Company Name: Toll Brothers, Inc.
Public Availability Date: December 20, 2007
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
November 9, 2007
VIA ELECTRONIC MAIL (cfletters@sec.gov) and FEDERAL EXPRESS
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Toll Brothers, Inc. - Shareholder Proposal of the Amalgamated Bank Long View
MidCap 400 Index Fund - Securities Exchange Act of 1934Rule 14a-8
Ladies and Gentlemen:
This letter is to inform you that our client, Toll Brothers, Inc. ("Toll"),
intends to omit from its proxy statement and form of proxy for its 2008 Annual
Meeting of Shareholders (collectively, the "2008 Proxy Materials") a shareholder
proposal (the "Proposal") and a statement in support thereof received from the
Amalgamated Bank LongView MidCap 400 Index Fund (the "Proponent").
Pursuant to Rule 14a-8(j), enclosed herewith are six (6) copies of this letter
and its attachments. Also, in accordance with Rule 14a-8(j), a copy of this
letter and its attachments is being mailed on this date to the Proponent,
informing the Proponent of Toll's intention to omit the Proposal from the 2008
Proxy Materials. Pursuant to Rule 14a 8(j), this letter is being filed with the
Securities and Exchange Commission (the "Commission") no later than eighty (80)
calendar days before Toll files its definitive 2008 Proxy Materials with the
Commission.
A copy of the Proposal and supporting statement, as well as related
correspondence from the Proponent, is attached to this letter as Exhibit A. On
behalf of our client, we hereby respectfully request that the staff of the
Division of Corporation Finance (the "Staff") concur in our view that the
Proposal may be excluded from the 2008 Proxy Materials pursuant to Rule
14a-8(i)(7), because the Proposal pertains to Toll's ordinary business
operations, and Rule 14a-8(i)(3) and Rule 14a-8(i)(6), because the Proposal is
impermissibly vague and indefinite.
THE PROPOSAL
The Proposal states:
Resolved: The shareholders of [Toll] request that the board of directors
establish a Compliance Committee, to be composed of independent directors, that
would conduct a thorough review of [Toll's] regulatory, litigation and
compliance risks with respect to its mortgage lending operations and would
report to shareholders within six months of the 2008 annual meeting as to the
committee's findings and recommendations, as well as the progress made towards
implementing those recommendations. This report should be prepared at reasonable
cost and may omit confidential information.
ANALYSIS
I. The Proposal may be excluded under Rule 14a-8(i)(7) because the Proposal
pertains to matters of ordinary business operations.
The Proposal is properly excludable pursuant to Rule 14a-8(i)(7) because the
Proposal pertains to matters of Toll's ordinary business operations. According
to the Commission's Release accompanying the 1998 amendments to Rule 14a-8, the
general underlying policy of the ordinary business exclusion is "to confine the
resolution of ordinary business problems to management and the board of
directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual meeting." Release No. 34-40018 (May 21, 1998) (the
"1998 Release").
In the 1998 Release, the Commission stated that the policy underlying the
ordinary business exclusion rests on two central considerations: first, that
"certain tasks were so fundamental to management's obligation to run a company
on a day-to-day basis that they could not, as a practical matter, be subject to
direct shareholder oversight"; and second, "the degree to which the proposal
seeks to `micro-manage' the company by probing too deeply into matters of a
complex nature upon which shareholders, as a group, would not be in a position
to make an informed judgment." In Staff Legal Bulletin No. 14C (June 28, 2005)
("SLB 14C"), the Staff stated with respect to analyzing proposals under Rule
14a-8(i)(7) that address environmental or public health issues, "[i]n
determining whether the focus of these proposals is a significant social policy
issue [as opposed to ordinary business matters], we consider both the proposal
and the supporting statement as a whole." The Staff has also stated that a
proposal requesting the dissemination of a report may be excludable under Rule
14a-8(i)(7) if the subject matter of the report involves an ordinary business
matter of the company at issue. See Release No. 34-20091 (Aug. 16, 1983).
A. The Proposal seeks a report on the risks of Toll's business operations.
The Proposal seeks the establishment of a committee that would review and report
to shareholders on its findings, as well as progress towards implementing them,
on Toll's "regulatory, litigation and compliance risks with respect to its
mortgage lending operations."
The Proposal does not request that Toll change its mortgage lending operations.
The supporting statement of the Proposal refers to the potential "damage to
shareholder value that can result from litigation, regulatory costs and
reputational injury" that can result from the "lack [of] adequate compliance
procedures" over a company's mortgage lending operations. Litigation costs,
regulatory costs and reputational injury are financial risks to a company. Thus,
the Proposal seeks an assessment of financial risks arising from Toll's ordinary
business operations.
It is well established that shareholder proposals seeking detailed information
on a company's assessment of the financial implications of aspects of its
business operations do not raise significant policy issues and instead delve
into the minutiae and details of the ordinary conduct of a company's business.
For example, in Pfizer Inc. ("Pfizer") (avail. Jan. 13, 2006), the Staff
concurred that the company could exclude a proposal requesting that the
company's management prepare a report on "the effects on the long-term economic
stability of the company and on the risks of liability to legal claims resulting
from the company's policy of limiting the availability of the company's products
to Canadian wholesalers or pharmacies that allow purchase of its products by
U.S. residents." There, the company argued that an assessment of financial risks
implicated the company's ordinary business operations. In its response, the
Staff concurred that the proposal was excludable under Rule 14a-8(i)(7) on the
basis that it pertained to the "evaluation of risk." Similarly, in General
Electric Company ("GE") (avail. Jan. 13, 2006), the Staff concurred that the
company could exclude a proposal requesting that the company's board of
directors prepare a report "evaluating the risk of damage to the company's brand
name and reputation as a result of a growing tendency to send manufacturing and
service work to other countries." There, the company argued that an assessment
of financial risks implicated the company's ordinary business operations. In its
response, the Staff noted that the proposal was excludable under Rule
14a-8(i)(7) on the basis that it pertained to the "evaluation of risk."
Further, in American International Group, Inc. (avail. Feb. 19, 2004), the Staff
concurred that the company could exclude a proposal that requested the board of
directors to report on "the economic effects of HIV/AIDS, tuberculosis and
malaria pandemics on the company's business strategy," because it called for an
evaluation of risks and benefits. See also The Dow Chemical Company (avail. Feb.
13, 2004) (concurring that the company could exclude under Rule 14a-8(i)(7) a
proposal requesting a report related to certain toxic substances, including "the
reasonable range of projected costs of remediation or liability," because it
related to an evaluation of risks and liabilities); Xcel Energy Inc. (avail.
