Securities & Exchange Commission v. Medical Committee for Human Rights

Background

A small civil-rights group, the Medical Committee for Human Rights, accepted a gift of five shares in Dow Chemical and sought to place a proposal in Dow’s proxy statements to bar sales of napalm unless buyers provided assurances it would not be used against people. Dow refused to include the proposal in 1968 and 1969, citing SEC proxy rules that permit omission of certain shareholder proposals. The Committee asked SEC staff to review, the Commission affirmed the staff decision, and the Committee won a review in the federal appeals court, which faulted the SEC for failing to explain its decision and remanded the matter for reconsideration.

Reasoning

Before this Court decided the merits, events made the dispute moot. In 1971 the Committee resubmitted the proposal, Dow allowed it to be included, and shareholders voted it down with under 3% support. Under the SEC rule cited, Dow could exclude the same or substantially similar proposal for three years. The Court concluded the combination of Dow’s inclusion then rejection and the low vote meant the allegedly wrongful conduct could not reasonably be expected to recur. Because Article III requires an ongoing case or controversy, the Court vacated the appeals court judgment and remanded with instructions to dismiss.

Real world impact

The ruling ends this particular judicial review without a decision on the SEC’s or Dow’s authority on the merits. It leaves the proxy‑rule dispute unresolved by the Supreme Court and means a company’s later inclusion and shareholder defeat of a proposal can make similar litigation disappear. The outcome is procedural, so the legal question could resurface if facts change.

Dissents or concurrances

Justice Douglas dissented, arguing voluntary cessation should not moot the case and warning Dow’s behavior could recur; he favored deciding the legality on the merits.