EMC Corporation v. Chevedden et al

Filing 40

Judge Mark L. Wolf: ORDER entered. MEMORANDUM AND ORDER(Hohler, Daniel)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
EMC CORPORATION,
Plaintiff,

)
)
)
)
)
)
)
)

v.
JOHN CHEVEDDEN
and JAMES McRITCHIE,
Defendants

C.A. No. 14-10233-MLW

MEMORANDUM AND ORDER
WOLF, D.J.

March 16, 2014

This memorandum is based upon the transcript of the decision
rendered orally on March 7, 2014, allowing Defendants' Motion to
Dismiss for Lack of Subject Matter Jurisdiction.

This memorandum

adds citations, deletes some colloquy, clarifies some language, and
represents the court's decision in this matter for purposes of any
appeal.
*
I.

*

*

*

*

*

INTRODUCTION
For the reasons explained in detail below, the court finds

that the plaintiff, EMC Corporation ("EMC"), lacks standing to
bring this case and that there is not an actual case or controversy
within the meaning of Article III of the Constitution.

Although,

as a legal matter, that finding could end the inquiry, the court
would,

even

if

EMC

had

Article

III

standing,

exercise

its

discretion not to decide EMC's request for a declaratory judgment.
The court would also deny EMC's request for a permanent injunction.
This case was filed on January 30, 2014.

Plaintiff EMC sued

defendants John Chevedden and James McRitchie, who have made a
shareholder proposal for inclusion with EMC's proxy materials to be
distributed in connection with EMC's annual shareholder meeting on
April 30, 2014.

EMC claims that it is entitled to exclude the

shareholder proposal, which, if adopted, would require that the
Chair of the EMC Board be an independent director.
EMC argues that Mr. Chevedden does not own EMC stock, as is
required to permit him to file a shareholder proposal.
contends that the

EMC also

proposal contains misleading information in

violation of Securities and Exchange Commission ("SEC") proxy
rules. EMC requests a declaratory judgment that it may exclude the
proposal or, in the alternative, an injunction against Chevedden
and McRitchie to prevent them from asking that the shareholder
proposal be included in the proxy materials. On February 14, 2014,
in anticipation of the approaching March 14, 2014 date that EMC
says is the deadline to complete its proxy materials for the April
30, 2014 shareholder meeting, the court allowed EMC's motion to
expedite this matter.

See Feb. 14, 2014 Order.

There are now two pending substantive motions. First, EMC has
filed a Motion for Summary Judgment or, in the Alternative, A
Preliminary Injunction.

EMC argues that it has a right to exclude

the shareholder proposal because of multiple deficiencies.
Second, the defendants have filed a Motion to Dismiss for Lack
of

Subject

Matter

Jurisdiction

2

and

for

Failure

to

Join

an

Indispensable Party.

Defendants argue that EMC lacks standing to

bring this declaratory judgment action, that there is no private
cause of action under SEC Rule 14a-8, and that the action should be
dismissed because EMC has failed to include the SEC, an allegedly
indispensable party.
The question of jurisdiction must be decided first.

If this

court lacks subject matter jurisdiction, that is the end of the
inquiry.
Important to the analysis of the question of whether there is
an actual case or controversy are the undisputed facts that the
defendants have each entered into an irrevocable covenant not to
sue EMC if their proposal is excluded from its proxy materials and
have irrevocably promised not to present their proposal at the
shareholder meeting if it is excluded.
II.

THE MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
The court is allowing the defendants' motion to dismiss

because the plaintiff has not borne its burden of demonstrating the
existence of a "case or controversy," as required by Article III,
to permit a judicial decision on a question.

This is an issue of

subject matter jurisdiction.
"It is the plaintiff's burden to prove the existence of
subject matter jurisdiction."

Aversa v. United States, 99 F.3d

1200, 1209 (1st Cir. 1996) (citing Murphy v. United States, 45 F.3d
520, 522 (1st Cir. 1995)).

