the production and sale of napalm.
The letter also requested that there be included in the company's
proxy statement for 1968 a proposal to amend Dow's Certificate of
Incorporation to prohibit the sale of napalm unless the purchaser
gives reasonable assurance that the napalm will not be used against
human beings. Dow replied that the proposal was too late for
inclusion in the 1968 proxy statement and for discussion at that
year's annual meeting, but that it would be reconsidered the
following year.
In an exchange of letters with Dow in 1969, the Committee
indicated its belief that it had a right under Rule 14a-8 of the
Securities and Exchange Commission, 17 CFR § 240.14a-8 (1970)
(promulgated pursuant to § 14(a) of the Securities Exchange Act of
1934, 48 Stat. 895, as amended, 15 U.S.C. § 78n(a)), to have its
proposal included in the company's proxy statement for
consideration by all shareholders. On February 7, 1969, Dow
responded that it intended to omit the proposal (somewhat modified)
from the 1969 statement under the authority of subsections of the
SEC Rule relied on by the Committee that permitted omission of
shareholder proposals under two sets of circumstances:
§ 240.14a-8(c)(2) --
"If it clearly appears that the proposal is submitted by the
security holder primarily for the purpose of enforcing a personal
claim or redressing a personal grievance against the issuer or its
management, or primarily for the purpose of promoting general
economic, political, racial, religious, social or similar
causes;"
or
Page 404 U. S. 405
§ 240.14a-8(c)(5) --
"If the proposal consists of a recommendation or request that
the management take action with respect to a matter relating to the
conduct of the ordinary business operations of the issuer."
The Committee requested that Dow's decision be reviewed by the
staff of the SEC. On February 18, 1969, the Chief Counsel for the
Division of Corporation Finance wrote both Dow and the Committee to
inform them that "this Division will not recommend any action to
the Commission if this proposal is omitted from the management's
proxy material." App. 21. The SEC Commissioners granted a request
by the Committee that they review the Division's decision and
affirmed it. App. 43. The Committee then sought and obtained review
of the Commission's decision in the United States Court of Appeals
for the District of Columbia Circuit.
On July 8, 1970, the Court of Appeals held that the decision of
the SEC was reviewable under § 25(a) of the Securities Exchange Act
of 1934, 15 U.S.C. § 78y(a); that, while review of Dow's decision
was clearly available in district court, review of the SEC's
decision could also be obtained in a court of appeals; that the
validity of the Commission's determination was extremely dubious,
especially in light of its failure to state reasons supporting its
conclusion; and that the case should be remanded to the Commission
for reconsideration and a statement of reasons. 139 U.S.App.D.C.
226, 432 F.2d 659. The Commission petitioned for review here, and
we granted certiorari on March 22, 1971. 401 U.S. 973.
Events have taken place, subsequent to the decision by the court
below, and some subsequent to our decision to grant certiorari,
that require that we dismiss this case on the ground that it has
now become moot. In January, 1971, the Medical Committee again
submitted
Page 404 U. S. 406
its napalm resolution for inclusion in Dow's 1971 proxy
statement. This time, Dow acquiesced in the Committee's request and
included the proposal. At the annual stockholder's meeting in May
1971, Dow's shareholders voted on the Committee's proposal. Less
than 3 of all voting shareholders supported it, and, pursuant to
Rule 14a-8(c)(4)(i), 17 CFR § 240.14a-8(c)(4)(i), Dow may exclude
the same or substantially the same proposal from its proxy
materials for the next three years. We find that this series of
events has mooted the controversy.
Respondent argues that it will continue to urge the adoption of
the proposal and its inclusion in proxy statements, and that it is
likely that Dow will reject inclusion in the future as it has in
the past. It is true that, in permitting the proposal to be
included in the 1971 proxy statement, Dow stated that it adhered to
its opinion that the proposal might properly be omitted and that
its inclusion was without prejudice to future exclusion. However,
this does not create the controversy that is necessary for us to
retain jurisdiction to decide the merits. Whether or not the
Committee will actually resubmit its proposal or a similar one in
1974 is purely a matter of conjecture at this point, as is whether
or not Dow will accept it. If Dow were likely to repeat its
allegedly illegal conduct, the case would not be moot.
See
Walling v. Helmerich & Payne, 323 U. S.
37,
323 U. S. 43
(1944);
United States v. W. T. Grant Co., 345 U.
S. 629,
345 U. S.
632-633 (1953). However, in light of the meager support
the proposal attracted, we can only speculate that Dow will
continue to include the proposal when it again becomes eligible for
inclusion, rather than to repeat this litigation. Thus, we find
that "the allegedly wrongful behavior could not reasonably be
expected to recur."