Apr. 1, 2003) and Cinergy Corp. (avail. Feb. 5, 2003) (concurring with the
exclusion of proposals requesting a report disclosing "the economic risks
associated with the company's past, present, and future emissions" of several
greenhouse gases and "the economic benefits of committing to a substantial
reduction of those emissions related to its current business activities,"
because it related to an evaluation of risks and benefits); Willamette
Industries, Inc. (avail. Mar. 20, 2001) (permitting the exclusion of a proposal
requesting a report on environmental problems, including an estimate of worst
case financial exposure due to environmental issues for the next ten years,
because it related to an evaluation of risk); and The Mead Corporation (avail.
Jan. 31, 2001) (allowing the exclusion of a proposal requesting an economic or
financial report of the company's environmental risks).
The Staff confirmed its position on proposals seeking an assessment of risk in
SLB 14C. There, the Staff stated that "to the extent that a proposal and
supporting statement focus on the company engaging in an internal assessment of
the risks or liabilities that the company faces as a result of its operations
..., we concur with the company's view that there is a basis for it to exclude
the proposal under rule 14a-8(i)(7) as related to an evaluation of risk."
Although SLB 14C specifically addressed shareholder proposals that reference
"environmental or public health issues," we believe that the same analysis
applies with respect to the Proposal; indeed, the proposals at issue in Pfizer
and GE did not involve "environmental or public health issues" and the Staff
concurred in excluding each of those proposals under Rule 14a-8(i)(7).
Specifically, the Proposal focuses on an "internal assessment of the risks"
(i.e., regulatory, litigation and compliance risks) that the Company may face as
a result of day-to-day operating decisions (i.e., mortgage lending operations).
The Staff has consistently concurred that shareholder proposals that relate to
the evaluation of the economic risks of particular company actions are properly
excludable under Rule 14a-8(i)(7). The Proposal calls for a report on the
regulatory, litigation and compliance risks of Toll's operating decisions and
does not raise a significant policy issue. Therefore, we believe that the
Proposal may properly be excluded from the 2008 Proxy Materials under Rule
14a-8(i)(7), and we request that the Staff concur in our conclusion.
B. The Proposal implicates Toll's litigation strategy.
The Proposal also implicates Toll's ordinary business operations because it
requests that the Board of Directors report on the risks of litigation from its
mortgage lending operations. Every company's management has a basic
responsibility to defend the company's interests against unwarranted litigation.
A shareholder request that interferes with this obligation is inappropriate. For
that reason, the Staff has stated that a shareholder proposal that implicates
the conduct of litigation or litigation strategy is properly excludable under
the "ordinary business" exception contained in Rule 14a-8(i)(7). See, e.g., R.J.
Reynolds Tobacco Holdings, Inc. (avail. Mar. 6, 2003) (proposal requesting the
company to report on the company's direct or indirect involvement in cigarette
smuggling excludable under Rule 14a-8(i)(7) because it interfered with the
litigation strategy of a civil lawsuit on similar matters); Benihana National
Corp. (avail. Sept. 13, 1991) (permitting exclusion under the predecessor to
Rule 14a-8(i)(7) of a proposal requesting the company to publish a report
prepared by a board committee analyzing claims asserted in a pending lawsuit);
see also Allstate Corporation (avail. Feb. 5, 2003) (permitting exclusion under
Rule 14a-8(i)(7) of a proposal requesting that the board undertake a study of
legal expenses and report the findings to the shareholders because if related to
the company's ordinary business operations, namely legal expenses); Hudson
United Bancorp (avail. Jan. 24, 2003) (allowing the exclusion of a proposal
requesting that the board of directors appoint a committee to investigate
possible corporate misconduct because it related to the ordinary business
operations of the company, namely the "general conduct of a legal compliance
program" (italics added)).
Under this precedent, a shareholder proposal is excludable if it implicates
litigation strategy regardless of whether the proposal might otherwise touch
upon significant policy issues. For example, in Philip Morris Companies, Inc.
(avail. Feb. 4, 1997), the Staff noted that it previously "has taken the
position that proposals directed at the manufacture and distribution of
tobacco-related products by companies involved in making such products raise
issues of significance that do not constitute matters of ordinary business," but
determined that the company nevertheless could exclude a "proposal [that]
primarily addresses the litigation strategy of [the company], which is viewed as
inherently the ordinary business of management to direct." See also R.J.
Reynolds Tobacco Holdings, Inc. (avail. Feb. 21, 2003) (proposal requesting that
the company find ways to inform customers about the actual risks of smoking
certain kinds of cigarettes to correct common misperceptions about their safety
excludable under Rule 14a-8(i)(7) because it interfered with the litigation
strategy of class-action lawsuits on similar matters); Philip Morris Companies
Inc. (avail. Feb. 22, 1999) (proposal requiring the company to stop using terms
"light" and "ultralight" until shareholders can be assured that those terms
reduce the risk of disease excludable for the same reason).
Toll has recently faced litigation relating to its mortgage lending operations.
The Proposal and its supporting statement implicate these lawsuits and other
potential litigation against Toll. The Proponent then asserts that litigation is
pending at "several home builders under the Real Estate Settlement Procedures
Act, the Truth in Lending Act and the Home Ownership Equity Protection Act, as
well as state anti-predatory lending statu[t]es." The Proposal calls upon Toll
to "conduct a thorough review of Toll's regulatory, litigation and compliance
risks relating to its mortgage lending policies." Any such report would
necessarily implicate Toll's decisions regarding litigation or possible
litigation under the statutes cited, including assessments as to the strength of
Toll's defenses, decisions as to what issues to contest, and implications of
positions that might be asserted in various litigation. In addition, the review
of regulatory and compliance risks could also implicate litigation decisions.
Because the Proposal intrudes on Toll's ordinary business operations with
respect to litigation strategy, we believe that the Proposal may properly be
excluded from the 2008 Proxy Materials under Rule 14a-8(i)(7) and we request
that the Staff concur in our conclusion.
II. The Proposal is vague and indefinite and thus may be excluded under Rule
14a-8(i)(3) and Rule 14a-8(i)(6).
Rule 14a-8(i)(3) allows the exclusion of a shareholder proposal if the proposal
or supporting statement is contrary to any of the Commission's proxy rules or
regulations including Rule 14a-9, which prohibits materially false or misleading
statements in proxy materials. The Staff in Staff Legal Bulletin No. 14B
(September 15, 2004) stated that excluding a proposal in reliance upon Rule
14a-8(i)(3) is appropriate when the "resolution contained in the proposal is so
inherently vague or indefinite that neither the stockholders voting on the
proposal, nor the company in implementing the proposal (if adopted), would be
able to determine with any reasonable certainty exactly what actions or measures
the proposal requiresthis objection also may be appropriate where the proposal
and the supporting statement, when road together, have the same result."
Moreover, a proposal is sufficiently vague and indefinite so as to justify
exclusion where a company and its shareholders might interpret the proposal
differently, such that "any action ultimately taken by the company upon
implementation of the proposal could be significantly different from the actions
envisioned by the shareholders voting on the proposal." Fuqua Industries, Inc.
