Company Name: Kellwood Co.
Public Availability Date: February 11, 2008
Document Sections: INQUIRY LETTER
APPENDIX 1
APPENDIX 2
APPENDIX 3
INQUIRY LETTER
APPENDIX 4
APPENDIX 5
APPENDIX 6
STAFF REPLY LETTER
[INQUIRY LETTER]
January 25, 2008
Ms. Nancy Morris
Office of the Secretary
Securities and Exchange Commission
Attn: Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE
Washington, D.C. 20549
Re: Kellwood Company 2008 Annual Meeting Shareowner Proposal Submitted by
CalPERS
Ladies and Gentlemen:
This letter is submitted on behalf of our client, Kellwood Company, a Delaware
corporation ("Kellwood"). Pursuant to Rule 14a-8(j) under the Securities and
Exchange Act of 1934, Kellwood hereby gives notice of its intention to omit from
its proxy statement and form of proxy for its 2008 Annual Meeting of Shareowners
(together, "Proxy Materials") a shareowner proposal and statements in support
thereof (the "Proposal") submitted by the California Public Employees'
Retirement System ("CalPERS").
This letter serves as Kellwood's statement of reasons why the CalPERS Proposal
may be excluded from its Proxy Materials. In accordance with Rule 14a-8(j),
enclosed are five additional copies of this letter with the attachment.
Kellwood intends to file its definitive Proxy Materials with the SEC on or after
April 17, 2008. It is our belief as counsel for Kellwood that the CalPERS
Proposal may be omitted from the Proxy Materials pursuant to Rule 14a-8(i)(8).
We request the concurrence of the Staff of the Division of Corporation Finance
(the "Staff") that the Staff will not recommend enforcement action against
Kellwood to the SEC, if Kellwood omits the Proposal from its Proxy Materials.
By copy of this letter, we respectfully inform CalPERS that copies of any
additional correspondence from CalPERS to the SEC or the Staff in connection
with this Proposal must be furnished simultaneously to the undersigned on behalf
of Kellwood pursuant to Rule 14a-8(k). Notwithstanding the issues in their
Proposal, Kellwood appreciates CalPERS' interest and is committed to continue
working with shareowners and other interested parties to build on the important
enhancements made in Kellwood's corporate governance policies and practices.
I. THE PROPOSAL
A copy of the CalPERS Proposal is attached hereto as Exhibit A.
The Proposal requests that shareowners adopt the following resolution to amend
the bylaws of Kellwood:
"RESOLVED, the shareowners of Kellwood Company (the "Company"), request that the
Board of Directors amend the Company's bylaws to add the following to Section
2.10(c):
Notwithstanding the above, the Corporation shall include in its proxy materials
for a meeting of stockholders at which directors are to be elected the name,
together with the Disclosure and Statement (both as defined in this section), of
any person nominated for election to the Board of Directors by a stockholder or
group of stockholders that satisfies the requirements of this section 2.10(c)
(the "Nominator"), and allow stockholders to vote with respect to such nominee
on the Corporation's form of proxy. Each Nominator may nominate up to two
candidates for election at a meeting.
To qualify as a Nominator, the stockholder or group of stockholders must:
(i) beneficially own 3% or more of the Corporation's outstanding common stock
("Required Shares") and have continuously held the Required Shares for at least
two years;
(ii) provide written notice received by the Secretary within the time period
specified in section 2.10(b) containing the following: (A) with respect to the
nominee, (1) the information required by section 2.10(c) and (2) such nominee's
consent to being named in the proxy statement and to serving as a director if
elected; and (B) with respect to the Nominator, proof of ownership of the
Required Shares (collectively, "Disclosure"); and
(iii) execute an undertaking agreeing to (A) assume all liability stemming from
any legal or regulatory violation arising out of the Nominator's communications
with the Corporation's stockholders, including the Disclosure and Statement; (B)
to the extent the Nominator uses soliciting materials other than the
Corporation's proxy materials, comply with all applicable laws and regulations,
including, without limitation, the SEC's Rule 14a-12.
The Nominator may furnish a statement, not to exceed 500 words, in support of
the nominee's candidacy (the "Statement") at the time the Disclosure is
submitted. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether notice of a nomination was timely given and whether the
Disclosure and Statement comply with this section and any applicable SEC rules.
