Target lawsuit, soliciting explained

Welcome to shareholder Primacy from free float media. A podcast about activist investing Securities Law, and all the ways, a financial and legal world's intersect and Collide in real life. I'm here with and Lipton law professor at Tulane in New Orleans who teaches and researches Securities and business law. And she holds up the very important legal end of our podcast and that's Mike Levin an activist investor who lives and works in Chicago. He covers the financial side of our podcast, all right, I try to, I don't do as well on the financial side as you doing illegal side. But anyway, so you're doing great and it sounds like you're done with your travel, right? And now you just have to grade or if, to administering great exams very quickly, so that the graduating students can get their grade. Can go forth into the world and, and administer Justice. All right, well, this week, we can talk about a couple of things. There's some more litigation, a lawsuit, this time, involving, Target and Pride Marketing. So it's a cousin of some of these other Kind of ESG or Dei woke related matters that have kind of warmed their way into Security's law. And it, this one is asserts that Pride Marketing. You know, putting Pride Goods in in a store constitutes Security fraud. Yeah, exactly. I'm also talk about what it means. And doesn't mean just elicits proxies just as proxy season starts to take off. Yes, that should be kind of fun. So, let's plunge into a discussion of Target. Our favorite kind of hip sometimes hip retailer. And they encountered a lawsuit over basically, the pride merchandise we have talked about the pride merchandise. That's well known about what it was doing but what describe the lawsuit? What was going on? Yes. So okay so just quickly Target. Marketed these pride and trans friendly merchandise and it was all big news because it was backlash. There was boycotts. I think some consumers actually like attacked like physically attacked targeted. There was there was there was it was sort of a precursor to like bombing Tesla. And so after that, five shareholders filed, the federal Securities fraud lawsuit in Florida, against Target. And the one thing I want to point out because this is going to be important to our story. Is, this wasn't a class action. These were five shareholders, who were suing only on their own behalf. And they wanted well, they wanted personal damages for their own losses. But what they also wanted was injunctive relief. They wanted new disclosures about about their ESG, risks and oversight a new board election because that they said the fraud impacted a proxy vote, that's what they were asking for and that's unusual because most Security's cases are filed his class action seeking damages on. Yeah. They're usually about, they're usually about money. Yeah. They're usually about money but this was not about money and I think tells you something about the goals here that it that it wasn't economic. I mean, I think this was a lawsuit that wanted to make a point about marketing Pride merchandise. In fact, one of the plaintiffs was Inspire and advisors which is an investment firm that explicitly takes a Biblical approach to investing. Actually, a related, entity inspiring investing was sanctioned by the SEC for lying about how much they actually consider the Bible, but that's a whole different thing. Oh, that was that, was that the case where they were sanctioned or whatever, for misrepresenting, what kind of investing they do? Yeah. Like they said, we will like carefully screen for biblical something something. Right? And they didn't carefully screen. I mean, a whole bunch of ESG funds encountered that. Yeah, yeah, but saying that they weren't ESG enough. Yeah. Or something. And our investing was one of two actually that did this from a religious angle, and got in trouble, and they were a plaintiff. So, they were one of these five plaintiffs. It doesn't matter that it would is it is an important it was in Florida. Well, I don't think so. But Florida will play a role in our story. So okay, great. So anyway um, know why was it is a classic action? Oh well I think because at the time I think they were after you know these particular, you know, junk different relief things. Oh, the non-monetary. And they were actually they were even in represented by America first. Goal which is a conservative activist Law Firm. They file a lot of anti Dei cases, that kind of thing. So this is really kind of a political lawsuit and the actual legal claim though was that Target, Warren shareholders about potential controversy surrounding its ESG efforts, but left out that in fact the board was not monitoring for the risk of backlash. It was only monitoring the risks of not being liberal enough and not the risks of being too liberal. And the plaintiff, argued the plaintiffs, they argue that these risk warnings, which only warned about potential controversy for ESG efforts. But not the risk of backlash that these risk warnings. Defrauded them as purchasers of Target stock and also defrauded them as voters and Target shareholder elections because the fall statements in the proxy materials cause the board members to be reelected. The claim was that shareholders would never reelected the board if they know the board wasn't. In fact was neglected, was neglecting the last And that was and that was based on it. Sounds like disclosures probably in 10k. Kind of in the proxy materials I want to proxy, okay? Wow, yeah. All right. Keep going so. Okay. So I gotta say that. This is this