(avail. Mar. 12, 1991). In addition, under Rule 14a-8(i)(6), a company "lacks
the power or authority to implement" a proposal when the proposal "is so vague
and indefinite that [the company] would be unable to determine what action
should be taken." Int'l Business Machines Corp. (avail. Jan. 14, 1992)
(permitting exclusion under the predecessor to Rule 14a-8(i)(6)).
It is uncertain what actions or measures the Proposal requires. The Proposal
requests the proposed committee conduct a "thorough review" of the regulatory,
litigation and compliance risks related to Toll's mortgage lending operations.
The Proposal does not explain what constitutes a "thorough review" or provide
any guidance on how the review should be conducted thereby leaving the Proposal
susceptible to multiple interpretations.
The Staff has previously allowed the exclusion of proposals lacking enough
information to implement or using non-existent or conflicting criteria. For
example, in Alcoa Inc. (avail. Dec. 24, 2002), the Staff concluded that a
proposal calling for the implementation of "human rights standards" and a
program to monitor compliance with these standards could be excluded under Rule
14a-8(i)(3) as vague and indefinite. See also Bank of America Corporation
(avail. Mar. 10, 2004)(proposal stating that "management has `no mandate' going
forward to pursue `merger discussions' with `any major institution'" excluded as
vague and indefinite where proposal did not include enough clear information to
implement without making assumptions regarding what the proponent bad in mind);
Peoples Energy Corporation (avail. Nov. 23, 2004)(proposal requesting
modifications to corporate organizational documents to limit ability to
indemnify officers and directors excluded as vague and indefinite where proposal
used nonexistent and indefinite standards such as "reckless neglect");
Safescript Pharmacies, Inc. (avail. Feb. 27, 2004) (proposal requiring that
options granted by company "be expensed in accordance with FASB guidelines"
excluded as vague and indefinite where FASB guidelines include two different
methods for expensing options); Avista Corporation (avail. Feb. 19, 2004)
(proposal recommending that the board adopt a resolution that the company "offer
a right of first refusal to its employees, customers and citizens within its
`service area' if an `acceptable offer' for the `purchase' of the company is
`tendered'" excluded as vague and indefinite).
In addition to the uncertainties noted above, the Proposal does not provide any
indication as to what the requested report should contain, other than (a) the
committee's findings and recommendations and (b) the progress made towards
implementing the findings and recommendations, in both cases, without providing
any guidance regarding any such findings or recommendations. Given the lack of
guidance in the Proposal with respect to recommendations of the committee, it is
equally difficult to understand what is required in terms of implementing such
recommendations. In light of all of these ambiguitics, it is unclear what
actions shareholders voting for the Proposal would expect Toll to take and what
actions Toll would be required to take if the Proposal were to be implemented.
Thus, like the proposals in Alcoa and related precedent, we believe that the
Proposal is excludable under Rule 14a-8(i)(3) as vague and indefinite as well as
misleading "because any action(s) ultimately taken by [the company] upon
implementation of the proposal could be significantly different from the
action(s) envisioned by [shareholders] voting on the proposal," and we request
that the Staff concur in our conclusion. Occidental Petroleum Corp. (avail. Feb.
11, 1991).
For the same reason, the Proposal also may be properly excluded pursuant to Rule
14a-8(i)(6) since it is vague and ambiguous, with the result that a company
"would lack the power to implement" the Proposal. A company "lacks[s] the power
or authority to implement" a proposal when the proposal "is so vague and
indefinite that [the company] would be unable to determine what action should be
taken." Int'l Business Machines Corp. (avail. Jan. 14, 1992). For example, in
The Southern Co. (avail. Feb. 23, 1995), a shareholder proposal requested that
the board of directors take steps to "ensure the highest standards of ethical
behavior" by employees serving in the public sector. The Staff concurred that
this proposal was excludable under the predecessor to Rule 14a-8(i)(6) because
the proposal was so vague and indefinite that the proposal was beyond the
company's power to implement. As noted above, the Proposal is inherently vague
on what issues should be covered by the "thorough review" and contained in the
report such that it would be impossible for Toll to implement it. Because it
would be impossible for Toll to determine what action should be taken under the
Proposal, we believe that the Proposal also may be excluded from the 2008 Proxy
Materials under Rule 14a-8(i)(6) and we request that the Staff concur in our
conclusion.
CONCLUSION
Based upon the foregoing analysis, we respectfully request that the Staff of the
Commission concur that it will take no action if Toll excludes the Proposal from
its 2008 Proxy Matcrials. We would be happy to provide you with any additional
information and answer any questions that you may have regarding this subject.
If we can be of any further assistance in this matter, please do not hesitate to
call me at (215) 977-2006 or Mark K. Kessler, Toll's General Counsel, at (215)
938-8006.
Sincerely,
/s/
Darrick M. Mix
For WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP
DMM
Attachments
[INQUIRY LETTER]
December 19, 2007
VIA ELECTRONIC MAIL (cfletters@sec.gov) and FEDERAL EXPRESS
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: Toll Brothers, Inc. - Shareholder Proposal of the Amalgamated Bank LongView
MidCap 400 Index Fund - Securities Exchange Act of 1934Rule 14a-8
Ladies and Gentlemen:
On behalf of Toll Brothers, Inc. (the "Company"), this letter replies to the
letter dated December 10, 2007 submitted by Cornish F. Hitchcock (the "Original
Response Letter") and the letter dated December 13, 2007 also submitted by
Cornish F. Hitchcock (the "New Response Letter"; and together with the Original
Response Letter, the "Response Letters") on behalf of the Amalgamated Bank
LongView MidCap 400 Index Fund (the "Proponent") to the staff of the Division of
Corporation Finance (the "Staff"). A copy of the Response Letters is attached
hereto as Exhibit A. The Response Letters are in response to the letter dated
November 9, 2007 submitted by Wolf, Block, Schorr and Solis-Cohen LLP (the
"Prior Letter") on behalf of the Company to the Staff seeking to exclude the
Proponent's proposal (the "Proposal") from the Company's proxy materials for its
2008 Annual Meeting of Shareholders (the "Proxy Materials"). The Proposal
requests that the Company establish a Compliance Committee, to be composed of
independent directors, that would conduct a thorough review of the Company's
regulatory, litigation and compliance risks with respect to its mortgage lending
operations and would report to shareholders within six months of the 2008 Annual
Meeting of Shareholders as to the committee's findings and recommendations, as
well as the progress made towards implementing those recommendations.
Pursuant to Rule 14a-8(j), enclosed herewith are six (6) copies of this letter
and its attachments. Also, in accordance with Rule 14a-8(j), a copy of this
letter and its attachments is being mailed on this date to the Proponent.
A. The Proposal involves the Company's ordinary business operations because it
seeks an evaluation of risk.