II. KELLWOOD'S BASIS FOR EXCLUSION OF THE PROPOSAL
UNDER 14a-8(i)
It is our belief as counsel for Kellwood that the proposal may be omitted from
the Proxy Materials pursuant to Rule 14a-8(i)(8) based upon the plain language
of the Rule, the adopting release, the precedent, and the case law.
A. Plain Language. Rule 14a-8(i)(8) provides that an issuer may omit a proposal
from its proxy materials "[i]f the proposal relates to an election for
membership on the issuer's board of directors or analogous governing body or a
procedure for such nomination or election." The CalPERS Proposal clearly relates
to a procedure for an election for membership on the Kellwood board of
directors.
B. Adopting Release. In December 2007, the SEC amended Rule 14a-8(i)(8) to
include the phrase "or a procedure for such nomination or election." Exchange
Act Release No. 56914 (Dec. 6, 2007) (emphasis added) (the "Adopting Release").
The SEC explained that the expansion of the text of the rule was intended to
codify its longstanding interpretation that the 14a-8(i)(8) exclusion should
apply not only to a proposal that would create a current contested election, but
also to a proposal that would implement a procedure whereby a contested election
could occur in the future. Unless interpreted to include this type of procedural
proposal, shareholders could circumvent the proxy rules applicable to contested
elections.
By way of example, the Proposal includes a qualification for any Nominator (as
defined in the Proposal) to agree "to the extent the Nominator uses soliciting
materials other than the Corporation's proxy materials, comply with all
applicable laws and regulations, including, without limitation, the SEC's Rule
14a-12." However, the SEC emphasized in the Adopting Release that the "numerous
protections of the federal proxy rules are triggered only by the presence of a
solicitation made in opposition to another solicitation" (emphasis added) and if
the election exclusion were not available, it would be possible to have a
contested election that would not be subject to the proxy disclosure rules and
would escape 14a-9 liability for false or misleading statements.
The CalPERS Proposal relates to nothing other than a procedure that, if
implemented, would permit a contested election, since it would mandate that
Kellwood include more candidates than available board seats. The SEC has clearly
articulated the scope of the election exclusion available under Rule 14a-8(i)(8)
and the CalPERS Proposal is exactly the type of proposal intended to be covered
by the Rule.
C. Precedent. As set forth in the Adopting Release, the Staff has historically
and consistently determined that proposals, like the Proposal, may be excluded
under Rule 14a-8(i)(8) because said proposals establish procedures that may
result in contested director elections. Eastman Kodak Company (Feb. 14, 2005);
Eastman Kodak Company (Feb 28, 2003); AOL Time Warner, Inc. (Feb. 28, 2003); The
Bank of New York Inc. (Feb. 28, 2003); Exxon Mobil Corp. (Feb. 28, 2003); Sears,
Robuck & Co. (Feb. 28, 2003); Citigroup, Inc. (Jan. 31, 2003); and HealthSouth
Corp. (Mar. 10, 2003). In each of these precedents, similar proposals to the
CalPERS Proposal were found excludable by the SEC under Rule 14a-8(i)(8).
D. Case Law. In American Federation of State, County & Municipal Employees v.
American International Group, Inc., 462 F.3d 121 (2006) ("AFSCME"), the SEC
permitted the exclusion of a proposal that was substantially similar to the
CalPERS Proposal. The Second Circuit reached a result contrary to the SEC based
upon the court's finding that when the Rule 14a-8(i)(8) was initially adopted in
1976 the SEC applied a more narrow interpretation of the rule. Id. at 20-21.
However, in the conclusion of the court's interpretation, the court stated,
"Regardless, if the SEC determines that the interpretation of the election
exclusion embodied in its 1976 Statement would result in a decrease in necessary
disclosures or any other undesirable outcome, it can certainly change its
interpretation of the election exclusion, provided that it explains its reasons
for doing so." Id. at 23. Based upon this dicta and in light of the amended Rule
and Adopting Release, if the Second Circuit were to hear a case with the same
facts today, the court should uphold the exclusion of the AFSCME's shareholder
proposal. The proposal at issue in AFSCME was substantially similar to the
Proposal submitted to Kellwood by CalPERS. Therefore, the AFSCME decision
reinforces the applicability of the 14a-8(i)(8) to the CalPERS Proposal when
read together with the amended Rule and Adopting Release.