is It's a ludicrous climb. Okay, it's kind of wild. I'm sorry. It's like because and I and, and to explain why you have to have a little bit of the history of Securities litigation. So back in, 1995 Congress became very concerned that Security fraud Security fraud lawsuits for too easy to bring that shareholders, were filing nuisance lawsuits to Blackmail companies into a quick settlement. And so Congress, passed a law known as this private Securities. Litigation reform actress. Exactly that made it much harder to bring Securities lawsuits mainly because you have to include a lot of detail in the complaint that establishes the basis for alleging fraud. You have to allege particular details about which statements were false. Why you think they were false, you have to show that it's more likely than not, not merely plausible, but actually more likely than not that any insiders acted with intent. And this target complaint. I mean, A lot of high threshold, it was just lacking in every respect. I mean, first of all, the only false statement where the ones were Target said it could receive negative publicity over. Its stakeholder Outreach at said, stakeholder expectations are not uniform and their constantly, a volume evolving and therefore failure, or perceived failure to achieve goals could result in harm to the company. That's not a full statement. That's and that's it. And that's a quote from the disclosure. I am paraphrasing but that's function like the you know, that that's basically what they listen. So this is not a fun. I mean the actual Stamp paragraph one. But really, that's what it said and it's not false, it's entirely true. And the only evidence the plaintiffs had that the company did not actually monitor for conservative backlash. Was that back in 2016? Target had opposed North Carolina's bathroom Bill, their anti-trans family, and that resulted in some protests and it one point, one of the target board members said, they hadn't monitored those risks carefully enough that tells you nothing about what the company or nothing. Right. Nothing about what I mean. This conduct was in 2020. This is 2023 right? Nonetheless and really. But so really shockingly the district court in Florida. Refused to dismiss the complaint. Oh I was going to ask what, what happened. So they went to appeal for summary judgment or something. This is because that's where a lot of this navigation happens because the pleading standards are so high in Security's cases, almost all the action is Actually, at the motion to dismiss the complaint. Did you meet the pleading standards and shockingly the district court refused to dismiss? I mean, you have to understand normally Securities fraud, complaints might have dozens of confidential Witnesses, who report? On problems with the company, you'll see courts, still dismiss complaints because those Witnesses can't attest to the precise information. That was communicated directly to the board and therefore, you can't infer that the board acted with intent. But in this case, the court, was completely willing to infer that because Target had experienced this backlash in 2016. It must not have a different status. The current risks of going too far with liberal causes seven years later. I mean, it's, it was so obvious to the court that if you had a backlash in 2016, you can't possibly have made an informed choice to engage in Pride, Marketing in 2023. And certainly, the court didn't even ask, didn't even ask if the company might make a strategic decision to cater to a customer base in hopes of a long-term payoff. Okay. Oh, wow. So so the current status is there. Probably taking more Discovery, and it was kinda actually, is more complicated than that. Oh, okay, keep going. Yeah, I mean So we, we talked about a case like this. We had a podcast on the American Airlines case, you're right. Oh yeah. So I was gonna say this, this seems Kind of remotely related to that one, but that was about, stakeholders are retirees retired suing American Airlines over, including over the ESG positioning of the funds that they were allowed to invest, right? Yeah, no, but it's a lot like that case, because there, it was a Texas Federal Court that held American Airlines breached. Its fiduciary duties to participants in his 401k plan because the plan included BlackRock funds at a time where Black Rock was Voting in favor of climate change resolution. And to that Court, it was the same idea. It was obvious without any further analysis. That if you vote for climate change resolution, you're necessarily sacrificing shareholder value. Same idea here. There was no possibility that Target might have made a considered decision to cater to a liberal Market. If Target shows to cater to Liberal customers, the only possible inference is that the decision was not considered and that Target did not take risks into account. The court actually compared this case to one involving click fraud, Where an internet company sold advertisements. And and the advertisement had to pay every time someone clicked on an ass. So in a ruling they did this comparison, right? That's what Yeah, so yeah. So this click frog case, you understand? So this click prompt case an internet company sold advertisements the advertisement and like the idea is that the advertiser pays whenever anyone clicks on the ad. So of course, one thing that way to defraud the advertising essentially is to generate a lot of false lie, about how many clicks, exactly. And in that Case, go. The Company lied about. Getting to monitor, click fraud. It said it was watching