Contrary to the claims made in the Response Letters, the Company continues to
believe, for the reasons set forth in the Prior Letter and below, that the
Proponent's proposal addresses the Company's ordinary business operations
because it seeks an internal assessment of the risks that the Company may face
as a result of its mortgage lending operations. As set forth in the Prior
Letter, the Staff has consistently concurred that shareholder proposals that
relate to the evaluation of the economic risks of particular company actions are
properly excludable under Rule 14a-8(i)(7).
The Company does not believe that a review of mortgage lending operations (as
opposed to human rights issues or doing business in terrorist countries)
involves significant social policy issues, and calling for the establishment of
a committee does not turn an ordinary business matter into a significant social
policy issue.
The Proponent attempts to wrap the Proposal in the social policy issues relating
to the "recent turmoil in the housing and credit markets." See Supporting
Statement of the Proposal. While there may well be social policy issues
emanating from this turmoil, the Proposal does not raise any significant policy
issues. The Proposal merely seeks an evaluation of risks arising from the
Company's mortgage lending operations; in this regard it is important to note
that less than 1% of the loans originated by the Company's mortgage lending
operation in fiscal 2007 were "subprime" mortgages, which are clearly the main
topic of the current social policy issues in this area. Notwithstanding claims
by the Proponent to the contrary, the Company, as part of its day-to-day
business operations, regularly evaluates regulatory, litigation and compliance
risks of its mortgage lending operations. The Company's mortgage subsidiary
employs a full time mortgage lending compliance officer who oversees on-going
loan level regulatory and lending standard compliance. In addition, regular
audits specific to the Company's mortgage lending operations are conducted by
the Company's internal audit department, an independent external auditor and
various state licensing authorities. The Company's mortgage lending operations
are also subject to Audit Committee and Board oversight.
As noted in the Prior Letter, in Staff Legal Bulletin No. 14C ("SLB 14C") the
Staff stated that its analysis as to whether the focus of a proposal is a
significant social policy issue is as follows:
To the extent that a proposal and supporting statement focus on the company
engaging in an internal assessment of the risks or liabilities that the company
faces as a result of its operations that may adversely affect the environment or
the public's health, we concur with the company's view that there is a basis for
it to exclude the proposal under rule 14a-8(i)(7) as relating to an evaluation
of risk. To the extent that a proposal and supporting statement focus on the
company minimizing or eliminating operations that may adversely affect the
environment or the public's health, we do not concur with the company's view
that there is a basis for it to exclude the proposal under rule 14a-8(i)(7).1
Nowhere in the Proposal does the Proponent call for the Company to minimize or
eliminate its mortgage lending operations; rather, the Proposal focuses on an
"internal assessment of the risks" (i.e., regulatory, litigation and compliance
risks) that the Company may facc as a result of day-to-day operating decisions
(i.e., mortgage lending operations).
1. The New Response Letter
The Proponent cites Beazer Homes USA, Inc. ("Beazer") (avail. November 30, 2007)
in support of its view that the Company may not exclude the proposal under Rule
14a-8(i)(7). There, the shareholder proposal requested that the board of
directors prepare a report evaluating the company's mortgage practices,
including the company's potential losses and liabilities relating to its
mortgage lending operations. The Company disagrees with the comparison to Beazer
for the following reasons.
The focus of the proposal in Beazer is on a general review of Beazer's mortgage
lending operations, as opposed to the sole focus of the Proposal on the
evaluation of risk. Furthermore, Beazer in its no-action request did not cite
"evaluation of risk" in its analysis of the ordinary business exception. The
Staff stated that it was "unable to conclude that [Beazer] has met its burden of
establishing that [Beazer] may exclude the proposal under rule 14a-8(i)(7)." The
Company believes that the "evaluation of risk" argument, and the no-action
requests cited in this regard in this letter and the Prior Letter, satisfies the
burden necessary to omit the Proposal from the Proxy Materials.
2. The Original Response Letter
The Proponent also cites three no-action requests in the Original Response
Letter in which the Staff denied no-action relief that the Proponent states,
without providing analysis, are comparable to the Proposal. The Company
disagrees with the comparisons for the reasons discussed below.
The Proponent first cites Associates First Capital Corporation ("Associates")
(avail. March 13, 2000), a no-action request filed before SLB 14C. There, the
shareholder proposal requested the board of directors to establish a committee
to "oversee the development and enforcement of policies to ensure that (1)
accounting methods and financial statements adequately reflect the risks of
subprime lending and (2) employees do not engage in predatory lending practices;
and to report before the next annual meeting to the shareholders on policies and
their enforcement." The proposal in Associates is inapposite to the Proposal
because the focus of the proposal in Associates is not on an internal evaluation
of risk; rather, it calls for the development and enforcement of substantive
operational policies with respect to subprime and predatory lending.
The focus of the proposal in General Electric Co. ("GE") (avail. January 28,
2005) cited by the Proponent, which was also a no-action request filed before
SLB 14C, is also significantly different than the focus of the Proposal. The
proposal in GE requested the board of directors to establish a committee to
review "GE's operations in Iran with a particular reference to potential
financial and reputational risks incurred by the company by such operations."
The focus of the proposal in GE was on a general review of GE's overall
operations in Iran, as opposed to the sole focus of the Proposal on the
evaluation of risk.
Finally, the focus of the proposal in Yahoo! Inc. ("Yahoo") (avail. April 16,
2007) cited by the Proponent is also significantly different than the focus of
the Proposal. The proposal in Yahoo requested the board of directors to
establish a committee on "Human Rights, which is created and authorized, to
review the implications of company policies, above and beyond matters of legal
compliance, for the human rights of individuals in the US and worldwide." The
proposal in Yahoo does not focus on an evaluation of risk; in fact, an
evaluation of risk argument was not even raised by Yahoo in its no-action
request.
The Company also notes that the Original Response Letter mischaracterizes the
other no-action letters cited with respect to the ordinary business exclusion.
The analogy that the Proponent attempts to draw to Exxon Mobil Corp. (avail.
March 18, 2005) is flawed. As noted in SLB 14C, the Staff did not concur with
Exxon's view that it could exclude the proposal under Rule 14a-8(i)(7) because,
in the Staff's view, the proposal and supporting statement focused on the
company minimizing or eliminating operations that may adversely affect the
environment or the public's health. As noted above, the Proposal does not seek
to minimize or climinate the Company's mortgage lending operations. The
Proponent also claims that the situation presented by the Proposal "is a far cry
from...an insurance company (which is in the business of assessing risk) being
asked to evaluate risk in a certain area." See Original Response Letter, page 6;
American International Group, Inc. (avail. Feb. 19, 2004). The Staff in SLB 14C
did not limit the availability of the evaluation of risk analysis of the
ordinary business exclusion to insurance companies in the business of evaluating
risk. In addition, the Company notes that the mortgage lending business is also
in the business of assessing risk. Finally, the Proponent also claims the
situation presented by the Proposal "is a far cry from...a company asked to
evaluate outsourcing when the 1998 Release cited hiring issues as covered by the
exclusion." See Original Response Letter, page 6; General Electric Company
(avail. Jan. 13, 2006). As noted in the Prior Letter, the Staff agreed that the
company may exclude the proposal at issue there under Rule 14a-8(i)(7) because
it related to an evaluation of risk and not, as the Proponent contends, because
the proposal involved hiring issues.