Where a court decides a Rule 12(b)(1)
3

motion on the pleadings, it must "construe the Complaint liberally
and treat all well-pleaded facts as true, according the plaintiff
the benefit of all reasonable inferences." Murphy, 45 F.3d at 522.
However, the court is not "bound to accept as true a legal
conclusion couched as a factual allegation."

Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007) (quoting Papasan v. Allain, 478
U.S. 265, 286 (1986)) (internal quotation marks omitted).
Importantly for the instant case, "when a motion to dismiss
for lack of subject matter jurisdiction under Fed. R. Civ. P.
12(b)(1) involves factual questions . . . the court must determine
whether the relevant facts, which would determine the court's
jurisdiction, also implicate elements of the plaintiff's cause of
action." Torres–Negrón v. J & N Records, LLC, 504 F.3d 151, 162–63
(1st Cir. 2007).

"[I]f the facts relevant to the jurisdictional

inquiry are not intertwined with the merits of the plaintiff's
claim, . . . 'the trial court is free to weigh the evidence and
satisfy itself as to the existence of its power to hear the case.'"
Id. at 163 (quoting Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th
Cir.

1990)).

Here,

because

the

facts

relevant

to

the

jurisdictional inquiry are distinct from those relevant to the
merits of the plaintiff's claim, the court may consider, and is
considering, evidence in addition to the allegations.
The requirement that a plaintiff have standing emanates from
Article III of the Constitution, which grants courts jurisdiction

4

only over "Cases" and "Controversies."

As the Supreme Court has

explained:
In its constitutional dimension, standing imports
justiciability: whether the plaintiff has made out a
"case or controversy" between himself and the defendant
within the meaning of Art. III. This is the threshold
question in every federal case, determining the power of
the court to entertain the suit.
Warth v. Seldin, 422 U.S. 490, 498 (1975) (emphasis added).

This

fundamental standing requirement has been applied by the Supreme
Court

both

to

actions

for

declaratory

judgments,

see,

e.g.,

MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 128 n.8 (2007),
and to actions for injunctive relief, see City of Los Angeles v.
Lyons, 461 U.S. 95, 110 (1983).

Furthermore, when a plaintiff

requests more than one remedy, it bears the burden to show standing
"for each type of relief sought."

Summers v. Earth Island Inst.,

555 U.S. 488, 493 (2009) (citing Lyons, 461 U.S. at 105).
Although

the

application

of

the

standing

doctrine

to

injunctive relief is relatively straightforward, its application to
actions for declaratory judgments deserves some discussion in light
of recent Supreme Court rulings.

When courts assess whether a

"case or controversy" exists in a declaratory judgment action, they
do not always discuss standing.

As Professors Wright and Miller

explain, "[b]ecause 28 U.S.C. §2201 explicitly requires 'a case of
actual controversy,' declaratory judgment cases are frequently
written in terms that look directly for a case or controversy,
without

pausing

to

employ

more
5

specific

categories

of

justiciability."

13 Wright, Miller & Cooper, Fed. Prac. & Proc.

§3529 n.30 (3d ed. 2013); see also In re Columbia Univ. Patent
Litig., 343 F. Supp. 2d 35, 43 (D. Mass. 2004) (Wolf, J.) ("The
requirement of actual controversy encompasses concepts such as
ripeness, standing, and the prohibition against advisory judicial
rulings . . . ." (quoting BP Chems. Ltd. v. Union Carbide Corp., 4
F.3d

975,

977

omitted))).

(Fed.

Cir.

1993)

(internal

quotation

marks

Here, the defendants have framed their argument in

terms of standing and the court finds that this is the proper
framework for analysis.
The Declaratory Judgment Act provides that:
In a case of actual controversy within its jurisdiction
. . . any court of the United States, upon the filing of
an appropriate pleading, may declare the rights and other
legal relations of any interested party seeking such a
declaration, whether or not further relief is or could be
sought. Any such declaration shall have the force and
effect of a final judgment or decree and shall be
reviewable as such.
28 U.S.C. §2201(a).