Subsequent to the AFSCME ruling, the Supreme Court heard an administrative rule
interpretation case, Long Island Care at Home, Ltd. v. Evelyn Coke, 127 S. Ct.
2339 (U.S. 2007). In Long Island, the Court upheld the Department of Labor's
(the "DOL") interpretation of its own regulation, despite finding that the DOL
had interpreted the regulations differently at different times because that the
change did not create an "unfair surprise." Id. at 24. The Court concluded that
the interpretation was "well within the principle that an agency's
interpretation of its own regulations is controlling unless plainly erroneous or
inconsistent with the regulations being interpreted." Id at 25 (Citing various
authority). The Long Island decision is at odds with AFSCME, is binding upon the
Second Circuit, effectively overrules the AFSCME decision, and upholds the
decision by the lower court in AFSCME that supported the SEC's determination not
to pursue action against AIG for the exclusion of the AFSCME proposal.
Therefore, even if the SEC had not come out with an amended Rule and Adopting
Release subsequent to AFSCME, there is substantial doubt whether the Second
Circuit's decision in AFSCME could be interpreted to prevent exclusion of the
CalPERS Proposal.
In the Adopting Release, the SEC acknowledged both the ASFCME and Long Island
cases and the confusion created for shareholders and companies. In the release,
the SEC emphasized, "It is our intention that this [clear and concise amendment
to the text of Rule 14a-8 that codifies the agency's longstanding
interpretation] will enable shareholders and companies to know with certainty
whether a proposal may or may not be excluded under Rule 14a-8(i)(8). It also
will facilitate the staff's efforts in reviewing no-action requests and in
interpreting Rule 14a-8 with certainty in responding to requests for no-action
letters during the 2008 proxy season." The CalPERS Proposal is clearly within
the Rule 14a-8(i)(8) plain text, adopting release, precedent and case law.
We therefore request that the Staff continue its long-standing precedent of
permitting exclusion of proposals such as these under Rule 14a-8(i)(8).
III. CONCLUSION
In view of the foregoing, it is our belief that Kellwood may rely upon Rule
14a-8(i)(8) to omit the CalPERS Proposal from the Proxy Materials. On behalf of
Kellwood, we request confirmation that the Staff will not recommend enforcement
action against Kellwood to the SEC, if Kellwood omits the Proposal from the
Proxy Materials.
As is required by Rule 14a-8(j), a copy of this letter is simultaneously being
sent to CalPERS to notify it of Kellwood's intention to omit the CalPERS
Proposal from Kellwood's Proxy Materials.
Please stamp the enclosed extra copy of this letter, acknowledging receipt, and
return it in the enclosed, postage prepaid, self-addressed envelope.
If we can be of any assistance in this matter, please call the undersigned at
(312) 984-7582, or Thomas H. Pollihan, General Counsel of Kellwood, at (314)
576-3312.
Very truly yours,
/s/
Robert A. Schreck, Jr., P.C.
RAS/jn
Enclosures
cc: Peter H. Mixon, General Counsel, CalPERS
Thomas H. Pollihan, Executive Vice President, General Counsel and Secretary,
Kellwood
[APPENDIX 1]
EXHIBIT A
CALPERS CORRESPONDENCE AND PROPOSAL
[attached]
December 20, 2007
Thomas H. Pollihan, Corporate Secretary
Kellwood Company
600 Kellwood Pkwy
Chesterfield, MO 63017
Re: Notice of Shareowner Proposal
Dear Mr. Pollihan:
The purpose of this letter is to submit our shareowner proposal for inclusion in
the proxy materials in connection with the company's next annual meeting
pursuant to SEC Rule 14a-8.1
Our submission of this proposal does not indicate that CalPERS is closed to
further communication and negotiation. Although we must file now, in order to
comply with the timing requirements of Rule 14a-8, we remain open to the
possibility of withdrawing this proposal if and when we become assured that our
concerns with the company are addressed.
If you have any questions concerning this proposal, please contact me.
Very truly yours,
/s/
PETER H. MIXON
General Counsel
Enclosures
cc: Dennis Johnson, Senior Portfolio Manager - CalPERS Robert C. Skinner Jr.,
Chairman & CEO - Kellwood Company
-----FOOTNOTES-----
1 CalPERS is the owner of approximately 305,000 shares of the company.
Acquisition of this stock has been ongoing and continuous for several years.