B. The Proposal involves the Company's ordinary business operations because it
implicates the Company's litigation strategy.
The Company continues to believe that the Proposal also involves the Company's
ordinary business operations because it requests that the Board of Directors
report to shareholders on the risks of litigation from its mortgage lending
operations. The no action requests cited by the Proponent challenging the
Company's position are not persuasive. The Company notes that the Proponent did
not address or distinguish any of the no-action requests cited in the Prior
Letter.
The Proposal in Wal-Mart Stores, Inc. ("Wal-Mart") (avail. March 17, 2003)
involved a request for a report including summary descriptions of certain
Wal-Mart equal employment opportunity policies and programs. The Proposal in The
Dow Chemical Company ("Dow") (avail. February 11, 2007) involved a request for a
report describing new initiatives instituted by management to address specific
health, environmental and social concerns of the Bhopal survivors. The proposals
in Wal-Mart and Dow did not require either company to provide findings or
recommendations regarding the matters at issue. Each of these proposals involves
a request for information on the company's policies/initiatives. In contrast,
and as noted in the Prior Letter, the report requested in the Proposal would
require assessments as to the strength of the Company's defenses, decisions as
to what issues to contest, and implications of positions that might be asserted
in various litigation involving its mortgage lending operations.
In Beazer, the company in its no-action request did not cite litigation strategy
in its analysis of the ordinary business exception. As noted above, the Staff
stated that it was "unable to conclude that [Beazer] has met its burden of
establishing that [Beazer] may exclude the proposal under rule 14a-8(i)(7)." The
Company believes that the litigation strategy argument, and the no-action
requests cited in this regard in this letter and the Prior Letter, satisfies the
burden necessary to omit the Proposal from the Proxy Materials.
Finally, the Proponent cites no-action requests where the Staff has concurred
with a company's view that it could exclude the proposal under Rule 14a-8(i)(7)
because the proposal implicated litigation strategy. The Company notes that it
has not relied on any of these no-action requests cited by the Proponent and
notes further that the Proponent has provided no analysis to accompany its
conclusory statement that these no-action requests do not "resemble the
situation here." See Original Response Letter, page 7. Accordingly, the Company
believes that the Proposal involves the Company's ordinary business operations
because it implicates the Company's litigation strategy.
CONCLUSION
Based upon the foregoing analysis and the analysis set forth in the Prior
Letter, we respectfully request that the Staff concur that it will take no
action if the Company excludes the Proposal from its 2008 Proxy Materials. We
would be happy to provide you with any additional information and answer any
questions that you may have regarding this subject. If we can be of any further
assistance in this matter, please do not hesitate to call me at (215) 977-2006
or Mark K. Kessler, the Company's General Counsel, at (215) 938-8006.
Sincerely,
/s/
Darrick M. Mix
For WOLF, BLOCK, SCHORR and SOLIS-COHEN LLP
DMM
Attachments
-----FOOTNOTES-----
1 As noted in the Prior Letter, the Staff has applied this same analysis to
proposals not involving "environmental or public health issues." See Pfizer Inc.
(avail. Jan. 13, 2006) and General Electric Company (avail. Jan. 13, 2006).
[INQUIRY LETTER]
5 October 2007
Mr. Michael I. Snyder
Corporate Secretary
Toll Brothers, Inc.
250 Gibraltar Road
Horsham, Pennsylvania 19044
By UPS
Re: Shareholder proposal for 2008 annual meeting
Dear Mr. Snyder:
On behalf of the Amalgamated Bank LongView MidCap 400 Index Fund (the "Fund") I
submit the enclosed shareholder proposal for inclusion in the proxy statement
that Toll Brothers Inc. (the "Company") plans to circulate to shareholders in
anticipation of the 2008 annual meeting. The proposal is being submitted under
SEC Rule 14a-8 and relates to the Company's board committee practices.
The Fund is an S&P MidCap 400 index fund located at 275 Seventh Avenue, New
York, N.Y. 10001. The Fund has beneficially owned more than $2000 worth of the
Company's common stock for more than a year. A letter confirming ownership is
being submitted under separate cover. The Fund plans to continue ownership
through the date of the 2008 annual meeting, which a representative plans to
attend.
We would be pleased to discuss with you the issues presented by this proposal.
Please do not hesitate to contact me if there is anything further that I can
provide.
Very truly yours,
/s/
Cornish F. Hitchcock
[APPENDIX]
RESOLVED: The shareholders of Toll Brothers, Inc. (the "Company") request that
the board of directors establish a Compliance Committee, to be composed of
independent directors, that would conduct a thorough review of the Company's
regulatory, litigation and compliance risks with respect to its mortgage lending
operations and would report to shareholders within six months of the 2008 annual
meeting as to the committee's findings and recommendations, as well as the
progress made towards implementing those recommendations. This report should be
prepared at reasonable cost and may omit confidential information.
SUPPORTING STATEMENT
The recent turmoil in the housing and mortgage markets has wiped out billions of
dollars in shareholder value at housing-related companies. During the first nine
months of 2007, the Dow Jones Home Construction Index declined by nearly half.
Toll Brothers stock lost 33% of its value during this same period. As of October
1, 2007, the Company's stock price was 60% below its high in mid-2005.
In its August 13, 2007 issue, BUSINESS WEEK suggested that some aggressive
business practices among the nation's largest homebuilders - particularly within
their mortgage or financing affiliates - may have contributed to the recent
collapse of the mortgage and housing markets. Concerns center on the conflict of
interest that may occur if a home builder's mortgage affiliate issues mortgages
to home buyers who may not be able to repay their obligations.
Concerns about housing financing practices have prompted calls for more
regulatory and legislative action, as well as litigation. Reports in the news
media indicate an increased interest by state and federal regulators in
enforcing existing laws affecting home builders and mortgage originators, with a
possibility of new regulations. In addition, some Members of Congress have
indicated an interest in imposing a fiduciary obligation on loan originators and
posoibly placing non-bank lenders under federal oversight. At the state level,
legislatures in a number of states are considering measures that target
deceptive lending, foreclosure or fraud.
Litigation is also pending at several home builders under the Real Estate
Settlement Procedures Act, the Truth in Lending Act, and the Home Ownership
Equity Protection Act, as well as state anti-predatory lending statues.