The Supreme Court has explained that "the

phrase 'case of actual controversy' in the Act refers to the type
of 'Cases' and 'Controversies' that are justiciable under Article
III" of the Constitution. MedImmune, 549 U.S. at 126 (citing Aetna
Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937)).
Defining

the

boundaries

of

the

Declaratory

jurisdiction, however, has proven challenging.

Judgment

Act

In its most recent

in-depth treatment of the justiciability of cases brought under the
Declaratory Judgment Act, the Supreme Court noted:
6

[Our cases] do not draw the brightest of lines between
those declaratory-judgment actions that satisfy the caseor-controversy requirement and those that do not. Our
decisions have required that the dispute be "definite and
concrete, touching the legal relations of parties having
adverse legal interests"; and that it be "real and
substantial" and "admi[t] of specific relief through a
decree of a conclusive character, as distinguished from
an opinion advising what the law would be upon a
hypothetical state of facts." [Aetna, 300 U.S.] at 24041. In Maryland Casualty Co. v. Pacific Coal & Oil Co.,
312 U.S. 270, 273 (1941), we summarized as follows:
"Basically, the question in each case is whether the
facts alleged, under all the circumstances, show that
there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy
and reality to warrant the issuance of a declaratory
judgment."
MedImmune, 549 U.S. at 127.
traditional

justiciability

The Court in MedImmune explained that
doctrines,

including

standing

and

ripeness, may be elements of the case-or-controversy analysis in
declaratory judgment actions.

See id. at 128 n.8.

depends,

"plaintiff

in

part,

on

whether

'imminent'

injury

in

fact

challenged

action

of

the

'fairly

.

.

defendant.'"

.

is

threatened

trace[able]
Id.

Standing
with

to

(alterations

the
in

original) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555,
560 (1992)).

Although a real risk of enforcement by someone other

than the defendant might arguably, in certain circumstances, also
be sufficient to justify the issuance of a declaratory judgment,
MedImmune essentially instructs courts to decide whether there
would be an imminent, redressable injury in fact if a declaratory
judgment plaintiff refused to accede to a defendant's demands.
Generally, with regard to the constitutional requirements for
7

standing, the plaintiff must demonstrate: (1) injury in fact; (2)
causation; and (3) redressability.

Lujan, 504 U.S. at 560-61;

accord Katz v. Pershing LLC, 672 F.3d 64, 71-72 (1st Cir. 2012).
In this case, the first and third requirements are the most
important.
An injury in fact is the "invasion of a legally protected
interest which is (a) concrete and particularized, and (b) actual
or imminent, not conjectural or hypothetical."

Lujan, 504 U.S. at

560. The Supreme Court has "repeatedly reiterated that 'threatened
injury must be certainly impending to constitute injury in fact,'
and

that

'[a]llegations

sufficient."

of

possible

future

injury'

are

not

Clapper v. Amnesty Int'l USA, 133 S. Ct. 1138, 1147

(2013) (quoting Whitmore, 495 U.S. 149, 158 (1990)).
The redressability requirement is met only when there is a
"likelihood that the requested relief will redress the alleged
injury."

Steel Co. v. Citizens for a Better Env't, 523 U.S. 83,

103 (1998).

When redress of a plaintiff's claim "'depends on the

unfettered choices made by independent actors not before the courts
and whose exercise of broad and legitimate discretion the courts
cannot presume either to control or to predict,' . . . it becomes
the burden of the plaintiff to adduce facts showing that those
choices have been or will be made in such manner as to produce
causation and permit redressability of injury." Lujan, 504 U.S. at
562 (citations omitted) (quoting ASARCO Inc. v. Kadish, 490 U.S.

8

605, 615 (1989) (opinion of Kennedy, J.)).
Because

EMC

is

the

party

seeking

to

invoke

federal

jurisdiction in this case, it bears the burden of establishing
standing.

See id. at 561.

EMC must support each of the elements

of standing "in the same way as any other matter on which the
plaintiff bears the burden of proof, i.e., with the manner and
degree of evidence required at the successive stages of the
litigation."

Id.

