In Trinity Wall Street v. Wal-Mart Stores, Inc. (3d Cir. Jul. 6, 2015), the U.S. Court of Appeals for the Third Circuit held that Wal-Mart could properly exclude a shareholder proposal under Rule 14a-8(i)(7) because the decision to sell assault rifles relates to Wal-Mart’s ordinary business operations. Trinity’s proposal asked Wal-Mart’s board to develop and implement standards for management to use in deciding whether to sell a product that (i) “especially endangers public safety; (ii) “has the substantial potential to impair the reputation of Wal- Mart”; and/or (iii) “would reasonably be considered by many offensive to the family and community values integral to the Company’s promotion of its brand.” Under Rule 14a-8(i)(7), a company may exclude a shareholder proposal from its proxy materials if the proposal deals with a matter relating to the company’s ordinary business operations. The Court found that the subject matter of Trinity’s proposal relates to Wal-Mart’s ordinary business operations because “a retailer’s approach to its product offerings is the bread and butter of its business.”

The SEC Staff has declared that a shareholder proposal generally will not be excludable under Rule 14a-8(i)(7) when “a proposal’s underlying subject matter transcends the day-to- day business matters of the company and raises policy issues so significant that it would be appropriate for a shareholder vote.” The Court determined that Trinity’s proposal raises a sufficiently significant policy issue, but not an issue that “transcends” Wal-Mart’s ordinary business operations. To meet that standard in this case, the Court stated that the policy issue “must target something more than the choosing of one among tens of thousands of products it sells.” Finally, the Court recommended that the SEC issue new interpretive guidance to address the increasing number of shareholder proposals that relate simultaneously to an ordinary business matter and a significant social policy issue.