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Delaware Supreme Court Issues Opinion on SEC's Questions

July 17, 2008

In CA, Inc. v. AFSCME Employees Pension Plan, the Delaware Supreme Court held that a proposed bylaw amendment relating to reimbursement of proxy contest expenses would, if adopted, cause CA to violate Delaware law.  CA sought no-action relief under Rule 14a-8 permitting it to exclude from its proxy materials a proposal that stockholders adopt the bylaw amendment, and the Securities and Exchange Commission certified two questions of law to the Delaware Supreme Court.  Although the Delaware Supreme Court held that the proposed bylaw was a proper subject for stockholder action under the General Corporation Law, it also concluded that, if adopted, the bylaw would cause CA to violate Delaware law because it would deprive CA's directors of their full power to exercise their fiduciary duty to decide whether or not reimbursement of proxy expenses would be appropriate in each specific case.