United States v. Phosphate Export
Assn., 393 U. S. 199,
393 U. S. 203
(1968). The case is therefore moot.
Page 404 U. S. 407
"[I]t is well settled that federal courts may act only in the
context of a justiciable case or controversy."
Benton v.
Maryland, 395 U. S. 784,
395 U. S. 788
(1969).
"Our lack of jurisdiction to review moot cases derives from the
requirement of Article III of the Constitution under which the
exercise of judicial power depends upon the existence of a case or
controversy."
Liner v. Jafco, Inc., 375 U. S. 301,
375 U. S. 306
n. 3 (1964);
cf. Doremus v. Board of Education,
342 U. S. 429,
342 U. S. 434
(1952).
Accordingly, the judgment of the Court of Appeals is vacated,
and the case is remanded to that court for dismissal.
MR. JUSTICE POWELL and MR. JUSTICE REHNQUIST took no part in the
consideration or decision of this case.
MR. JUSTICE DOUGLAS, dissenting.
With all respect, I must dissent from the judgment of the Court
that this case has become moot because the Dow Chemical Co.
acquiesced in the decision of the Court of Appeals below. The
underlying dispute in this case is essentially a private one,
between Dow and the Medical Committee for Human Rights, though it
has large public overtones. In 1969, Dow refused to submit to its
shareholders the Medical Committee's proposal that Dow amend its
corporate charter to forbid the manufacture of napalm. Dow refused
again in 1970. Only in 1971, after the decision of the Court of
Appeals now under review, did Dow permit such a proposal to be
submitted for a vote. In doing so, however, Dow resolutely affirmed
its right to reject the proposal at any future time.
This gratuitous conduct did not, in my view, moot the
controversy. "Mere voluntary cessation of allegedly illegal conduct
does not moot a case."
United States v. Phosphate Export
Assn., 393 U. S. 199,
393 U. S. 203.
If it could,
Page 404 U. S. 408
then a defendant would always be "free to return to his old
ways."
United States v. W. T. Grant Co., 345 U.
S. 629,
345 U. S. 632.
[
Footnote 1]
But it is said that, because of the poor showing made by the
proposal when finally submitted, Dow could refuse to resubmit it
for three years under SEC proxy rules not at issue in this case.
Ante at
404 U. S. 406.
The Court suggests that it is "purely a matter of conjecture" that
the proposal will again be submitted at the expiration of this
period, and that Dow will attempt again to reject it. The Court
seems to think that Dow's best strategy, given the proposal's poor
showing, is to let it go to a vote, rather than undertake
protracted litigation.
Ibid.
This assumption, however, is not only baseless, it is
irrelevant. In
Grant, supra, an antitrust violation was
charged because of an interlocking directorate. In response to the
suits, the interlocking directors resigned,
Page 404 U. S. 409
and defendant companies represented to the court their intention
not to revive the interlock. We disposed of this argument in
summary fashion. "Such a profession does not suffice to make a case
moot."
Id. at
345 U. S. 633.
Here, Dow has not even made the minimal representation we rejected
in
Grant, nor is it likely to do so.
This is not a controversy that could not arise again for
decades,
Golden v. Zwickler, 394 U.
S. 103, or a controversy whose decision could have no
possible future effect on the parties,
Atherton Mill v.
Johnston, 259 U. S. 13. Dow
has for the past four years fought tooth and nail its obligation to
include this shareholder proposal. While
"[a] case might become moot if subsequent events made it
absolutely clear that the allegedly wrongful behavior could not
reasonably be expected to recur,"
Phosphate Export Assn., supra, at
393 U. S. 203,
that is hardly the situation here.
While this litigation is not formally between Dow and the
Medical Committee, but between the SEC and the Medical Committee,
it does involve a whole panoply of substantive [
Footnote 2] and procedural [
Footnote 3] rights in connection with a
corporation's obligation to include shareholder proposals in proxy
materials. The modern super-corporations, of which Dow is one,
wield immense, virtually unchecked, power. Some say [
Footnote 4] that they are "private
governments," whose decisions affect the lives of us all. [
Footnote 5] The philosophy of our
times, I think, requires that such
Page 404 U. S. 410
enterprises be held to a higher standard than that of the
"morals of the marketplace" which exalts a single-minded, myopic
determination to maximize profits as the traditional be-all and
end-all of corporate concern. The "public interest in having the
legality of the practices settled, militates against a mootness
conclusion."