Specifically, CalPERS has owned shares with a market value in excess of $2,000
continuously for at least the preceding year. (Documentary evidence of such
ownership is enclosed.) Furthermore, CalPERS intends to continue to own such a
block of stock at least through the date of the annual shareholders' meeting.
[APPENDIX 2]
SHAREOWNER PROPOSAL
RESOLVED, the shareowners of Kellwood Company (the "Company"), request that the
Board of Directors amend the Company's bylaws to add the following to Section
2.10(c):
Notwithstanding the above, the Corporation shall include in its proxy materials
for a meeting of stockholders at which directors are to be elected the name,
together with the Disclosure and Statement (both as defined in this section), of
any person nominated for election to the Board of Directors by a stockholder or
group of stockholders that satisfies the requirements of this section 2.10(c)
(the "Nominator"), and allow stockholders to vote with respect to such nominee
on the Corporation's form of proxy. Each Nominator may nominate up to two
candidates for election at a meeting.
To qualify as a Nominator, the stockholder or group of stockholders must:
(i) beneficially own 3% or more of the Corporation's outstanding common stock
("Required Shares") and have continuously held the Required Shares for at least
two years;
(ii) provide written notice received by the Secretary within the time period
specified in section 2.10(b) containing the following: (A) with respect to the
nominee, (1) the information required by section 2.10(c) and (2) such nominee's
consent to being named in the proxy statement and to serving as a director if
elected; and (B) with respect to the Nominator, proof of ownership of the
Required Shares (collectively, "Disclosure"); and
(iii) execute an undertaking agreeing to (A) assume all liability stemming from
any legal or regulatory violation arising out of the Nominator's communications
with the Corporation's stockholders, including the Disclosure and Statement; (B)
to the extent the Nominator uses soliciting materials other than the
Corporation's proxy materials, comply with all applicable laws and regulations,
including, without limitation, the SEC's Rule 14a-12.
The Nominator may furnish a statement, not to exceed 500 words, in support of
the nominee's candidacy (the "Statement") at the time the Disclosure is
submitted. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether notice of a nomination was timely given and whether the
Disclosure and Statement comply with this section and any applicable SEC rules.
SUPPORTING STATEMENT
The Company's stock price has significantly underperformed in comparison to the
Russell 3000 and its industry peers. As of November 30, 2007, the Company'
five-year total stock return was -41%, its 3-year total stock return was -53%,
and its 1-year total stock return was -50%. Comparing the Company's relative
total stock return to the Russell 3000 Index and the Textiles Apparel
Manufacturers Russell Industry Peer Index, respectively, the Company's total
stock returns are, -121% and -141% (5-year), -88% and -78% (3-year) and - 57%
and -38% (1-year).
The Company's shareowners have also expressed their disapproval of the
composition of the Company's Board of Directors. Jerry Hunter received withhold
votes of 50.83% in 2005 and 48.92% in 2007.
For these reasons, CalPERS urges you to make the Company more accountable by
providing shareowners a meaningful voice in the election of the Board of
Directors.
Please vote FOR this proposal.
[APPENDIX 3]
December 20, 2007
To Whom It May Concern:
State Street Bank and Trust, as custodian for the California Public Employees'
Retirement System, declares the following under penalty of perjury:
1) State Street Bank and Trust performs master custodial services for the
California State Public Employees' Retirement System.
2) As of the date of this declaration and continuously for at least the
immediately preceding eighteen months, California Public Employees' Retirement
System is and has been the beneficial owner of shares of common stock of
Kellwood Company, having a market value in excess of $1,000,000.00.
3) Such shares beneficially owned by the California Public Employees' Retirement
System are custodied by State Street Bank and Trust through the electronic
book-entry services of the Depository Trust Company (DTC). State Street is a
participant (Participant Number 0997) of DTC and shares registered under
participant 0997 in the street name of Surfboard & Co. are beneficially owned by
the California Public Employees' Retirement System.
Signed this 20th day of December, 2007 at Sacramento, California.
STATE STREET BANK AND TRUST
As custodian for the California Public Employees'
Retirement System.