As shareholders, we are concerned about the damage to long-term shareholder
value that can result from litigation, regulatory costs and reputational injury
at companies that lack adequate compliance procedures and active oversight by
the board. Given the current public scrutiny of homebuilders and their business
practices, we believe that it is important for the Toll Brothers board to
undertake a thorough investigation of the Company's practices in this area and
to avoid or mitigate any potential conflicts that might be disclosed.
We urge you to vote FOR this proposal.
[INQUIRY LETTER]
10 December 2007
Office of the Chief Counsel
Division of Corporation Finance
Securities & Exchange Commission
100 F Street, NE
Washington, DC 20549
By courier and e-mail (cfletters@sec.gov)
Dear Counsel:
I write on behalf of Amalgamated Bank LongView MidCap 400 Index Fund (the
"Fund") in response to the letter from counsel for Toll Brothers, Inc. ("Toll"
or the "Company") dated 9 November 2007. In that letter the Company requests
that the Division grant no-action relief with respect to a shareholder proposal
submitted by the Fund that deals with establishing a Compliance Committee on
Toll's Board of Directors. For the reasons set forth below, the Fund submits
that the Company has not carried its burden with respect to establishing that
the Fund's proposal may be excluded from the Company's proxy materials.
Toll argues that the Fund may be excluded under SEC Rule 14a-8(i)(7) as relating
to the "ordinary business" of the Company and under SEC Rules 14a-8(i)(3) and
(6) as being so vague and indefinite that it cannot be implemented. As we now
demonstrate, these arguments fail to persuade.
The Fund's Proposal.
The Fund requests that the Company "establish a Compliance Committee, to be
composed of independent directors, that would conduct a thorough review of the
Company's regulatory, litigation and compliance risks with respect to its
mortgage lending operations and report to shareholders within six months of the
2008 annual meeting as to the committee's findings and recommendations, as well
as the progress made towards implementing those recommendations." The resolution
adds that the report should be prepared at reasonable cost and may omit
confidential information.
The Supporting Statement cites the recent turmoil in the housing and mortgage
markets and how that has had a negative effect on Toll Brothers stock, as well
as others in the industry, with the Company's stock price on 1 October 2007
trading at 60% below its high in mid-2005.
The Supporting Statement cites a report in BUSINESS WEEK suggesting that some
aggressive business practices among the nation's largest homebuilders -
particularly within their mortgage or financing affiliates - may have
contributed to the recent collapse of the mortgage and housing markets. Concerns
center on the conflict of interest that may occur if a home builder's mortgage
affiliate issues mortgages to home buyers who may not be able to repay their
obligations.
The Supporting Statement cites as well the growing demand for legislative and
regulatory action at both the federal and state levels that could increase legal
obligations on loan originators, as well as crack down on deceptive lending,
foreclosure or fraud. This is in addition to the threats of litigation under
current laws affecting home buildings under the Real Estate Settlement
Procedures Act, the Truth in Lending Act, and the Home Ownership Equity
Protection Act, as well as state anti-predatory lending statues.
The Supporting Statement expresses concern about the damage to long-term
shareholder value that can result from litigation, regulatory costs and
reputational injury at companies that lack adequate compliance procedures and
active oversight by the board. Accordingly, the Fund's proposal urges an
investigation of the Company's practices in this area and efforts to mitigate
any potential conflicts that might be disclosed.
The "Ordinary Business" Exclusion.
1. The Applicable Standard.
Toll Brothers first invokes the "ordinary business" exclusion in Rule
14a-8(i)(7), which permits companies to omit proposals that "are mundane in
nature and do not involve any substantial policy or other considerations." This
is the standard set out in the 1976 rulemaking which produced Rule 14a-8(c)(7)
(later recodified as Rule 14a-8(i)(7)) and explained how it should be applied in
particular cases. Release No. 34-12999, 41 Fed. Reg. 52994, 52998 (3 December
1976) (the "1976 Release").
This interpretation stemmed from the Commission's concern about a no-action
letter advising a utility that it could exclude a resolution on the topic of
whether the company should build a nuclear power plant. The staff's theory was
that the utility's management, "as an ordinary business matter, determines the
fuel mix and the types of electrical generating methods that will be utilized to
furnish electricity to the company's customers." Potomac Electric Power Co. (5
March 1976), 1976 SEC No-Act. LEXIS 622, *3. To avoid this result in the future,
the SEC proposed amending the "ordinary business" exclusion to require the
inclusion of "proposals involving important business matters, notwithstanding
the fact that such matters generally would relate to the conduct of the issuer's
ordinary business operations." SEC Release No. 34-12598, 41 Fed. Reg. 29982,
29984 (20 July 1976).1 After receiving public comments, the SEC adopted the 1976
Release and reissued Rule 14a-8 in amended form; the Commission did not,
however, alter the language of the "ordinary business" exclnsion, citing
administrative and interpretational concerns. 41 Fed. Reg. at 52997. The SEC
concluded that the existing standard (which was placed in a new subpart (c)(7))
"appears to be a workable one if it is interpreted in a somewhat more flexible
manner than in the past." Id. at 52998.
The "substantial policy" benchmark well captures the point the Commission sought
to make: It is not enough that the topic of a resolution be "mundane" - indeed,
the PEPCO example shows how any policy issue can be characterized to seem like a
part of the company's day-to-day business. What matters is whether the proposal
is also devoid of "any substantial policy or other considerations," 1976
Release, 41 Fed. Reg. at 52998 (emphasis added).
In Release No. 34-40018, 63 Fed. Reg. 29106 (28 May 1998) the Commission
reaffirmed this approach and provided additional guidance for determining what
sort of issues would transcend "ordinary business." The Commission recommended a
focus first on the subject matter of the proposal, noting that "[c]ertain tasks
are so fundamental to management's ability to run a company on a day-to-day
basis that they could not, as a practical matter, be subject to director
shareholder oversight." e.g., decisions on hiring or promotion of employees,
production quality, and retaining suppliers. Id. at 29108. Even so, the SEC
noted, some proposals would "transcend the day-to-day business matters and raise
policy issues so significant" as to warrant shareholder input. Id.
Secondly, the Commission cited a need to examine the extent to which a proposal
would "micro-manage" the company "by probing too deeply into matters of a
complex nature upon which shareholders, as a group, would not be in a position
to make an informed judgment." Id.
In seeking no-action relief Toll argues that the Fund's proposal fails to meet
this standard because it seeks nothing more than a report on the risks of Toll's
business operations (Toll Letter at pp. 2-3) and is also said to implicate
Toll's litigation strategy (Toll Letter at pp. 4-5). As we now demonstrate, the
issues presented by the Fund's proposal transcend ordinary business
considerations, and Toll has not sustained its burden of proving otherwise.