"At

the

pleading

stage,

general

factual

allegations of injury resulting from the defendant's conduct may
suffice, for on a motion to dismiss [courts] presum[e] that general
allegations embrace those specific facts that are necessary to
support the claim." Id. (internal quotation marks omitted); accord
Bennett v. Spear, 520 U.S. 154, 168 (1997).

However, as explained

earlier, "if the facts relevant to the jurisdictional inquiry are
not intertwined with the merits of the plaintiff's claim, . . .
'the trial court is free to weigh [] evidence and satisfy itself as
to the existence of its power to hear the case.'"

Torres–Negrón,

504 F.3d at 163 (quoting Lawrence v. Dunbar, 919 F.2d 1525, 1529
(11th Cir. 1990)).

Here, because the facts relating to whether a

controversy exists are distinct from the underlying merits of the
controversy or the claim, the court has also considered the
evidence submitted by the parties.
In this case, the defendants argue that EMC lacks standing
because

it

has

not

satisfied

the

9

Lujan

requirements.

This

contention is correct. EMC has not demonstrated that there will be
an "imminent injury in fact" in the absence of a declaratory
judgment or injunction, or that a declaratory judgment would
actually redress any injury in fact that might occur.
lacks standing to pursue this matter.

Thus, EMC

Therefore, the motion to

dismiss is meritorious.
First, EMC has not carried its burden of demonstrating that,
if it decided to exclude the defendants' proposal from its proxy
materials, it would face an "imminent injury in fact" attributable
to the defendants.
The defendants have made an "irrevocable promise" that they
will not file suit against EMC or raise their proposal at EMC's
annual meeting if their proposal is excluded from the proxy
materials.
comprehensive

As the Supreme Court has recently recognized, a
covenant

declaratory judgment.

not

to

sue

can

moot

a

request

for

a

See Already, LLC v. Nike, Inc., 133 S. Ct.

721, 733 (2013) (finding defendant's counterclaim for declaratory
judgment moot when plaintiff voluntarily entered comprehensive
covenant not to sue).

Similarly, in In re Columbia University

Patent Litigation, 343 F. Supp. 2d 35 (D. Mass. 2004), this court
determined that a patentee's covenant not to sue eliminated any
Article III controversy between the litigants, see id. at 43.
One court, applying MedImmune, concluded that the defendant's
"direct and unequivocal statement that [it] has absolutely no plan

10

whatsoever to sue" did not moot the actual controversy between the
litigants. See SanDisk Corp. v. STMicroelectroncis, Inc., 480 F.3d
1372, 1382 (Fed. Cir. 2007).

However, that conclusion was reached

because the defendant had nevertheless "engaged in a course of
conduct that show[ed] a preparedness and willingness to enforce
its . . . rights," id. at 1383.

In essence, the Federal Circuit

found in SanDisk that the defendant was using "the kinds of 'extrajudicial
tactics'
obviate."

patent
that

the

enforcement

with

Declaratory

scare-the-customer-and-run

Judgment

Act

was

intended

to

Id. (quoting Arrowhead Indus. Water, Inc. v. Ecolochem,

Inc., 846 F.2d 731, 735 (Fed. Cir. 1988)).
Moreover, in SanDisk, the defendant merely said that it had
"no plan" to sue, but did not expressly renounce its right to sue.
In

another

case,

the

Federal

Circuit

noted

this

critical

distinction between a defendant's statement that it did not intend
to sue and a statement that it would not sue.

See Benitec Aus.,

Ltd. v. Nucleonics, 495 F.3d 1340, 1347-48 (Fed. Cir. 2007).
Here, where the defendants have "irrevocably promised" not to sue,
no justiciable case or controversy exists.
EMC argues that even if there is little or no risk of a suit
from the defendants, there is nevertheless a substantial risk that
the

SEC

or

other

shareholders

could

bring

an

action

if

defendants' proposal is excluded from the proxy materials.

the
EMC

relies on two unpublished Fifth Circuit opinions involving Mr.

11

Chevedden, a defendant here.