By: /s/
Name: Sauncerae Gans
Title: Client Relationship Officer
[INQUIRY LETTER]
January 25, 2008
Ms. Nancy Morris
Office of the Secretary
Securities and Exchange Commission
Attn: Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE
Washington, D.C. 20549
Re: Kellwood Company 2008 Annual Meeting Shareowner Proposal Submitted by
CalPERS
Ladies and Gentlemen:
This letter is submitted on behalf of our client, Kellwood Company, a Delaware
corporation ("Kellwood"). Pursuant to Rule 14a-8(j) under the Securities and
Exchange Act of 1934, Kellwood hereby gives notice of its intention to omit from
its proxy statement and form of proxy for its 2008 Annual Meeting of Shareowners
(together, "Proxy Materials") a shareowner proposal and statements in support
thereof (the "Proposal") submitted by the California Public Employees'
Retirement System ("CalPERS").
This letter serves as Kellwood's statement of reasons why the CalPERS Proposal
may be excluded from its Proxy Materials. In accordance with Rule 14a-8(j),
enclosed are five additional copies of this letter with the attachment.
Kellwood intends to file its definitive Proxy Materials with the SEC on or after
April 17, 2008. It is our belief as counsel for Kellwood that the CalPERS
Proposal may be omitted from the Proxy Materials pursuant to Rule 14a-8(i)(8).
We request the concurrence of the Staff of the Division of Corporation Finance
(the "Staff") that the Staff will not recommend enforcement action against
Kellwood to the SEC, if Kellwood omits the Proposal from its Proxy Materials.
By copy of this letter, we respectfully inform CalPERS that copies of any
additional correspondence from CalPERS to the SEC or the Staff in connection
with this Proposal must be furnished simultaneously to the undersigned on behalf
of Kellwood pursuant to Rule 14a-8(k). Notwithstanding the issues in their
Proposal, Kellwood appreciates CalPERS' interest and is committed to continue
working with shareowners and other interested parties to build on the important
enhancements made in Kellwood's corporate governance policies and practices.
I. THE PROPOSAL
A copy of the CalPERS Proposal is attached hereto as Exhibit A.
The Proposal requests that shareowners adopt the following resolution to amend
the bylaws of Kellwood:
"RESOLVED, the shareowners of Kellwood Company (the "Company"), request that the
Board of Directors amend the Company's bylaws to add the following to Section
2.10(c):
Notwithstanding the above, the Corporation shall include in its proxy materials
for a meeting of stockholders at which directors are to be elected the name,
together with the Disclosure and Statement (both as defined in this section), of
any person nominated for election to the Board of Directors by a stockholder or
group of stockholders that satisfies the requirements of this section 2.10(c)
(the "Nominator"), and allow stockholders to vote with respect to such nominee
on the Corporation's form of proxy. Each Nominator may nominate up to two
candidates for election at a meeting.
To qualify as a Nominator, the stockholder or group of stockholders must:
(i) beneficially own 3% or more of the Corporation's outstanding common stock
("Required Shares") and have continuously held the Required Shares for at least
two years;
(ii) provide written notice received by the Secretary within the time period
specified in section 2.10(b) containing the following: (A) with respect to the
nominee, (1) the information required by section 2.10(c) and (2) such nominee's
consent to being named in the proxy statement and to serving as a director if
elected; and (B) with respect to the Nominator, proof of ownership of the
Required Shares (collectively, "Disclosure"); and
(iii) execute an undertaking agreeing to (A) assume all liability stemming from
any legal or regulatory violation arising out of the Nominator's communications
with the Corporation's stockholders, including the Disclosure and Statement; (B)
to the extent the Nominator uses soliciting materials other than the
Corporation's proxy materials, comply with all applicable laws and regulations,
including, without limitation, the SEC's Rule 14a-12.
The Nominator may furnish a statement, not to exceed 500 words, in support of
the nominee's candidacy (the "Statement") at the time the Disclosure is
submitted. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether notice of a nomination was timely given and whether the
Disclosure and Statement comply with this section and any applicable SEC rules.
II. KELLWOOD'S BASIS FOR EXCLUSION OF THE PROPOSAL UNDER 14a-8(i)
It is our belief as counsel for Kellwood that the proposal may be omitted from
the Proxy Materials pursuant to Rule 14a-8(i)(8) based upon the plain language
of the Rule, the adopting release, the precedent, and the case law.
A. Plain Language. Rule 14a-8(i)(8) provides that an issuer may omit a proposal
from its proxy materials "[i]f the proposal relates to an election for
membership on the issuer's board of directors or analogous governing body or a
procedure for such nomination or election." The CalPERS Proposal clearly relates
to a procedure for an election for membership on the Kellwood board of
directors.