out for it, but in fact, it was letting the click fraud happen. So here in Target the court, compared to the click fraud case and said, it's the exact same thing Target warned about the general risks of ESG, but never warned about the specific risk of conservative backlash. But Same thing. These are not the same things even close, you can't legitimately decide to defraud your advertisers, but you can totally legitimately decide to engage in a public marketing scheme to cater to a particular demographic. Except apparently, according to this one quart in Florida, you can't choosing to allow click fraud and shoes in to Market Pride. Merchandise are the exactly the same thing. Yeah, equivalent. Yeah, that doesn't sound right. So the court, the court refuses just miss and, and then What I started asking this, what happened after that. Okay, so it gets even more bizarre. This is just wild, okay? Sure parties. Agreed to go to mediation. oh, and then It's time the plaintiffs tried to amend their complaint, to make it a class action because it hadn't been a class action before, except they couldn't because the pslra the same statute that imposes, these height, and pleading requirements, it has some really specific procedures for class actions. See one of the concerns that motivated the pslra was that Securities. Fraud was all lawyer driven litigation. You'd have a client with maybe one share of stock. Sure wouldn't pay attention with the lawyers so you're shopping for you. So you get this theory in your shop for a shareholder, right? Exactly. And the rack up expenses and and they'll settle with no benefit to the class. So Congress changed the rules today. If you file a class action in a Security's case, you have to issue a press release and tell people that you just filed the class action. And at that point other investors have the option to intervene and compete for the role of lead plaintiff and the important to look to all of these different investors who are competing for the lead plane of spot. And they'll choose the one who will actually take on this role. And the lead plaintiff role is really critical. Because the lead plane is the one who runs the litigation on behalf of the entire class. They hire the attorneys, they file a new complaint, the covers all the allegations they handle the briefing, they handle Discovery and critically. It's their attorneys that get the fees. So in Securities class actions, everything is about the lead plane if and in particular who the lead plane of selects their counsel because they make all the Strategic decisions. So under the pslra, usually, the lead. Plaintiff is the investor who lost the most money, who has the most dollars at stake. Who's the most at stake? Exactly. The obvious reason that if you have the most money at stake, you're the one who is going to pick an attorney wise. Try harder to write exactly. So to Prevail, exactly. But these plaintiffs and Target they skipped all those steps which meant that they couldn't just convert to a class action. So now we had a new twist, the same attorneys, who represented these five plaintiffs, they found a new plaintiff. And who did they find? I am, I am dying to know the State Board of administration of Florida FS. The SBA Florida is a planet. I mean, I've worked with them, they're like, they're, they're about as I mean, I don't I haven't talked to him in a long time, but they're there a very Progressive, they're huge. And they're a very Progressive, they're a leading member of the CII. Well they're really good people. I'm not legal and I want to be clear State Pension funds. Brings Security's lawsuits all the time, they frequently seriously Planet. But Florida is fun represented by America. First legal. A lot of the Florida attorney. General is also representing them in this complaining against Target like as co-counsel. Yeah, anything exactly. So I don't So, this is interesting. So this kind of started as we were saying is sort of a Like ideologically, motivated. Case with these five. Shareholders playing if someone of whom was was that other kind of funky fire investing yet Inspire, right. And and it kind of evolved to now. include the state, I mean, the State of Florida, which is, of course, you know, everything kind of run runs up to the governor So he's got to know what's going on with. I think this is about Ron, DeSantis. I totally think this is about round of Santa so he's been very active in targeting companies and investment funds for what he calls woke investing. He already went after Disney for a posing, don't say sure he accused Bud Light of violating its fiduciary duties to shareholders when they were working with that trans influencer her and that was all at the same time as this target stuff was happening. So Florida suddenly getting involved, it looks to me like it's another instance of sound is putting the screws to a company that he views as engaging and woke business practices, but we're not done. Because remember under the pslra, anyone can compete for the lead plane of spot. So the State Board of administration of Florida came in. But then another plane of Cayman and who is this other planet? The Ohio Retirement System and that has its own history. Because as I understand this apparently, the Ohio Retirement System, their pension fund didn't want to be Involved precisely because they viewed this probably approached at some point to do this and originally probably declined. Well, they apparently did want to decline. I don't sure how they were approached but apparently, they did want to not get