See Waste Connections, Inc. v.

Chevedden, No. 13-20336, 2014 WL 554566 (5th Cir. Feb. 13, 2014);
KBR v. Chevedden, 478 Fed. Appx. 213 (5th Cir. 2012). Although the
Fifth Circuit credited the defendants' promise not to sue, it
nevertheless concluded that a "case or controversy" existed because
the plaintiffs had "explained to the district court that the
exclusion of the Defendants' proposal could lead directly to an SEC
enforcement action or liability from other shareholders."
Connections,
respectfully,

2014

WL

finds

554566,
the

at

Fifth

*2.

However,

Circuit's

this

reasoning

unpersuasive, at least on the record of this case.

Waste
court,
to

be

Among other

things, the Fifth Circuit decisions do not recognize that a
declaratory judgment stating that a shareholder proposal could be
excluded would not, as a matter of law, actually redress the
plaintiff's alleged harm or risk.1
First, EMC has submitted no evidence that persuades the court
that there would be a substantial risk of an enforcement action by
the SEC or any shareholder.

Indeed, they have not provided

evidence that there is any real risk at all.

In the absence of

such evidence this court has no basis to conclude that EMC has

1

The court notes that, since the March 7, 2014 hearing in
this case, Mr. Chevedden's motion to dismiss in a similar case in
the Southern District of New York was allowed for substantially
the same reasons explained at the hearing and in this Memorandum
and Order. See Omnicom Grp., Inc. v. Chevedden, No. 14 Civ. 0386
(LLS) (S.D.N.Y. Mar. 11, 2014).
12

established an "imminent injury in fact" that would result from
excluding the defendants' proposal from its proxy materials.
The defendants argue that enforcement by any third party would
be quite unlikely.

The defendants state in their memorandum that

the SEC has brought a suit under Rule 14a-8 only once in the 72year history of 14a-8 and its predecessor rule.

See Defs.' Memo.

in Reply to Memo. in Opp. to Mot. to Dismiss at 5 n.5 (citing SEC
v. TransAmerica Corp., 163 F.2d 511 (3d Cir. 1947)).

They also

claim that, to their knowledge, there have been no enforcement
suits brought by third-party shareholders under Rule 14a-8.

Id.

This information is not in an affidavit and, therefore, is not
evidence on which the court now relies.

However, these statements

have not been rebutted by any evidence offered by EMC, which bears
the burden of proof.
EMC has provided evidence of the complaints filed by the SEC
in three enforcement actions stemming from alleged violations of
Section 14(a) and the SEC rules under it.
7-9 (Docket Nos. 31-7 to 31-9).

See Roffman Decl. Exs.

However, none of those actions

involved alleged violations of Rule 14a-8.

Rather, in those cases

the SEC brought suit because of the defendant corporation's own
allegedly

misleading

statements

in

its

proxy

materials,

in

violation of Rule 14a-9, not because the corporation excluded a
shareholder proposal in alleged violation of Rule 14a-8.
Even if there were evidence that indicated a genuine risk of

13

an

enforcement

action

by

the

SEC

or

another

shareholder,

a

declaratory judgment by this court would not bar such suits because
those

parties

declaration.

would

not

be

collaterally

estopped

by

such

a

Due process requires that for collateral estoppel to

operate, the party against whom the prior judgment is asserted must
have had a "full and fair opportunity to litigate" its claim in the
earlier action. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322,
328 (1979); see also Rodriguez-Garcia v. Miranda-Marín, 610 F.3d
756, 771 (1st Cir. 2010).

Here, however, neither the SEC nor any

shareholder other than the defendants has had an opportunity to
participate in this case, directly or indirectly.

Therefore, they

would not be bound by any declaratory judgment issued by this
court.
This fact also relates to the other major requirement for
standing implicated in this case: redressability.