B. Adopting Release. In December 2007, the SEC amended Rule 14a-8(i)(8) to
include the phrase "or a procedure for such nomination or election." Exchange
Act Release No. 56914 (Dec. 6, 2007) (emphasis added) (the "Adopting Release").
The SEC explained that the expansion of the text of the rule was intended to
codify its longstanding interpretation that the 14a-8(i)(8) exclusion should
apply not only to a proposal that would create a current contested election, but
also to a proposal that would implement a procedure whereby a contested election
could occur in the future. Unless interpreted to include this type of procedural
proposal, shareholders could circumvent the proxy rules applicable to contested
elections.
By way of example, the Proposal includes a qualification for any Nominator (as
defined in the Proposal) to agree "to the extent the Nominator uses soliciting
materials other than the Corporation's proxy materials, comply with all
applicable laws and regulations, including, without limitation, the SEC's Rule
14a-12." However, the SEC emphasized in the Adopting Release that the "numerous
protections of the federal proxy rules are triggered only by the presence of a
solicitation made in opposition to another solicitation" (emphasis added) and if
the election exclusion were not available, it would be possible to have a
contested election that would not be subject to the proxy disclosure rules and
would escape 14a-9 liability for false or misleading statements.
The CalPERS Proposal relates to nothing other than a procedure that, if
implemented, would permit a contested election, since it would mandate that
Kellwood include more candidates than available board seats. The SEC has clearly
articulated the scope of the election exclusion available under Rule 14a-8(i)(8)
and the CalPERS Proposal is exactly the type of proposal intended to be covered
by the Rule.
C. Precedent. As set forth in the Adopting Release, the Staff has historically
and consistently determined that proposals, like the Proposal, may be excluded
under Rule 14a-8(i)(8) because said proposals establish procedures that may
result in contested director elections. Eastman Kodak Company (Feb. 14, 2005);
Eastman Kodak Company (Feb 28, 2003); AOL Time Warner, Inc. (Feb. 28, 2003); The
Bank of New York Inc. (Feb. 28, 2003); Exxon Mobil Corp. (Feb. 28, 2003); Sears,
Robuck & Co. (Feb. 28, 2003); Citigroup, Inc. (Jan. 31, 2003); and HealthSouth
Corp. (Mar. 10, 2003). In each of these precedents, similar proposals to the
CalPERS Proposal were found excludable by the SEC under Rule 14a-8(i)(8).
D. Case Law. In American Federation of State, County & Municipal Employees v.
American International Group, Inc., 462 F.3d 121 (2006) ("AFSCME"), the SEC
permitted the exclusion of a proposal that was substantially similar to the
CalPERS Proposal. The Second Circuit reached a result contrary to the SEC based
upon the court's finding that when the Rule 14a-8(i)(8) was initially adopted in
1976 the SEC applied a more narrow interpretation of the rule. Id. at 20-21.
However, in the conclusion of the court's interpretation, the court stated,
"Regardless, if the SEC determines that the interpretation of the election
exclusion embodied in its 1976 Statement would result in a decrease in necessary
disclosures or any other undesirable outcome, it can certainly change its
interpretation of the election exclusion, provided that it explains its reasons
for doing so." Id. at 23. Based upon this dicta and in light of the amended Rule
and Adopting Release, if the Second Circuit were to hear a case with the same
facts today, the court should uphold the exclusion of the AFSCME's shareholder
proposal. The proposal at issue in AFSCME was substantially similar to the
Proposal submitted to Kellwood by CalPERS. Therefore, the AFSCME decision
reinforces the applicability of the 14a-8(i)(8) to the CalPERS Proposal when
read together with the amended Rule and Adopting Release.
Subsequent to the AFSCME ruling, the Supreme Court heard an administrative rule
interpretation case, Long Island Care at Home, Ltd. v. Evelyn Coke, 127 S. Ct.
