The SEC’s stance on precatory proposals has deflated the ESG shareholder proposals this proxy season. This year saw proposals slow to new lows as the federal agency is granting default “no action” letters. However, some shareholders are fighting back in court, and they just won a victory in Massachusetts.
A group of shareholders submitted a proposal to BJ’s Wholesale. The proposal would require BJ’s to assess its risk exposure to deforestation in its supply chain. BJ’s, relying on the SEC’s new policy, refused to include the proposal in its proxy materials. Shareholders sued, and now a federal judge granted plaintiffs a preliminary injunction barring BJ’s Wholesale from finalizing their proxy materials without the plaintiff’s proposal. The New York State Comptroller, one of the Plaintiffs in the case, sums up the case in a press release:
“The company [BJ’s Wholesale], among other things, argued in court that shareholders as a whole have no right to legally challenge a corporation’s unilateral decision to preclude shareholder proposals and that even general proposals intrude on the company’s management prerogative. Following the SEC’s Nov. 17, 2025, announcement that its Division of Corporation Finance would stop substantively reviewing virtually all no-action requests from companies seeking to exclude shareholder proposals during the 2025–2026 proxy season, investors have been forced to seek relief in federal court
If the company had prevailed on its broad claim, coupled with the SEC’s policy, shareholders would have been left with no avenue to compel a company to bring important issues impacting investment value to vote at corporations’ annual meeting.”
In granting the preliminary injunction, the judge found that the plaintiffs had a likelihood of success based on the merits of their case. This is because shareholder rights are established by statute, not the SEC. While the SEC sets rules and enforces regulations, it doesn’t have an exclusive right of action on shareholder proposals. The court found that a private right of action exists for shareholders, regardless of whether it is enforced by the SEC. Ultimately, the preliminary injunction is a stopgap measure. It is not dispositive, and litigation is likely to be ongoing. However, it does bode well for investors, who may have to increasingly resort to private litigation.
Our members can learn more about ESG litigation here.
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