Grant, supra, at
345 U. S.
632.
There is no reason to assume Dow's antipathy to the inclusion of
this shareholder proposal will be any less in 1974 than it is
today. Perhaps Dow will adopt the advice given to it by the Court.
But it is just as likely to decide its superior financial position
makes continued litigation the preferable alternative, which may
now be conducted under proxy rules more favorable to corporate
management [
Footnote 6] than
are the present rules.
Page 404 U. S. 411
This case now joins a growing list of monuments to the present
Court's abdication of its constitutional responsibility to decide
cases properly within its jurisdiction.
See, e.g., Picard v.
Connor, ante, p.
404 U. S. 270, at
404 U. S. 278
(DOUGLAS, J., dissenting);
North Carolina v. Rice, ante,
p.
404 U. S. 244, at
404 U. S. 248
(DOUGLAS, J., dissenting statement);
McClanahan v. Morauer
& Hartzell, ante, p. 16, at 17 (DOUGLAS, J., dissenting).
Once again, I dissent.
[
Footnote 1]
See also Walling v. Helmerich & Pane, 323 U. S.
37, where we held that a case involving the legality of
"split-day contracts" under the Fair Labor Standards Act was not
rendered moot by the defendant company's abandonment of the
contracts during the litigation.
"Despite respondent's voluntary cessation of the challenged
conduct, a controversy between the parties over the legality of the
split-day plan still remains. . . . Respondent has consistently
urged the validity of the split-day plan, and would presumably be
free to resume the use of this illegal plan were not some effective
restraint made."
Id. at
323 U. S.
43.
The vitality of this controversy was recognized by the Solicitor
General, himself, virtually to the moment of oral argument. While
he has abruptly reversed his position, the force of his prior
argument remains undiminished. Citing the above quotation from
Walling, he said:
"The same reasoning [as that of the
Walling Court]
applies to the dispute between respondent and Dow over whether the
latter is required to distribute to its shareholders the
Committee's proposal. Dow continues to insist that it is not
required to distribute the proposal, and even if it does so this
year [1971] and the proposal is defeated, Dow may reject it in
future year."
First Reply Brief for Petitioner 5.
[
Footnote 2]
See generally Note, 84 Harv.L.Rev. 700 (1971).
[
Footnote 3]
See generally Note, 84 Harv.L.Rev. 835 (1971).
[
Footnote 4]
See, e.g., Miller, Toward the "Techno-Corporate" State.
-- An Essay in American Constitutionalism, 14 Vill.L.Rev. 1 (1968);
J. Galbraith, The New Industrial State (1967); A. Berle, Economic
Power and the Free Society (1957).
[
Footnote 5]
A. Berle has suggested, for example, that
"The recession of 1956 was in part due to the fact that the
three principal automobile manufacturers, General Motors, Ford, and
Chrysler, sold 8 million cars in the previous year.
The
National City Bank Economic Review estimated the 'normal'
market for cars at the time at 6 million. The following year, the
motorcar companies sold only 4 million cars, and, naturally,
purchased far less from their suppliers of raw materials, glass,
et cetera. The effect on employment was severe."
The Three Faces of Power 31 n. 2 (1967).
[
Footnote 6]
In this regard, it should be noted that the SEC has recently
proposed amendments to its proxy rules which might strengthen Dow's
hand. The new rules would permit a company to refuse to submit for
a shareholder vote any proposal which,
inter alia,
"(ii) consists of a recommendation, request or mandate that
action be taken with respect to any matter, including a general
economic, political, racial, religious, social or similar cause,
that is not significantly related to the business of the issuer or
is not within the control of the issuer."
Proposed amendment to Rule 14a-8(c)(2), Securities Exchange Act
Release No. 9432, Dec. 22, 1971.
There is substantial sentiment, however, for a more liberal
approach to shareholder proxy proposals than is evidenced by the
current, much less the proposed, rules. Senator Muskie, for
example, introduced a bill in the last Congress, entitled the
"Corporate Participation Act," which would have,
inter
alia, barred exclusion of a shareholder proposal
"on the ground that such proposal may involve economic,
political, racial, religious, or similar issues, unless the matter
or action proposed is not within the control of the issuer."
S. 4003, § 2, 91st Cong., 2d Sess. For the view that a
corporation should be required to include any shareholder proposal
which is a "proper subject" for shareholder action under applicable
state law,
see Chisum, Napalm, Proxy Proposals and the
SEC, 12 Ariz.L.Rev. 463 (1970).
See also Note, 84
Harv.L.Rev. 700 (1971).