2339 (U.S. 2007). In Long Island, the Court upheld the Department of Labor's
(the "DOL") interpretation of its own regulation, despite finding that the DOL
had interpreted the regulations differently at different times because that the
change did not create an "unfair surprise." Id. at 24. The Court concluded that
the interpretation was "well within the principle that an agency's
interpretation of its own regulations is controlling unless plainly erroneous or
inconsistent with the regulations being interpreted." Id at 25 (Citing various
authority). The Long Island decision is at odds with AFSCME, is binding upon the
Second Circuit, effectively overrules the AFSCME decision, and upholds the
decision by the lower court in AFSCME that supported the SEC's determination not
to pursue action against AIG for the exclusion of the AFSCME proposal.
Therefore, even if the SEC had not come out with an amended Rule and Adopting
Release subsequent to AFSCME, there is substantial doubt whether the Second
Circuit's decision in AFSCME could be interpreted to prevent exclusion of the
CalPERS Proposal.
In the Adopting Release, the SEC acknowledged both the ASFCME and Long Island
cases and the confusion created for shareholders and companies. In the release,
the SEC emphasized, "It is our intention that this [clear and concise amendment
to the text of Rule 14a-8 that codifies the agency's longstanding
interpretation] will enable shareholders and companies to know with certainty
whether a proposal may or may not be excluded under Rule 14a-8(i)(8). It also
will facilitate the staff's efforts in reviewing no-action requests and in
interpreting Rule 14a-8 with certainty in responding to requests for no-action
letters during the 2008 proxy season." The CalPERS Proposal is clearly within
the Rule 14a-8(i)(8) plain text, adopting release, precedent and case law.
We therefore request that the Staff continue its long-standing precedent of
permitting exclusion of proposals such as these under Rule 14a-8(i)(8).
III. CONCLUSION
In view of the foregoing, it is our belief that Kellwood may rely upon Rule
14a-8(i)(8) to omit the CalPERS Proposal from the Proxy Materials. On behalf of
Kellwood, we request confirmation that the Staff will not recommend enforcement
action against Kellwood to the SEC, if Kellwood omits the Proposal from the
Proxy Materials.
As is required by Rule 14a-8(j), a copy of this letter is simultaneously being
sent to CalPERS to notify it of Kellwood's intention to omit the CalPERS
Proposal from Kellwood's Proxy Materials.
Please stamp the enclosed extra copy of this letter, acknowledging receipt, and
return it in the enclosed, postage prepaid, self-addressed envelope.
If we can be of any assistance in this matter, please call the undersigned at
(312) 984-7582, or Thomas H. Pollihan, General Counsel of Kellwood, at (314)
576-3312.
Very truly yours,
/s/
Robert A. Schreck, Jr., P.C.
RAS/jn
Enclosures
cc: Peter H. Mixon, General Counsel, CalPERS
Thomas H. Pollihan, Executive Vice President, General Counsel and Secretary,
Kellwood
[APPENDIX 4]
EXHIBIT A
CALPERS CORRESPONDENCE AND PROPOSAL
[attached]
December 20, 2007
Thomas H. Pollihan, Corporate Secretary
Kellwood Company
600 Kellwood Pkwy
Chesterfield, MO 63017
Re: Notice of Shareowner Proposal
Dear Mr. Pollihan:
The purpose of this letter is to submit our shareowner proposal for inclusion in
the proxy materials in connection with the company's next annual meeting
pursuant to SEC Rule 14a-8.1
Our submission of this proposal does not indicate that CalPERS is closed to
further communication and negotiation. Although we must file now, in order to
comply with the timing requirements of Rule 14a-8, we remain open to the
possibility of withdrawing this proposal if and when we become assured that our
concerns with the company are addressed.
If you have any questions concerning this proposal, please contact me.
Very truly yours,
/s/
PETER H. MIXON
General Counsel
Enclosures
cc: Dennis Johnson, Senior Portfolio ManagerCalPERS Robert C. Skinner Jr.,
Chairman & CEOKellwood Company
-----FOOTNOTES-----
1 CalPERS is the owner of approximately 305,000 shares of the company.
Acquisition of this stock has been ongoing and continuous for several years.
Specifically, CalPERS has owned shares with a market value in excess of $2,000
continuously for at least the preceding year. (Documentary evidence of such
ownership is enclosed.) Furthermore, CalPERS intends to continue to own such a
block of stock at least through the date of the annual shareholders' meeting.