The Supreme

Court explained in Lujan that the redressability requirement was
not met in that case because "resolution by the District Court
would not have remedied [the plaintiffs'] alleged injury anyway,
because

it

would

not

have

been

binding

upon

the

[relevant

government] agencies. They were not parties to the suit, and there
is no reason they should be obliged to honor an incidental legal
determination the suit produced." Lujan, 504 U.S. at 569. This is
equally true in the instant case.
EMC argues that the SEC would, nevertheless, feel bound by

14

such a declaratory judgment and would not bring an independent
enforcement action.

See Opp. to Mot. to Dismiss at 11.

EMC

contends that the SEC has stated in one of its publications that
"only a court such as a U.S. District Court can decide whether a
company is obligated to include shareholder proposals in its proxy
materials," and that the SEC "do[es] not and cannot adjudicate the
merits of a company's position with respect to the proposal."

SEC

Div. of Corp. Fin., Informal Procedures Regarding Shareholder
Proposals (Nov. 2, 2011), http://www.sec.gov/divisions/corpfin/cf
-noaction/14a-8-informal-procedures.htm.
This statement was, however, made in the context of the SEC's
explanation that individual shareholders may file suit to have
their proposals included in a company's proxy materials, even if
the SEC has issued a no-action letter.

The SEC was discussing a

situation analogous to that which this court addressed in Gillette
Co. v. RB Partners, 693 F. Supp. 1266 (D. Mass. 1988).

In that

case, the SEC issued no-action letters after a proxy contest had
begun, and there were subsequent judicial proceedings to decide, in
a more deliberate and adversarial fashion, whether the proxy rules
had been violated.

See id. at 1287-88.

For the foregoing reasons, the court finds that EMC does not
have standing and there is no case or controversy.
defendants' motion to dismiss is meritorious.

15

Therefore, the

III. THE DECLARATORY JUDGMENT ACT
Even if there were an Article III case or controversy, the
court would exercise its discretion under the Declaratory Judgment
Act, 28 U.S.C. §2201, not to issue a declaratory judgment in the
present posture of this case.
In Wilton v. Seven Falls Co., 515 U.S. 277 (1995), the Supreme
Court wrote:
By the Declaratory Judgment Act, Congress sought to place
a remedial arrow in the district court's quiver. It
created an opportunity rather than a duty to grant a new
form of relief to qualifying litigants. Consistent with
the nonobligatory nature of the remedy, the district
court is authorized, in the sound exercise of its
discretion, to stay or to dismiss an action seeking a
declaratory judgment before trial or after all arguments
have drawn to a close.
In the declaratory judgment
context, the normal principle that federal courts should
adjudicate claims within their jurisdiction yields to
considerations
of
practicality
and
wise
judicial
administration.
Id. at 288 (footnote omitted).

In the instant case, a declaratory

judgment would be an advisory opinion without relieving EMC of any
uncertainty or insecurity about being sued by the defendants if EMC
excludes their proposal. As explained earlier, the defendants have
provided

a

written

irrevocable

promise

not

to

present

their

proposal at the annual meeting or to sue EMC if EMC excludes their
proposal from its proxy materials.

In addition, EMC has not

demonstrated the existence of a genuine threat that the SEC or
anyone else will sue if the proposal is excluded.
In addition, the court has not heard from the expert SEC,

16

which has declined to grant a no-action letter.
at 3.

See Compl. Ex. D

If EMC had standing, the court would offer the SEC an

opportunity to be heard before deciding whether to issue the
declaratory judgment EMC requests.

In view of the fact that EMC

asserts that it needs a decision by March 14, 2014, there is not
time to solicit the participation of the SEC, which has not
attempted to intervene in this action despite having notice of it.
Deciding this matter on an expedited basis, when, as here, EMC
did not present all of its arguments to the SEC before filing suit
would essentially reverse the process contemplated by the scheme
established by Congress and would not be in the interests of the
administration of justice.

Pursuant to its statutory authority,

the SEC has established a process by which companies like EMC can
present their proxy materials to the SEC.
8(j).

See 17 C.F.R. §240.14a-

The SEC, quickly and informally, will provide advice and in

appropriate cases issue no-action letters.

See Apache Corp. v.

