Wal-Mart Asks Court to Reject Investor Plan on Gun Oversight

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Wal-Mart Stores Inc.’s decision to sell high-capacity weapons is best left to management and not one that falls within the scope of shareholder votes, a lawyer for the company told a federal appeals court.

The retailer is seeking to reverse a lower-court decision that it must allow investors to vote at its annual meeting on a proposal requiring oversight of dangerous items such as ammunition magazines that enable guns to fire 10 or more rounds. The U.S. Court of Appeals in Philadelphia is expected to rule by April 15.

Wal-Mart, the world’s largest retailer, sells guns at as many as 1,900 of its 5,000 stores. Trinity Church Wall Street, an Episcopalian church in Manhattan and a Wal-Mart shareholder, convinced a federal judge in Delaware in November that it should be allowed to include language in a proxy statement that company directors should oversee the sale of items that threaten the company’s reputation or offend family values.

The issue “goes to the broader question of striking a balance between shareholder suffrage and the prerogative of management,” Theodore Boutrous, an attorney for Bentonville, Arkansas-based Wal-Mart, told the appeals panel on Wednesday. A ruling for Trinity would require the retailer to scrutinize hundreds of thousands of potentially controversial products from sugary sodas to organic vegetables, he said.

SEC Guidance

U.S. District Judge Leonard Stark in Delaware ruled that Trinity’s proposal addresses significant social policy concerns and “serves the public interest” by giving shareholders the opportunity to vote on the issue. The subject “transcends day-to-day business matters” that are excluded from the purview of shareholders under the U.S. Securities and Exchange Commission’s guidance on proxy questions, Stark ruled.

Circuit judges questioned where to draw the line and questioned whether the court should defer to the SEC.

“What is the best way for a court to analyze it?” Judge Thomas Ambro asked. “What is the subject matter of the review called for and does it involve the company’s ordinary business operations? Where is the best place to draw a line between what is excludable and what is not?”

Joel Friedlander, an attorney for Trinity, argued that the church’s proposal is reasonable considering the risks of selling guns. Public scrutiny of the company justifies the request for board oversight and input from shareholders, he said.

‘Public View’

“We’re not asking the board to survey every single item sold. They have the tools to see products that generate controversy,” Friedlander said. “Wal-Mart because of its prominence gets thrust into the public view because of its decisions.”

High-capacity magazines make it harder for victims in a mass shooting to flee or overwhelm a shooter during reloading, according to the church’s proposed statement. Such magazines “enabled” mass killings in Newtown, Connecticut, and Columbine, Colorado, the church said.

Wal-Mart doesn’t sell handguns in its U.S. stores, bars online firearm sales and won’t sell high-capacity ammunition magazines as an accessory, a company spokesman, Randy Hargrove, said in November.

The lower-court case is Trinity v. Wal-Mart, 14-cv-00405 U.S. District Court, District of Delaware (Wilmington). The appeals-court case is Trinity v. Wal-Mart, 14-4764, U.S. Court of Appeals for the Third Circuit (Philadelphia).

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