[APPENDIX 5]
SHAREOWNER PROPOSAL
RESOLVED, the shareowners of Kellwood Company (the "Company"), request that the
Board of Directors amend the Company's bylaws to add the following to Section
2.10(c):
Notwithstanding the above, the Corporation shall include in its proxy materials
for a meeting of stockholders at which directors are to be elected the name,
together with the Disclosure and Statement (both as defined in this section), of
any person nominated for election to the Board of Directors by a stockholder or
group of stockholders that satisfies the requirements of this section 2.10(c)
(the "Nominator"), and allow stockholders to vote with respect to such nominee
on the Corporation's form of proxy. Each Nominator may nominate up to two
candidates for election at a meeting.
To qualify as a Nominator, the stockholder or group of stockholders must:
(i) beneficially own 3% or more of the Corporation's outstanding common stock
("Required Shares") and have continuously held the Required Shares for at least
two years;
(ii) provide written notice received by the Secretary within the time period
specified in section 2.10(b) containing the following: (A) with respect to the
nominee, (1) the information required by section 2.10(c) and (2) such nominee's
consent to being named in the proxy statement and to serving as a director if
elected; and (B) with respect to the Nominator, proof of ownership of the
Required Shares (collectively, "Disclosure"); and
(iii) execute an undertaking agreeing to (A) assume all liability stemming from
any legal or regulatory violation arising out of the Nominator's communications
with the Corporation's stockholders, including the Disclosure and Statement; (B)
to the extent the Nominator uses soliciting materials other than the
Corporation's proxy materials, comply with all applicable laws and regulations,
including, without limitation, the SEC's Rule 14a-12.
The Nominator may furnish a statement, not to exceed 500 words, in support of
the nominee's candidacy (the "Statement") at the time the Disclosure is
submitted. The Board of Directors shall adopt a procedure for timely resolving
disputes over whether notice of a nomination was timely given and whether the
Disclosure and Statement comply with this section and any applicable SEC rules.
SUPPORTING STATEMENT
The Company's stock price has significantly underperformed in comparison to the
Russell 3000 and its industry peers. As of November 30, 2007, the Company'
five-year total stock return was -41%, its 3-year total stock return was -53%,
and its 1-year total stock return was -50%. Comparing the Company's relative
total stock return to the Russell 3000 Index and the Textiles Apparel
Manufacturers Russell Industry Peer Index, respectively, the Company's total
stock returns are, -121% and -141% (5-year), -88% and -78% (3-year) and -57% and
-38% (1-year).
The Company's shareowners have also expressed their disapproval of the
composition of the Company's Board of Directors. Jerry Hunter received withhold
votes of 50.83% in 2005 and 48.92% in 2007.
For these reasons, CalPERS urges you to make the Company more accountable by
providing shareowners a meaningful voice in the election of the Board of
Directors.
Please vote FOR this proposal.
[APPENDIX 6]
December 20, 2007
To Whom It May Concern:
State Street Bank and Trust, as custodian for the California Public Employees'
Retirement System, declares the following under penalty of perjury:
1) State Street Bank and Trust performs master custodial services for the
California State Public Employees' Retirement System.
2) As of the date of this declaration and continuously for at least the
immediately preceding eighteen months, California Public Employees' Retirement
System is and has been the beneficial owner of shares of common stock of
Kellwood Company, having a market value in excess of $1,000,000.00.
3) Such shares beneficially owned by the California Public Employees' Retirement
System are custodied by State Street Bank and Trust through the electronic
book-entry services of the Depository Trust Company (DTC). State Street is a
participant (Participant Number 0997) of DTC and shares registered under
participant 0997 in the street name of Surfboard & Co. are beneficially owned by
the California Public Employees' Retirement System.
Signed this 20th day of December, 2007 at Sacramento, California.
STATE STREET BANK AND TRUST
As custodian for the California Public Employees' Retirement System.
By: /s/
Name: Sauncerae Gans
Title: Client Relationship Officer
[STAFF REPLY LETTER]
February 11, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Kellwood Company Incoming letter dated January 25, 2008.
The proposal amends the bylaws to require that
Kellwood include in its proxy materials the name, along with certain disclosures
and statements, of any person nominated for election to the board by a
stockholder who has beneficially owned 3% or more of Kellwood's outstanding
common stock for at least two years.
There appears to be some basis for your view that Kellwood may exclude the
proposal under rule 14a-8(i)(8). Accordingly, we will not recommend enforcement
action to the Commission if Kellwood omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(8).
Sincerely,
/s/
John R. Fieldsend
Attorney-Adviser
|
