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CA, Inc. (plaintiff) was a Delaware corporation with a 12-person board of directors subject to annual reelection. AFSCME Employees Pension Plan (defendant) was a CA shareholder. AFSCME proposed a bylaw that would require CA to reimburse its shareholders for the costs associated with holding a contested election of its board of directors. CA's bylaws and certificate of incorporation did not address the reimbursement of proxy expenses, but the certificate of incorporation provided generally that the board of directors was responsible for the management of CA's business and the conduct of the corporation's affairs. Thus, the decision whether to reimburse election expenses was vested in the board of directors, subject to Delaware law and the directors' fiduciary duties. CA notified the Securities and Exchange Commission (SEC) of its intent to exclude AFSCME's bylaw proposal from its proxy materials and requested a no-action letter from the SEC ensuring that the SEC would not take any enforcement action if CA excluded the proposal. AFSCME opposed CA's no-action request. The SEC then certified the matter to the Delaware Supreme Court to determine (1) if the bylaw was appropriate for stockholder action without agreement by the board and (2) whether adopting the bylaw would cause CA to violate Delaware law.
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