Chevedden, 696 F. Supp. 2d 723, 729 (S.D. Tex. 2010).

If a

shareholder is sufficiently disappointed with the SEC's no-action
letter, he or she can bring a suit in federal court to enjoin an
annual shareholder meeting or, as happened in Gillette, bring suit
after the annual meeting, providing the court an opportunity to
develop the record and make a properly informed decision.
Gillette, 693 F. Supp. at 1287-88.

Issuing a declaratory judgment

would reverse this usual process without good cause.

17

See

As counsel for EMC confirmed at the March 7, 2014 hearing, EMC
did not present to the SEC all of the arguments for excluding the
defendants'

proposal

that

it

has

made

in

this

case.

More

specifically, on December 20, 2013, EMC's senior corporate counsel,
Rachel Lee, sent a letter to the SEC's Division of Corporate
Finance

to

inform

the

Division

of

EMC's

intent

defendants' proposal from its proxy materials.

to

omit

the

The company relied

solely on the contention that Mr. Chevedden and Mr. McRitchie had
violated proxy rules by failing to provide a copy of the GMI
Ratings report referenced in their proposal and stated:
We believe that the proposal may properly be excluded
from the 2014 proxy materials pursuant to Rule
14a-8(i)(3) because the supporting statement contained
unsubstantiated and misleading references to nonpublic
materials that the proponent has not made available to
the company for evaluation.
Compl. Ex. C at 4.

The letter did not mention any other potential

reason to exclude the proposal.

EMC did, however, attach to Ms.

Lee's letter its prior correspondence with Mr. Chevedden and Mr.
McRitchie, which expressed concerns about whether they satisfied
the ownership requirements, essentially raising the issue that Mr.
Chevedden evidently does not own any EMC stock.
On January 16, 2014, the SEC Division of Corporate Finance
declined EMC's request for a no-action letter.

In its letter to

EMC, the SEC stated:
The proposal requests that the board adopt a policy, and
amend other governing documents as necessary to reflect
that policy, to require the chair of the board of
18

directors to be an independent member of the board.
We are unable to concur in your view that EMC may exclude
the proposal or portions of the supporting statement
under rule 14a-8(i)(3). We are unable to conclude that
you have demonstrated objectively that the proposal or
the portions of the supporting statement you reference
are materially false or misleading. Accordingly, we do
not believe that EMC may omit the proposal or portions of
the supporting statement from its proxy materials in
reliance on rule 14a-8(i)(3).
Compl. Ex. D at 3.
Two weeks later, on January 30, 2014, EMC filed the instant
action in this court, requesting a declaratory judgment that it may
exclude

the

defendants'

proposal

or,

in

the

alternative,

a

preliminary and permanent injunction to prevent the defendants from
continuing to seek the inclusion of their proposal in the proxy
materials.

The court is asked to issue a declaratory judgment on

an expedited basis, without the advice of the SEC, without much
time to consider the matter, and without the full benefit of the
adversary process because the defendants are not represented, in
part because it would be too expensive for them to engage counsel.
There is, therefore, the risk of a decision that is not well
informed and properly considered.
More significantly, a declaratory judgment would abet an
inappropriate practice by encouraging companies to fail to present
all

of

their

opportunity

to

arguments
perform

first
its

to

the

intended

SEC
role

to
as

provide
a

it

an

source

of

expeditious, expert advice. As the defendants have argued, issuing

19

a declaratory judgment would encourage end runs around the SEC,
which would deprive shareholders of an inexpensive opportunity to
have disputes resolved in their favor.

As a practical matter,

forcing shareholders to litigate in federal court deprives them of
the opportunity to have their positions evaluated by the SEC
inexpensively, expertly, and expeditiously. Doing so is not in the
interests of justice.
IV.

INJUNCTIVE RELIEF
Finally,

analysis

also

in

the

bears

interest
on

the

of

completeness,

plaintiff's

the

alternative

requested, a preliminary and permanent injunction.

standing
relief

As EMC intends

to finalize its proxy materials by March 14, 2014, if EMC had
standing, the court would have consolidated any hearing on a motion
for a preliminary injunction with the trial on the merits.

