Limiting the “Capable-of-Repetition-Yet-Evading-Review” Exception in SEC No-Action Letter Appeals

Introduction

This case arises from a dispute between the National Center for Public Policy Research (“NCPPR”) and the Securities and Exchange Commission (“SEC”) over the SEC staff’s refusal to recommend enforcement action against Kroger Company’s decision to exclude a shareholder proxy proposal. NCPPR, a Kroger shareholder, sought to include a proxy statement asking Kroger to report on the risks of omitting “viewpoint” and “ideology” from its equal employment-opportunity policy. The SEC staff issued a no-action letter agreeing that the proposal was excludable under the “ordinary business” exception to Rule 14a-8. NCPPR appealed directly to the Fifth Circuit, alleging viewpoint discrimination. After Kroger ultimately included the proposal in its 2023 proxy materials (where it failed to secure a majority vote), the SEC moved to dismiss the appeal as moot. The Fifth Circuit granted dismissal, holding that NCPPR’s claim was moot and did not satisfy the “capable-of-repetition-yet-evading-review” exception to Article III mootness.

Summary of the Judgment

Per curiam, the Fifth Circuit withdrew its prior opinion and substituted the following holding:

The case is moot because Kroger included the challenged proposal in its 2023 proxy materials and submitted it to a shareholder vote (where it garnered less than 2% support).
Under Article III, a case becomes moot when the issues are no longer “live” or the parties lack a legally cognizable interest.
NCPPR invoked the “capable-of-repetition-yet-evading-review” exception, but failed to show a reasonable expectation that the same controversy would recur under the same circumstances.
The Supreme Court’s decision in SEC v. Medical Committee for Human Rights (404 U.S. 403 (1972)) governed: a mere possibility that Kroger or another issuer would again exclude the proposal is too speculative.
The SEC’s motion to dismiss for lack of jurisdiction was granted, and the appeal was dismissed as moot.

Analysis

Precedents Cited

Fontenot v. McCraw, 777 F.3d 741 (5th Cir. 2015) – General Article III mootness standard.
Already, LLC v. Nike, Inc., 568 U.S. 85 (2013) – Definition of “live” case or controversy.
Empower Texans, Inc. v. Geren, 977 F.3d 367 (5th Cir. 2020) – Two-pronged “capable-of-repetition” test.
Yarls v. Bunton, 905 F.3d 905 (5th Cir. 2018) – Restatement of the exception’s two elements.
Turner v. Rogers, 564 U.S. 431 (2011) – Same two-pronged framework.
Libertarian Party v. Dardenne, 595 F.3d 215 (5th Cir. 2010) – Requirement of “demonstrated probability” or “reasonable expectation.”
SEC v. Medical Committee for Human Rights, 404 U.S. 403 (1972) – Mootness in proxy-statement litigation.
Lopez v. City of Houston, 617 F.3d 336 (5th Cir. 2010) – Speculation is insufficient to avoid mootness.
Mancusi v. Stubbs, 408 U.S. 204 (1972) – Ancillary relief dissolves controversy.
Spencer v. Kemna, 523 U.S. 1 (1998) – No comment on past actions without continuing effect.

Legal Reasoning

The court’s opinion turned on Article III’s case-or-controversy requirement and the doctrine of mootness. NCPPR’s appeal became moot when Kroger included its proposal in publicly distributed proxy materials and subjected it to a shareholder vote. The remaining question was whether the “capable-of-repetition-yet-evading-review” exception applied:

Duration Too Short to Litigate: Although the panel did not expressly decide this prong, it recognized that proxy cycles move quickly—no-action letters are typically issued a month before distribution—and full appellate review in that window is infeasible.
Reasonable Expectation of Recurrence: NCPPR contended it would re-submit the proposal to Kroger or other companies and face the same no-action treatment. The court found this too speculative:
- Kroger’s inclusion and failure of the proposal in 2023 independently triggers a three-year exclusion under Rule 14a-8(i)(12).
- Predicting future companies’ decisions and SEC staff positions involves a chain of contingencies—companies may include, amend or withdraw proposals; SEC staff may change its view.
- Under Medical Committee, “meager support” and evolving company practices preclude a reasonable expectation of recurrence.

Because NCPPR failed to satisfy the second element, the court held the mootness exception inapplicable and dismissed the appeal for lack of jurisdiction.

Impact

This decision reinforces and limits the “capable-of-repetition-yet-evading-review” exception in two ways:

It underscores that the exception demands a concrete, fact-specific showing of a recurrent, short-lived controversy, not abstract possibilities.
It signals to shareholder proponents that obtaining interim relief from the SEC (via no-action letters) may not withstand mootness challenges if the company later includes the proposal—even if only to defeat it at the ballot box.

Future litigants will need to marshal evidence that proposals will be excluded under virtually identical circumstances, and that SEC treatment will not vary, to avoid dismissal as moot.

Complex Concepts Simplified

Case or Controversy (Article III): Federal courts can only decide ongoing disputes where parties have “live” interests.
Mootness: If an event occurs that resolves the dispute, leaving no practical relief to grant, the case is moot and must be dismissed.
Capable-of-Repetition-Yet-Evading-Review: A narrow exception allowing review of issues that recur so quickly they never survive the appellate process—but only when recurrence is reasonably likely and the dispute is too short to litigate fully.
No-Action Letters: Informal SEC staff responses stating they will not recommend enforcement if a company excludes a shareholder proposal. Though “informal,” they guide corporate behavior and may carry precedential weight.
Rule 14a-8 Ordinary Business Exclusion: Allows companies to omit shareholder proposals that concern routine business matters, with thirteen enumerated exceptions (e.g., deadlines, resubmissions, ordinary business).

Conclusion

By dismissing NCPPR’s appeal as moot, the Fifth Circuit reaffirmed the stringent requirements of Article III’s mootness doctrine and sharply narrowed the “capable-of-repetition-yet-evading-review” exception in the context of proxy-statement litigation. Parties seeking to challenge SEC no-action letters must now demonstrate not only that a corporate issuer will exclude their proposal again, but that the entire sequence of events—company decision, SEC staff response and procedural timing—will repeat under essentially identical facts. This decision clarifies that speculative or theoretical possibilities will not overcome mootness, thereby limiting judicial review of interim SEC staff actions in the fast-moving proxy season.