2. Significant Policy Issues.
Although Toll Brothers tries to characterize the Fund's proposal as merely a
request for a report, the proposal is in fact of greater scope. The proposal
does not focus on day-to-day operation of the company, but rather on governance
at the board of directors level. Directors, after all, are elected by the
shareholders to act as stewards of the shareholders. Particularly at a time when
the Company's stock price has collapsed with no sign of immediate recovery, it
is plainly not a matter of "ordinary business" for shareholders to raise
questions about how directors carry out that responsibility in this industry.
Specifically, the Fund's proposal asks the board to create a new committee that
would focus on issues pertaining to the present housing and mortgage crisis, a
"significant policy" issue by anyone's definition.2 The proposal also seeks a
board-level review of the Company's mortgage operations business amidst concerns
that home builders' mortgage financing affiliates may have exacerbated the
current problems by originating mortgages in significant numbers to buyers who
could not afford those mortgages.
Apart from significant policy issues presented by the current housing and credit
crisis, we note that the utilization of compliance committees has itself emerged
as a significant issue of corporate governance in recent years. Nearly two years
THE WALL STREET JOURNAL reported how a "small but growing number" of S&P 500
committees are setting up compliance committees along the line recommended by
the Fund here, rather than simply relying on the audit committee. Joann S.
Lublin, Compliance Panels Slowly Take Hold, WALL ST. JOURNAL (9 January 2006)
(Ex. A hereto). The practice is noticeable in industries that are subject to
significant regulatory requirements, as are home builders.
The Fund's proposal is thus comparable to other proposals seeking the creation
of a board-level committee to look into significant policy issues. Three
no-action determinations in which the Division denied no-action relief are
illustrative.
Associates First Capital Corporation (13 March 2000) chillingly anticipated the
subprime lending issues that dominate today's news. The resolution there sought
the creation of a board committee to "oversee the development and enforcement of
policies to ensure that (1) accounting methods and financial statements
adequately reflect the risks of subprime lending and (2) employees do not engage
in predatory lending practices; and to report before the next annual meeting to
the shareholders on policies and their enforcement." Despite pleas from the
company this related to its core business activities, the Division denied
no-action relief.
Similarly in General Electric Co. (28 January 2005), the proposal asked the
board to create a committee to "review General Electric's operations in Iran,
with a particular reference to potential financial and reputational risks
incurred by the company by such operations." A report was similarly requested.
The Division rejected GE's argument that the proposal merely sought a request
for an evaluation on doing business in a single country and did not involve any
overriding social policy issue.
More recently in Yahoo! (16 April 2007), a proposed bylaw would create a
board-level Committee on Human Rights to review "implications of the company's
policies" with respect to human rights, both at home and abroad. Of particular
note, the Division rejected the company's argument that the "issue of how the
Company should respond or alter its services to comply with government
regulations ... is central to the Company's day-to-day business operations," and
the "issue is highly complex, and requires a detailed understanding of, among
other things, the Company's current and future business models and strategies,
available technology and the regulatory landscape" - matters on which
shareholders were said to be ill-equipped to judge. 2007 SEC No-Act. LEXIS 445
at *70-71.
The authorities cited by Toll involve situations that are not close to what we
have here and appear to rely primarily upon commentary in STAFF LEGAL BULLETIN
14C (2005), section D of which dealt with application of the "ordinary business"
exclusion to proposals to evaluate environmental and public health risks.
Passing the fact that this Bulletin does not address topics of the sort
presented here, the Division made it clear that the appearance of the word
"risk" in a resolution is not an automatic disqualifier.
The STAFF LEGAL BULLETIN thus cited as an example of a proposal that must be
included a request that ExxonMobil prepare a report "on the potential
environmental damage that would result from the company drilling for oil and gas
in protected areas" such as national parks. ExxonMobil Corp. (18 March 2005).
Choices about where and how to drill for oil are surely part of the day-to-day
decision making that takes place at an oil company such as ExxonMobil. Moreover,
the wrong choice may have not only serious environmental concerns, but also
economic consequences in terms of potential liability and loss of reputation.
Nonetheless the Division approved a proposal seeking a report on those issues.
Similarly, a home builder's choices about how to operate a financing affiliate
are at one level a part of the company's day-to-day activities. Nonetheless, the
wrong choice can have significant consequences not only for the company and its
shareholders, but also for home owners who find themselves faced with
foreclosure, for renters who may find themselves evicted from homes threatened
with foreclosure, for communities that face the risk of crime and economic
decline from foreclosures and a need to issue debt to deal with those threats,+
and for investors in this country and abroad who put their money into
collateralized debt obligations only to see the value plummet.
This situation is a far cry from proposals of the sort that Toll cites, which
deal with an insurance company (which is in the business of assessing risk)
being asked to evaluate risk in a certain area (American International Group,
Inc. (19 February 2004)), or a company asked to evaluate outsourcing (General
Electric Co. (13 January 2006) when the 1998 Release cited hiring issues as
covered by the exclusion.
For these reasons Toll's attempt to trivialize the Fund's proposal as merely a
request for a proposal on risk assessment badly underestimates the policy
significance of the proposal. Nor is there merit to Toll's alternative argument
that the proposal seeks to intrude into the Company's litigation strategy to the
extent that Toll may find itself in litigation.
Here again, in sharp distinction to the cases that Toll cites, the Division has
denied no-action relief when a proposal involves a clear policy issue, and when
adoption of the requested policy would have only a collateral effect on a
company's litigation strategy. Illustrative is Wal-Mart Stores, Inc. (17 March
2003), where the company opposed a resolution requesting a report on equal
employment opportunity data; the Division rejected Wal-Mart's argument that the
company was litigating a Title VII class action at the time, and disclosure of
the requested EEO data would interfere with Wal-Mart's litigation strategy.
Similarly, the resolution in Dow Chemical Co. (11 February 2004) sought a report
describing new initiatives to address specific health, environmental and social
concerns of Bhopal survivors, another undisputed policy issue. The Division
rejected Dow's complaint that the proposal should be excluded because it "went
to the very essence of the lawsuit that is currently pending" against Dow's
India subsidiary and because any "new" initiatives might be viewed as a
concession in the ongoing Bhopal-related litigation.
By contrast, relief under this theory has been granted as to resolutions that
try to micro-manage the filing or handling of specific suits against specific
individuals (e.g., NetCurrents, Inc. (8 May 2001), CMS Energy Corp. (15 January
2004)) or that ask a company to take action that would have a material impact on
a specific suit (e.g., Microsoft Corp. (15 September 2000) (asking Microsoft to
spin off part of its operations rather than contest an antitrust suit), R.J.
Reynolds Tobacco Holdings, Inc. (6 February 2004) (seeking end to use of
"light," "ultralight" or "mild" to describe cigarettes for the express reason of
reducing the company's liability in litigation). None of those situations
resembles the situation here.
For these reasons, Toll's reliance on Rule 14a-8(i)(7) should be rejected.
Allegedly Vague and Indefinite Statements.
