Shareholder Proposals. Ohio Edison Co is a public utility. Ohio Edison's articles of incorporation vest the authority to make capital expenditures solely in the board of directors. Since 1982, the company's capital expenditures have averaged 595 million per year. C. L. Grimes, a shareholder in Ohio Edison, proposed that the company amend its articles of incorporation to require shareholder approval of certain capital expenditures in excess of 300 million. In other words, under Grimes's proposal, once the spending threshold of 300 million was reached, each expenditure, including such routine expenditures as the purchase of a typewriter or a new desk, would require shareholder approval. On October 23, 1990, Grimes asked Ohio Edison to enclose his proposal in the proxy materials for the next shareholders' meeting. Ohio Edison submitted the proposal to the Securities and Exchange Commission (SEC) for an opinion as to whether it needed to be included with the proxy materials. The SEC ruled that the proposal could be omitted, because it concerned ordinary business operations. When Ohio Edison distributed proxy materials for the meeting without mentioning Grimes's proposal, Grimes filed suit. Grimes contended that Ohio Edison violated SEC rules by failing to include his proposal in its proxy materials and by failing to inform its shareholders that he would offer his proposal at the meeting (which, Grimes argued, made the proxy materials false and misleading). Ohio Edison responded with a motion to dismiss the complaint. The court granted the motion. Grimes appealed. How will the appellate court rule? Discuss fully.
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