Federal court says shareholders can’t debate Wal-Mart gun sales

04/15/15 7:31 AM | by

A federal appeals court this week reversed a lower court's ruling that Wal-Mart shareholders could question the practice of selling guns. (Photo: AP)

A federal appeals court this week reversed a lower court’s ruling that Wal-Mart shareholders could question the practice of selling guns. (Photo: AP)

In a ruling by a U.S. appeals court handed down Tuesday, a previous order to let shareholders vote on a proposal for tighter oversight on selling firearms with high-capacity magazines was reversed.

The opinion was an appeal to an earlier U.S. District Court ruling from last December in favor of New York-based Trinity Church, which filed the lawsuit in April 2014 after the retail giant refused to bring the proposal to shareholders and the Securities and Exchange Commission said it would not punish Wal-Mart for excluding it.

In that case, U.S. District Judge Leonard Stark said Wal-Mart wrongly excluded the church, a major shareholder, at its annual meeting and granted Trinity an injunction preventing the company from excluding the proposal from proxy materials for its 2015 annual meeting. A three-judge panel of the U.S. Third Circuit Court of Appeals in Philadelphia overturned that injunction Tuesday.

Citing that the court would issue a detailed opinion later, Circuit Judge Thomas L. Ambro noted simply in the case of Trinity Wall Street v. Wal-Mart Stores Inc. that the lower court’s decision was reversed and its injunction vacated.

“Consequently, Wal-Mart may exclude Trinity’s Proposal from its 2015 proxy materials,” wrote Ambro, a 1999 appointment by President Bill Clinton. The two other judges, Thomas I. Vanaskie and Patty Shwartz, are both appointments to the bench by President Obama.

Trinity, a Lower Manhattan church with some $2 billion in assets, had sought to give shareholders the opportunity to consider that, “sale of certain products can have momentous consequences” – including selling guns with magazines capable of holding more than 10 rounds.

Wal-Mart’s attorney, Theodore J. Boutrous, Jr., argued in front of the court that allowing shareholders to micro-manage basic business practices would inhibit growth.

The case has seen some support from gun control groups such as the Law Center To Prevent Gun Violence which argued that, “Among the hundreds of thousands of items Wal-Mart sells, assault rifles with high-capacity magazines stand apart because of their capacity to kill large numbers of people in a very short period of time. They would doubtless be appropriate for consideration under any policy involving products sold which might impact safety of the general public and the reputation of Wal-Mart.”

Pro-business groups such as the U.S. Chamber of Commerce, the Business Roundtable and the Washington Legal Foundation filed briefs in support of the nation’s largest retailer. The last citing that they were, “deeply concerned about the enormous uncertainty that the district court’s decision in this case – if allowed to stand – would create for all publicly held companies.”

Second Amendment scholars explained to Guns.com that the ruling has important implications both for business interests and gun owners.

“This ruling was less a victory for gun owners than a victory for corporations,” Adam Winkler, a professor of constitutional law at UCLA, told Guns.com. “Courts have long been reluctant to force public companies to put political and social issues up for a shareholder vote. Whether the issue is liberal or conservative, courts generally give big companies autonomy to decide whether to allow votes on such proposals.

“Still, gun buyers benefit from the ruling because Wal-Mart is the nation’s largest retail outlet and will continue to sell guns,” said Winkler.

Seemingly with relief, Walmart released the following statement: “The Third Circuit reached the right decision in reversing the district court’s ruling. We appreciate the court’s quick consideration of the issues.”

 

Trinity did not respond to requests for comment from Guns.com in time for publication.

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