Toll's next argument is that the Fund's proposal is impermissibly vague, thus
allowing exclusion under Rule 14a-8(i)(3), and is similarly beyond the power of
the board to effectuate, thus permitting exclusion under Rule 14a-8(i)(6). None
of the arguments withstands scrutiny, however.
Toll argues (at p. 6) that it is uncertain what the Fund's proposal means when
the proposal requests a "thorough review" of issues pertaining to Toll's
mortgage lending operations. This objection cannot be taken seriously and is not
supported by the no-action letters that Toll cites.
In the first place, if the Toll board of directors truly does not know how to
conduct a "thorough" review of an issue, then matters may be worse than
share-holders imagine. Moreover, it is difficult to identify a verbal
formulation that would suffer from less ambiguity than Toll perceives here. If
the proposal had simply sought a "review" of the situation, Toll would doubtless
claim that the proposal was impermissibly vague because the proposal failed
identify the level of scrutiny that directors should apply to the matter.
Similarly, if the proposal had sought a "comprehensive" or "exhaustive" review,
Toll would doubtless raise the same objection - and the Company fails to suggest
an adjective that would provide what Toll deems an acceptable level of clarity.
None of the letters that Toll cites have held that the phrase "thorough review"
is impermissibly vague or that a board of directors would be unable to conduct
such a review. We are not dealing with proposals involving an undefined standard
of liability such as "reckless neglect" (Peoples Energy Corp. (23 November
2004)) or that requires compliance with FASB standards when there are two ways
of achieving such compliance (Safescript Pharmacies, Inc. (27 February 2004)) or
that speaks of "human rights standards" without identifying clearly what such
standards might be (Alcoa Inc. (24 December 2002)).
Toll's second argument (at pp. 6-7) is that the proposal "does not provide any
indication as to what the requested report should contain," other than findings
and recommendations and progress made towards implementing any recommendations.
This objection is truly baffling. A request that a board of directors conduct a
"review" of a company's operations and report on what it finds inevitably
contemplates that the company will publish findings and recommendations. Toll
fails to identify what other categories of information might be contemplated.
The resolution here is sufficiently clear, with the supporting statement citing
concerns about how operations of a home builder's lending affiliate may have
contributed to the current housing and credit crisis by originating mortgages
that may help a home builder sell out a development, but where there are doubts
that the home buyers can repay the loan. Any "review" of a company's practices
would inevitably focus on the adequacy of corporate practices to assure that
conflicts of interest are adequately addressed. It is a straight-forward task to
report findings on that topics, recommendations as to what should be done, and
what progress has been made on those recommendations.
Toll's reliance on Rules 14a-8(i)(3) and (6) should therefore be rejected.
Conclusion.
For the foregoing reasons, Toll Brothers has failed to carry its burden of
justifying exclusion of the Fund's proposal, and we would ask the Division to
advise the Company that its request for no-action relief is denied.
Thank you for your consideration of these points. Please do not hesitate to
contact me if there is any further information that can be provided.
Very truly yours,
/s/
Cornish F. Hitchcock
cc: Darrick M. Mix, Esq.
Mr. Scott Zdrazil
-----FOOTNOTES-----
1 The proposed text amendment would have replaced the language then in subpart
(c)(5), which allowed companies to omit requests to act on "a matter relating to
the conduct of the ordinary business operations of the issuer," with a new
subpart (c)(7), which would permit the omission only of "routine, day to day matter[s] relating to the conduct of the ordinary business operations of the
issuer." See 41 Fed. Reg. at 29988, 29984.
2 See, e.g., Congress Takes Up Mortgages, WALL ST. JOURNAL at A7 (6 September
2007); Treasury Secretary Paulson Presses for Congress to Act on FHA Bill, WALL
ST. JOURNAL (14 September 2007); Bush Wants to Expand Mortgage Disclosures, WALL
ST., JOURNAL at D3 (20 September 2007); Housing Moss: Congress to the Rescue?,
WALL ST. JOURNAL at A9 (22 September 2007); Paulson Urges Congress to Act on
Loan Woes, WALL ST. JOURNAL at A2 (4 December 2007); Bush to Unveil Aid to
Homeowners, WALL ST. JOURNAL at A3 (5 December 2007); Henry M. Paulson, Jr., Our
Plan to Help Homeowners, WALL ST. JOURNAL at A17 (7 December 2007).
3 See Spreading the Misery, THE NEW YORK TIMES (29 November 2007) and Ohio to
Sell Bonds to Avert Home Foreclosures, BLOOMBERG NEWS (24 March 2007) (Exs. B
and C, attached hereto).
[INQUIRY LETTER]
13 December 2007
Office of the Chief Counsel
Division of Corporation Finance
Securities & Exchange Commission
100 F Street, NE
Washington, DC 20549
By courier and e-mail (cfletters@sec.gov)
Dear Counsel:
I write on behalf of Amalgamated Bank LongView MidCap 400 Index Fund (the
"Fund") to supplement my letter of the 10\th/, which answered the request for
no-action relief from counsel for Toll Brothers, Inc. dated 9 November 2007.
As an additional authority in support of its position, the Fund would cite the
recent determination in Beazer Homes USA, Inc. (30 November 2007). There the
Division denied no-action relief with respect to a proposal that requested a
report "evaluating the Company's potential losses or liabilities relating to its
mortgage operations and/or those of any affiliates or subsidiaries." The
Division rejected Beazer's arguments that this proposal could be excluded under
the "ordinary business" exclusion in Rule 14a-8(i)(7), upon which Toll relies
here.
In Beazer, as here, the proponent cited the current crises involving mortgage
lending, the credit crunch, and the significant loss of shareholder value among
homebuilders as factors that took the proposal out of the realm of "ordinary
business." The Fund submits that the Division should reach the same result here.
Thank you for your considcration of these points. Please do not hesitate to
contact me if there is any further information that can be provided.
Very truly yours,
/s/
Cornish F. Hitchcock
cc: Darrick M. Mix, Esq.
[STAFF REPLY LETTER]
December 20, 2007
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Toll Brothers, Inc. Incoming letter dated November 9, 2007
The proposal requests that the board establish a compliance committee, to be
composed of independent directors, that would conduct a thorough review of the
company's regulatory, litigation and compliance risks with respect to its
mortgage lending operations and would report to shareholders its findings and
recommendations, as well as the progress made towards implementing those
recommendations.
There appears to be some basis for your view that Toll Brothers may exclude the
proposal under rule 14a-8(i)(7), as relating to Toll Brothers' ordinary business
operations (i.e., evaluation of risk). Accordingly, we will not recommend
enforcement action to the Commission if Toll Brothers omits the proposal from
its proxy materials in reliance on rule 14a-8(i)(7). In reaching this position,
we have not found it necessary to address the alternative bases for omission
upon which Toll Brothers relies.
Sincerely,
/s/
Eduardo Aleman
Attorney-Adviser
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