involved because they viewed it as two political and they recorded some. Maybe they were even sympathetic to Target, but then the Ohio attorney general insisted that Ohioans needed to be protected from woke governance or whatever. And so now, the Ohio system decides to compete to be lead Planet except they aren't being represented by the Ohio attorney general their represented by Grant and eisenhofer Grant. Oh, the Delaware, the Delaware from yeah, they're a major Delaware Securities, fraud Law Firm, they're very mainstream plaintiff class action firm. They're very experienced at these kinds of suits. So my guess here honestly, is that Grant is in Hoffer, they know that the suit is ridiculous and they had no real basis and they never would have filed it originally. But once it survived a motion to dismiss, now, there was an Opportunity to cash in. So now you have these two competing plaintiffs for the lead spot, the Florida system and the Ohio, Retirement System. And they're arguing about who had the bigger losses, because that's the big question under the PSI. That's the factor that factor for determining supposed to be the main factor for determining. But and they have like different arguments about how you calculate losses, which whatever. But what's, but there are also arguing about which one of them is taking an ideological approach to the case. Oh, interesting. So in addition to just, the monetary Factor about who's, who got damaged more, there are saying, no, no, Florida. You're the one who's pushing a political engineering. We're just, we're just in here for the money in Florida saying, no, no, we are. We, we have five of us and, and a big state fund and, and we're in a for the money and you're just, you kind of jumped on the bad wagon later. No. Because of the other side. So here, so At the eisenhofer is arguing that Florida's approaching this ideologically that they're using the same attorneys as in the original action and that Florida and its papers is characterized. This is a suit about stakeholders versus shareholders and Grant knives. And offers arguing, this is just a routine Securities fraud case, it shouldn't be approached as a matter of ideology. Meanwhile, Florida is arguing that Ohio is the one that's ideological because they're big, ESG people, because not only did Ohio, not want to file this case originally, but Grant nice and offer. As a firm has adopted all kinds of ESG policies. So Florida, Walker Dia website, you know, we care about ESG, whatever Florida even included data and this data is from a conservative organization devoted to like exposing woke, business or whatever. So Florida included the status that purports to show that the Ohio Retirement System votes in favor of ESG initiatives more often than the more than the Florida. Right? Which really just shows this assumption here, which is just taken his Baseline, is that there's no Universe in which catering to Liberal preferences as well. Maximizing. The positions are the only way to make money. Anything else is special interests and I want to Pack that for a moment because it's a really specific claim. The underlying assumption is conservatives are, in fact, the majority of Shoppers they're the majority of consumers and they represent the mainstream of America. And therefore, if you cater to Liberal preferences, you're not, you lose money, you lose money. You're not catering to mainstream America, you're sacrificing. So you must be doing it on ideological grounds, not out of a business mode of now, you can see why conservative politicians want to argue that. Of course they want to believe that, but they want to believe that they are just representing the main stream and everyone else is French but I don't know that that's true. This is a big country, there's like there's lots of diverse taste and consumer preferences. data point is right now, we know that a lot of Them Trump to like, get rid of Dei or whatever and Target agree to scale, back its diversity initiative and that inspired a boycott and its foot traffic. I've been, I don't know if investor in Target and Target took a hit. Exactly. Costco refused to scale back. Its diversity initiatives and its foot traffic is always, and it's right. And its share price is done done so I don't know that there's an exact cause and effect here, but it's certainly makes clear that being politically conservative does not always mean forever. You're going to raise your sales The thing I want to come back to is the fact that this this case is I think and when there's no way to predict its kind of a loser. Yeah. This judge I don't know but like it should have been like under the law As I understood it, right? We should have been In the context of a Securities. Fraud case we went from a pretty explicitly ideological Securities. Fraud claim to now a battle over whose ideology is appropriate to manage the case going forward and the bigger Is. This is, it's not supposed to be a free speech case, but it's that's what it's looking like. It's becoming exactly when this becomes Ron DeSantis, an America, First legal, using a Florida State entity to argue that Target violated the law by carrying Pride merchandise and Grant on the country. This isn't just yet the case because they're too supportive of diversity. That looks like a governmental entity, punishing private entities for their expression, I think. Yeah, I think you write question is like how, and when will we start to recognize? This is the first amendment problem. That liberal initiatives are seeing as inherently suspect. We're