Shareholder Proposal Litigation Increases Following The SEC's Revised Rule 14a-8 Process

Once comparatively rare, shareholder proposal litigation has proliferated since the SEC's November 2025 announcement that it would no longer provide substantive responses to most Rule 14a-8 no-action requests. In the last month alone, shareholders have filed five lawsuits challenging the exclusion of their proposals under the SEC's revised process. By comparison, there were fewer than 30 such lawsuits in the previous 50 years.

Settled

• New York City Employees' Retirement System v. AT&T Inc. was filed on February 17, 2026, in the Southern District of New York, challenging AT&T's exclusion of an EEO-1 workforce diversity disclosure proposal on "ordinary business" grounds. AT&T settled nine days later by agreeing to include the proposal in its proxy materials.
• Masters v. PepsiCo, Inc. was filed February 19, 2026, in the Southern District of New York by an animal rights proponent represented by PETA. The suit challenged exclusion of her proposal because of purported procedural defects. The case settled the next day, with PepsiCo agreeing to include the proposal in its proxy materials.
• Nathan Cummings Foundation, Inc. v. Axon Enterprise, Inc. was filed on February 17, 2026, in the U.S. District Court for the District of Columbia, challenging Axon's exclusion of a political spending disclosure proposal on "ordinary business" grounds. The case settled on March 9, with Axon agreeing to publicly disclose its policies and governance framework for political spending, as well as certain contributions, over the next five years. Nathan Cummings Foundation agreed to refrain from submitting further political spending proposals over the same time period.

Pending

• Comptroller of the State of New York v. BJ's Wholesale Club Holdings, Inc. was filed on March 2, 2026, in the U.S. District Court for the District of Massachusetts, challenging BJ's exclusion of a deforestation proposal on "ordinary business" grounds. BJ's must respond to the plaintiff's motion for injunctive relief by March 23, and the plaintiff's reply is due March 30.
• As You Sow v. Chubb Limited was filed on March 3, 2026, in the U.S. District Court for the District of Columbia, challenging Chubb's exclusion of a proposal requesting that the insurer assess potential subrogation claims against those purportedly responsible for climate-related losses. Chubb's answer to the complaint is due March 30.

Before the SEC's policy change, courts rarely had to interpret Rule 14a-8 because companies and shareholder proponents generally deferred to the SEC's no-action process. But the agency's retreat from providing substantive no-action analysis is plainly driving shareholders to seek judicial review. This emerging trend raises a number of questions, such as the level of deference, if any, courts will give the SEC's prior no-action interpretations, and the utility of seeking "no-objection" responses from SEC staff under the new policy if it does not deter shareholder proponent litigation.

This trend will almost certainly inform the SEC's approach to its planned "Shareholder Proposal Modernization" rulemaking, which is on the Commission's Spring 2025 Reg Flex Agenda with a target date of April 2026. The SEC has indicated it intends to "modernize the requirements of Exchange Act Rule 14a-8 to reduce compliance burdens for registrants and account for developments since the rule was last amended."

This Alert will be updated periodically as developments unfold.

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