Rather than attempt to exclude a shareholder proposal through the normal SEC channels, a company filed a lawsuit in the Federal District Court for the Southern District of Texas seeking a declaratory judgment that would allow the company to exclude the shareholder proposal submitted by John Chevedden due to his alleged lack of eligibility. On April 4, 2011, the court ruled in the company's favor, upholding the Apache Corp. v. Chevedden decision from 2010, filed in the same court. The court found that under its decision in Apache, the company may exclude Chevedden's proposal from its 2011 proxy materials. In Apache, the court held that letters from Mr. Chevedden's introducing broker were insufficient evidence of his eligibility, since the introducing broker was not a "record holder" of Apache shares under Rule 14a-8(b). In this case, the court found that Mr. Chevedden submitted eligibility letters with the same deficiencies as the letter in Apache.

The only remaining issue for the court was whether the SEC's rejection of no-action requests from a number of companies that raised arguments similar to those raised in Apache, casts doubt on Apache's validity. The company, in its defense, cited Rule 14a-11, which governs shareholder proposals that seek to establish a procedure in the company's governing documents for inclusion of one or more shareholder director nominees. Rule 14a-11 requires that a nominating shareholder who is not the registered holder of securities demonstrate ownership by attaching "a written statement from the 'record' holder of the nominating shareholder's shares (usually a broker or a bank) verifying that, at the time of submitting the shareholder notice, the nominating shareholder continuously held the securities being used to satisfy the applicable ownership threshold." For a nominating shareholder to establish ownership when the shareholder owns the shares through a broker or a bank that is not a participant in the Depository Trust Company, the SEC has stated that the nominating shareholder must meet certain requirements and submit additional documentation proving they are eligible to be a nominating shareholder.

The court noted that the SEC's comments on Rule 14a-11 regarding the requirement to provide an ownership statement from a "record holder" show that Apache's reasoning is still persuasive and concluded that the SEC's no-action letters do not undermine the Apache decision.

KBR Inc., v. Chevedden, C.A. H-11-0196(April 4, 2011).