conservative initiatives or presumed to be wealth maximizing and legally compliant. I don't know. Anyway, but that is where we are. Like, so now the case I'm just, I'm just, I'm just marveling at these at these firms, specially granting Grand National for whose, you know, aggressive. They make their money off this kind of stuff, you know, dealing with this case, which you know, who knows where it's going to go, but it doesn't seem. I mean, it's Target. Target's a great defendant here in terms of getting money, but there's no question in the grandson of the week. This isn't the case. I think they, as I said, I think they came in because they saw the motion to dismiss and after that, probably, at the very least settlements, on the table. Get some okay, get something so but this is but this will be nothing, nothing more happens. Until they select the lead plane F and we go from there. Right. Oh, so there, this is gonna be a while before there's before. There's there's progress here. So, all right. Well, we'll have to stay tuned. I've come back to this one, I think, wow, that is pretty pretty, pretty, pretty fascinating. Right, let's let's take a quick break and come back and talk a little bit about what it means to solicit proxies here. It's your holder promising. Shareholder Primacy is brought to you by free float and lyrics.com the only free database of corporate directors their influence and their performance. If you own a Stocker, retirement plan go to free. Float. Analytics.com and look up which of your elected directors are performing well and which aren't use your vote in the alternative democracy and get your data at free. Float analytics.com. Now, back to the show, Oh Mike, let's take a look at what it means to solicit proxies soliciting. So listening practice. So what What is the legal technology definition? And why does care? I want, I want to just mention. I've been very eager to go over this with you. Okay. I've been, I've been wanting to talk to like my favorite legal scholar. Okay. About some of the, some of the Nuance here and some of the technical Parts, because I think it kind of matters in this proxy season because it influences kind of what activists can and can't do at various points during an activist project and who they can talk to and how they can talk to other shareholders and what you can put in writing and so. So, there's some some and I've read it over and I don't exactly know what I'm reading, but I try some of the statute and there's some, it's in the Security's actor, whatever it's called and in part of this was motivated. Also by I think we've talked about it the book dear Chairman, you know Jeff was Jeff. Graham was a guest on the podcast while you were out at some point and if you haven't looked at it and you got it, you got to pick this up because he tells these stories. About, you know, you know, decades ago about, you know, shareholders and like railroads soliciting proxies but literally this is when people had to travel to shareholder meetings and they couldn't and if you couldn't some other Cheryl to be knocking on your door, literally saying, hey give me your proxy. Appoint me, pick me. Pick me and there was and it was a lot of fraud going on. There was a lot of really underhanded stuff. You know, representation for the exchange act in the first place like this? Yeah, exactly the first place. Yeah, so he tells us a couple of great stories, you know, going back in archival research about, you know, this actual the act of proxy listening when it was, you know, around you know, in the 20s and 30s and you know, fast forward to today. You know, there's a there's a lot that's a valve but still the legal underpinning to this and and how it influences, you know what I can and can't talk about with other shareholders is always been kind of interesting to me. So there is, you know, a technical, meaning the there's so a rule 14, a Which is very familiar. To any lawyer who practices in the activism space has a very technical almost ornate description, or definition, its 240.14 a1l. Okay, solicit and solicitation include requests for a proxy whether or not a company by a form of proxy. A request to exclude or not exclude to revoke a proxy Furnishing of a form of proxy or other communication, security holders under circumstances reasonably calculated to result in the procurement withholding revocation practices. So so it's not merely the asking for like a vote. Yeah, it's not really, it's nothing as it's any kind of conduct or that could. You would expect will give have something someone appointing you well, but it's it's not merely appointing you proxy which is the act that we're concerned about because then you show up at the meeting with a stack of letters that say have a point you proxy. But there's, you know, there's a lot of kind of gray area here. It's like You know, vote for me. And it could any kind of, you know, document that you send out that says, you know, here's our, here's our candidates and we'd like you to consider them or even like oral communication like stuff over the phone or whatever. So there's a lot of communication that this is designed to kind of kind of cover and again, definition of soliciting. Yeah, yeah, exactly. And so I you know trying to parse that you know not in huge depth here, you know, there's there's you know Scholars and treatises on that and the reason it matters. It's eliciting. you are within the Anti-regulation. And You are not solicit. You are not within the ambitious regulation so it's right the distinction is really