See

Fed. R. Civ. P. 65(a)(2).
As the First Circuit has explained the standards for a court
to grant injunctive relief:
Under [the] four-part inquiry, injunctive relief may be
ordered where (1) the plaintiff has prevailed on the
merits, (2) the plaintiff would suffer irreparable injury
in the absence of injunctive relief, (3) the harm to the
plaintiff would outweigh the harm to the defendants from
an injunction, and (4) the injunction would not adversely
affect the public interest.
Joyce v. Town of Dennis, 720 F.3d 12, 25 (1st Cir. 2013).

The

Supreme Court has indicated that the "injury in fact" prong of the
standing

requirement

is

related
20

to

the

"irreparable

injury"

requirement for an injunction:
The equitable remedy is unavailable absent a showing of
irreparable injury, a requirement that cannot be met
where there is no showing of any real or immediate threat
that the plaintiff will be wronged again –- a "likelihood
of substantial and immediate irreparable injury."
Lyons, 461 U.S. at 111 (quoting O'Shea v. Littleton, 414 U.S. 488,
502 (1974)); see also In re Navy Chaplaincy, 534 F.3d 756, 766
(D.C. Cir. 2008) ("[T]o show irreparable harm '[a] plaintiff must
do more than merely allege . . . harm sufficient to establish
standing.'" (quoting Associated Gen. Contractors of Cal., Inc. v.
Coal for Econ. Equity, 950 F.2d 1401, 1410 (9th Cir. 1991))).
Accordingly, the absence of an "injury in fact" for standing
purposes necessarily forecloses injunctive relief.
The particular and somewhat unusual posture of this case also
indicates that the plaintiff would not suffer an "irreparable
injury" if the defendants are not enjoined from requesting that
their proposal be included in EMC's proxy materials.
decide to exclude it from its proxy materials.

EMC may

As explained

earlier, the defendants have pledged not to pursue any action
against EMC if it excludes their proposal, there is no demonstrated
risk that anyone else will sue EMC, and EMC contends that any
enforcement action by the SEC or third party shareholders would be
unmeritorious.
Injunctive

relief,

and

in

particular

the

concept

of

irreparable harm, could exist in the context of a mirror image of

21

the instant suit, a case in which a shareholder seeks to enjoin the
corporation from excluding the proposal.

See, e.g., N.Y.C. Emps.'

Ret. Sys. v. Dole Food Co., Inc., 795 F. Supp. 95 (S.D.N.Y. 1992);
Amalgamated Clothing & Textile Workers Union v. Wal-Mart Stores,
Inc., 821 F. Supp. 877, 879 (S.D.N.Y. 1993).

In such situations,

courts have acknowledged that a shareholder's inability to present
its proposal to other shareholders for another year may constitute
"irreparable harm."
103.

See N.Y.C. Emps.' Ret. Sys., 795 F. Supp. at

However, here, EMC would sustain no "irreparable harm" as a

result of the defendant's actions.
V.

CONCLUSION
In conclusion, the plaintiff has not demonstrated that it

would

suffer

an

imminent

injury

in

fact

if

it

excluded

the

defendant's proposal or that there is any "case or controversy"
between the parties within the meaning of Article III of the
Constitution.

The court is, therefore, allowing the defendant's

motion to dismiss.
In addition, in the interest of completeness, the court has
explained that EMC has also not shown that it would be appropriate
for the court to exercise its discretion to issue a declaratory
judgment even if EMC had standing.
Finally, even if there were an actual case or controversy,
there

would

not

be

a

proper

basis

injunction.
22

for

issuing

a

permanent

VI.

ORDER
In

view

Defendants'

of

the

Motion

to

foregoing,
Dismiss

it
for

is
Lack

hereby
of

ORDERED

Subject

that

Matter

Jurisdiction (Docket No. 19) is ALLOWED and this case is DISMISSED.

/s/ Mark L. Wolf
UNITED STATES DISTRICT JUDGE

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