88 F.4th 103
2d Cir.2023Background
- Nuveen operates several closed-end investment funds whose shares trade on the market and can trade at discounts to NAV.
- Activist investor Saba accumulated concentrated stakes (≈9.9%–12%) in multiple Nuveen funds and intended to buy additional shares to pursue governance changes.
- In October 2020 Nuveen amended its bylaws (the "Control Share Amendment") to strip voting rights from any shares acquired that take a holder above certain thresholds (lowest trigger 10%) unless authorized by a shareholder vote.
- Saba sued under the Investment Company Act (ICA), arguing the amendment violated 15 U.S.C. § 80a-18(i) (one-share–one-vote/equal voting rights) and sought rescission and a declaratory judgment; the district court granted summary judgment for Saba and rescinded the amendment.
- On appeal Nuveen contended (1) Saba lacks Article III standing because any injury is speculative and not historically cognizable, and (2) the amendment is permissible because it restricts shareholders, not shares; the Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing (injury-in-fact: imminence) | Saba: has concrete, imminent intent and history of buying shares that would trigger the Amendment and was deterred from further purchases | Nuveen: injury speculative because it depends on future purchases and shareholder votes; no actual control-share acquisition has occurred | Court: Saba showed a pattern of purchases, specific intent, and automatic operation of the Amendment, so the injury is imminent and satisfies standing |
| Article III standing (injury-in-fact: concreteness) | Saba: deprivation of voting rights attached to shares is a concrete, property-analogous injury (conversion/trespass to chattels analogue) and Congress created a statutory right | Nuveen: no historical common-law analogue because vote restrictions were historically common; statutory violation alone insufficient | Court: Voting-rights impairment is concrete and has a close common-law analogue; Congress’s statutory protection is also instructive—standing satisfied |
| Scope of ICA § 18(i) (one-share–one-vote) | Saba: Amendment strips the shares themselves of present voting entitlement, violating § 80a-18(i) read with the definition of "voting security" (presently entitling owner to vote) | Nuveen: Amendment restricts shareholders not shares; courts have recognized a share/shareholder distinction; ICA policy favors limiting concentrated control | Court: Statutory text requires shares to be "voting" and to "presently entitle" their owners to vote; the Amendment operates on shares (automatically encumbering voting rights) and thus violates § 18(i); policy arguments do not override plain statutory language |
Key Cases Cited
- TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021) (explains historical-analogue test for concreteness and distinguishes statutory violations that do or do not produce concrete harms)
- Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) (concreteness requirement and role of history and tradition in Article III injury analysis)
- Clapper v. Amnesty Int'l USA, 568 U.S. 398 (2013) (standards for imminence and speculative chains of possibilities in standing cases)
- Susan B. Anthony List v. Driehaus, 573 U.S. 149 (2014) (permits pre-enforcement suits where threatened injury is certainly impending or presents substantial risk)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (requires more than bare intent; factual showing for imminent future injury)
- Carney v. Adams, 141 S. Ct. 493 (2020) (clarifies need for specific factual proof of plans when asserting future injury)
- Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020) (Article III standing elements summarized in the ICA context)
- Oxford Univ. Bank v. Lansuppe Feeder, LLC, 933 F.3d 99 (2d Cir. 2019) (recognizes private cause of action under the ICA for rescission)
- Providence & Worcester Co. v. Baker, 378 A.2d 121 (Del. 1977) (Delaware case recognizing a shareholder-vs-share distinction under state law; discussed and distinguished by the court)