important, right? And the reason this is, this specific reason comes important is because once you've you're deemed to be soliciting under the scope of the law here, there's a very long, Arcane fairly complicated list of things you have to do filing. You have to make 14 a preliminary, indefinitive and huge amounts of disclosure about yourself and your nominees and so forth. And if you're not soliciting, You know I got to file all that. You can just sort of have what I would consider and you know they're activists would consider you know constructive informed conversations with other shareholders about what's going on at a company. Okay. But, you know, we're not verging over. We're not you're not kind of going over towards the right vote for me. Yeah, you're sending my proxy card. You communication is become regulated. If you are soliciting and right there and the default, I mean, yeah. So the default is once you are soliciting that you have to file all kinds of documents and disclosures unless you can find an exception. But yeah, right. And there's more, you know, and activists that have done proxy, kind of, but others, you know, it's not merely the filing of the proxy statement but there's all these supplemental traditional, nine, that you have to. That's why we see if you're following a proxy contest. You know, sometimes every day twice a day, you know, you know, go look at what's being filed in the Philips Elliot proxy contest right now? You know, there's, you know, anytime Elliot, you know, sends out at a tweet or put something on social media or whatever, they're filing another disclosure and that's because they're they're in the that's the act of soliciting has been has been committed. They've committed the act of soliciting. And so they need to kind of keep complying with the law. And there's all these disclaimers. Okay so I want to I want to make a couple points about this. In addition to you know, saying okay we want to figure out when we have to and don't have to comply with all these disclosures that first I want to make a distinction between soliciting a proxy and succeeding in collecting. Or succeeding and gaining a proxy. And I think that's a very important distinction, okay? Because that has to do with some other aspects of compliance. So many companies, In their, in their bylaws or their costuming documents. Have this requirement that you solicit a certain number of a certain percentage of proxies frequently. It's like half of the voting power representing half of the I was saying shares and that's just part of bylaws frequently. So, However, the soliciting them sometimes me just sending out a postcard like under notice and access. Then you've kind of complied with the need to solicit to that level. More importantly, under the universal proxy rule, you have to solicit 67% of the voting power, okay, to be able. But again, that's that's solicitation is is can be really straightforward and can be really streamlined? Importantly, that leads to a really potentially interesting tactic that activists have started to think about which is because soliciting is not the act of succeeding. You can say, you can commit like in a notice letter or in whatever. Yeah, I'm going to solicit 607 percent. Okay. But you don't you can you can continue to do that up until like the day of a shareholder meeting. Okay. So you could you could solicit You know, a few shareholders, three days before and then what you get 60% of the day before and this and the company doesn't really know what's going on at that point. So because you don't have because you don't have to like send in the proxies like five ten days before you just show up at the shower holder me. I mean you do it electronically. um, you can sort of commit to doing this and then do it kind of later, which also can kind of put the company in an interesting Corner because if they don't exactly know what's going on, you know, maybe they're a little more inclined to talk to you or settle or something like that so the activist benefit to delay Talking to some shareholders and sort of keeping their conversations and that helps keep their conversations quiet potentially. Yeah, exactly because because you know, companies have a huge number of advantages here in just in general and any kind of proxy contests or any kind of really corporate governance, they set the schedule for the shareholder meetings. They can you know communicate and really an unlimited way showers and so forth. So the more than an active is able to kind of do stuff with the company kind of knowing Um is is kind of their advantage. It sounds kind of underhanded but you know it's really just a response to you know the way companies sometimes do this and you know I'm all for a more constructive set of relationships and you know, in many companies that's evolving. But there's plenty of activists situations. I'm involved in some now where it doesn't doesn't work, it's not that friendly and so you're you need to kind of you need to do this kind of stuff. I mean, I remember there was one called, I think there was take two interactive and it was before advance, notice where it's common. I think they actually did very quietly solicit shareholders, taking advantage of exceptions in that proxy disclosure rules, right? There's a there's a ten or fewer except yeah and exactly just listening approxi that is if the Gerald a meeting, By themselves and vote not to get their proxy, none of this. You don't actually, if you're just saying, are you going to attend the meeting? Yeah, so so please attend the meeting. They