Case: 11-20921     Document: 00511882572         Page: 1     Date Filed: 06/11/2012




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                           June 11, 2012

                                     No. 11-20921                          Lyle W. Cayce
                                   Summary Calendar                             Clerk



KBR,

                                                  Plaintiff - Appellee
v.

JOHN CHEVEDDEN,

                                                  Defendant - Appellant



                   Appeal from the United States District Court
                        for the Southern District of Texas
                              USDC No. 4:11-CV-196


Before REAVLEY, SMITH, and PRADO, Circuit Judges.
PER CURIAM:*
        Plaintiff-Appellee KBR brought this action under § 14(a) of the Securities
and Exchange Act of 1934. KBR sought a declaratory judgment that SEC Rule
14a-8, 17 C.F.R. § 240.14a-8, permits KBR to exclude Defendant-Appellant John
Chevedden’s proposed shareholder resolution from the proxy materials KBR
would supply to its shareholders at their 2011 meeting. The district court
granted KBR’s motion for summary judgment, ruling that Chevedden was not


        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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                                  No. 11-20921

eligible to have his proposal included in KBR’s proxy materials. Chevedden filed
a number of motions for reconsideration, which the district court denied. On
appeal, Chevedden argues (1) that § 14(a) does not create a private right of
action; and (2) that the dispute lacks sufficient immediacy and reality to be a
justiciable dispute under the Declaratory Judgment Act, 28 U.S.C. § 2201.
      We AFFIRM.
       Section 14a of the Securities and Exchange Act of 1934, 15 U.S.C.
§ 78n(a)(1), states:
     It shall be unlawful for any person, by the use of the mails or by any
     means or instrumentality of interstate commerce or of any facility of
     a national securities exchange or otherwise, in contravention of such
     rules and regulations as the Commission may prescribe as necessary
     or appropriate in the public interest or for the protection of investors,
     to solicit or to permit the use of his name to solicit any proxy or
     consent or authorization in respect of any security (other than an
     exempted security) registered pursuant to section 78l of this title.
      SEC Rule 14a-8, 17 C.F.R. § 240.14a-8, “addresses when a company must
include a shareholder’s proposal in its proxy statement and identify the proposal
in its form of proxy when the company holds an annual or special meeting of
shareholders.” Subsection (b) limits those eligible to have their proposals
included in the company’s proxy statements to persons who have held “at least
$2,000 in market value, or 1%, of the company’s [voting] securities” for at least
one year. 17 C.F.R. § 240.14a-8(b)(1). Subsection (b) also requires the person
submitting a proposal to supply documentation proving his eligibility. 17 C.F.R.
§ 240.14a-8(b)(2).
      In November 2010, Chevedden submitted a shareholder proposal for
inclusion in KBR’s proxy statement for its May 2011 shareholders’ meeting.
Chevedden’s proposal lacked sufficient proof of his eligibility, and he was unable
to supply documentation of stock ownership in response to repeated requests
from KBR. Needing to finish its proxy statement by April 4, 2011, KBR asked


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                                       No. 11-20921

Chevedden to withdraw his proposal in January 2011. He refused, and KBR
filed this action seeking a declaratory judgment that it could properly exclude
the proposal.
       Chevedden filed motions to dismiss the case for lack of personal and
subject-matter jurisdiction, which the district court denied in February 2011.
Though he continued to refuse to withdraw his proposal, Chevedden was unable
to supply the documentation of his eligibility required by Rule 14a-8, and in a
second motion to dismiss he stipulated that he would not sue if KBR excluded
his proposal from its proxy statement. The district court denied that motion on
April 4, 2011. The district court also granted KBR’s motion for summary
judgment, ruling that KBR could properly exclude Chevedden’s proposal from
its proxy statement. KBR excluded Chevedden’s proposal, and held its May 2011
shareholders’ meeting. The district court entered a final judgment for KBR on
December 21, 2011, and Chevedden filed this appeal.
       Chevedden’s argument that § 14(a) does not create a private right of action
is foreclosed by J.I. Case Co. v. Borak, 

, 

 (1964), in
which the Supreme Court held that § 14(a) creates a private right of action to
enforce SEC regulations controlling the conditions under which proxies are
submitted. Id. at 431–433, 84 S. Ct. at 1559-60.1
       Chevedden also argues that his conflict with KBR lacks the sufficient
immediacy and reality to give KBR standing to bring a declaratory judgment
action. The Declaratory Judgment Act permits a federal court to “declare the
rights and other legal relations” of parties in “a case of actual controversy.” 28
U.S.C. § 2201(a). Chevedden’s proposal put KBR to a choice between spending



       1
        Since Borak, the Supreme Court has changed its general approach to determining
whether a federal statute creates a private right of action. See, e.g., Alexander v. Sandoval,

, 287, 

, 1520 (2001). But the Supreme Court has not overruled
Borak’s holding that § 14(a) creates a private right of action.

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                                 No. 11-20921
a significant sum to revise its proxy statement, or excluding Chevedden’s
proposal and exposing itself to potential litigation.      The choice between
accommodating a potential adverse litigant at substantial expense or taking
action that would expose onself to a suit creates a justiciable dispute between
parties. See, e.g., MedImmune, Inc. v. Genentech, Inc., 

, 137, 

, 777 (2007) (holding that a patent licensee could seek a declaration
that the patent was invalid without first exposing itself to an infringement suit
by withholding payments due under its licensing agreement with the cpatent
holder). Chevedden argues that any possibility of litigation stemming from a
decision to exclude his proposal is vitiated by his stipulation that he would not
sue if KBR chose that course. But whichever course KBR chose, the decision
would implicate KBR’s duties to all of its shareholders. Also, wrongly excluding
an eligible shareholder’s proposal from its proxy statements could expose KBR
to an SEC enforcement action.
      The district court’s judgment is AFFIRMED.




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