can even you can even Touch, you're not soliciting, their proxy. And so and so, without an advanced, notice my life, I think in that case, they were able to pretty much run a proxy contest without management, knowing about it until the very last. All right? And take two, and they also took advantage of this. What's called this 10 or fewer exemption? Yeah, the rules. So if you're soliciting 10 or fewer shareholders and what we mean by a shoulder sometimes wonky, but in this case, they were able to comply. So they saw that, this is years ago. They solicited like eight shareholders, representing enough shares and then the soliciting shareholder showed up at the meeting unknown to the company with enough proxies to Prevail. Yeah, and one. Yeah. But now these days now that everybody has an investors, buy a lot of you can do that anymore but it was funny at the time. Yeah. So so yeah. So this again, it leads to some of these interesting ideas about the minimum solicitation and so forth that that you know, activists are kind of thinking about, you know, ways to, you know, comply but not necessarily, you know, give the company too much of an edge. This also leads to, you know, an interesting situation involving proxy advisors That's the other. That's the other kind of end of this, is that the, you know, ISS and glass Lewis are, you know, possibly in a really kind of a bit of a pickle here because the act of soliciting is now being At least in some, some ways, the active advising shareholders, about how to vote is being deemed to be solicitation. Which is really kind of weird. Um, you know, and this is kind of an artifact accompanies, you know, long winding to regulate the proxy solicitors, you know, not wanting, you know them to be able to have as much, you know, freedom to, you know, this is a debates. We've talked about here and elsewhere. And so the SEC expanded like 2020 expanded the definition of solicit of solicitation to cover them because they had actually proposed that the solicit include reading here. Any proxy advice that makes recommendation as to how to do the rule, right? Exactly. And now that's tied up in litigation so that's actually not yeah I know it was really it's a really specific thing. So the idea is in this they wanted you know this comes more of the conservative side, wants to put more regulation on proxy advisors. Right the way remember if you are solicit Nation, you come under the proxy rules. So that's what. So that's what they did. They amended the definition of solicitation to make sure that it captured proxy advice. And then, if you are soliciting, you have to immediately your subject to all these disclosure obligations unless your subject to an exemption. So, basically, by saying proxy advice is a solicitation that meant the proxy advisors would have to disclose all this stuff, including their advice and you can't sell your advice of your disclosing it publicly. Just so basically, they were saying if you want to not have to disclose things, you're going to have to comply with our rules for. How you go about, giving your advice, and they had these rules that the proxy solicitors didn't want to the park city, advisors did not want to comply with. So then the Biden Administration repealed most but not all of those rules and and issues saying, well, we're not solicitation at all. We should never have been defined as holistic and they won, but it's on appeal. Right. Exactly. So this is still tied up and there's a, there's a Chance that it'll it'll happen which would be really you know really really bad news for the proxy advisory for them. I don't think they have a lot of friends and in this SEC know you know correct and but again I think the litigation has to work out it's not like they're just appealing, you know, it's not well, right? Yeah, the couple different litigation going on about the that those rules. But the main thing is it's in the DC circuit as to whether or not you can even call proxy advice solicitation that the argument from the proxy advisors is. If you come to me and ask me for what I think and pay me then I'm not soliciting. That's not what to listen. Right. Exactly. And that's, and I think that's a strong, right? I mean, you've heard me say this before I'm a strong supporter overall of the proxy guy, I think they provide a valuable service and its Consulting, you know, they got problems that I've, you know, complained about, but you know, whether they're supposedly proxies ain't one of them, and that's the end, obviously, you know, one quart, bought it. We'll see if we'll see if that's the next one does. Anyway, cool. Well, that's kind of what I had in mind about this listening. This is good. I'm glad I got a little input here about how to interpret the statute and the, or the rag and how it affects the proxy. Solicitors I think, I think we can kind of leave it right there. How's that sound? All right, cool, let's wrap up and it's been terrific this time talking with you will be back again, very soon. We'll continue with you subject after revisit this target case, All right, this is shareholder Primacy hosted by in Lipton and me, Mike Levin. I'm an independent activist investor and advisor to investors about their activist situations, and is the Michael M. Fleischman professor in business law, and Entrepreneurship at Tulane law school and an affiliate of toolings Murphy Institute. You can find Mike at the activist investor.com and an at 2 lane.edu, our podcast is produced and distributed by free float media. Thanks for listening. We will talk again. Soon.