Conservative Caucus Research Analysts & Education Foundation v. Chevron Corp.

Delaware Court of Chancery · Corporations

CorporationsStockholder inspection rightsStockholder listsProper purposeDGCL 220stockholder listproper purposeburden on corporation

Facts

The plaintiff, a non-profit corporation, was the registered owner of 30 shares of Chevron stock and on January 15, 1987 made a sworn demand for Chevron's stockholder list. It sought the list to communicate with other stockholders about alleged economic risks arising from Chevron's business operations in Angola, to support a proposed stockholder resolution concerning Angola, and to alert stockholders that Chevron might refuse to submit that resolution. The proposed resolution asked stockholders to request that Chevron's board take certain actions relating to Angola and potentially terminate operations there unless the Angolan government changed course politically. Chevron opposed the request, arguing that the plaintiff's purpose was improper, political, harassing, and unrelated to the plaintiff's interest as a stockholder.

Issue

Whether a stockholder who seeks Chevron's stockholder list to communicate with fellow stockholders about alleged economic risks of Chevron's Angola operations and a proposed annual-meeting resolution has a proper purpose under 8 Del. C. § 220. More specifically, the question was whether Chevron carried its statutory burden to prove that the plaintiff's stated purpose was improper.

Rule

Under 8 Del. C. § 220, a stockholder who makes a written demand under oath stating a purpose reasonably related to its interest as a stockholder may inspect a stockholder list for any proper purpose. Communication with other stockholders about specific matters of corporate concern, especially in connection with a pending stockholders' meeting, is a proper purpose. When the stockholder seeks the stock ledger or stockholder list and has complied with the statutory form and manner requirements, the burden is on the corporation to establish that the inspection is sought for an improper purpose. Once a proper purpose is stated, other purposes are irrelevant.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Maya Desai is the registered owner of 50 shares of Red Mesa Energy Holdings, a Delaware corporation headquartered in Houston. Before the annual meeting, she sends a written demand under oath for the stockholder list so she can mail other stockholders about alleged economic risks from the company’s drilling operations in northern Colombia, including possible sanctions, facility losses, and instability affecting profits.

If Red Mesa refuses and litigation follows, which argument most strongly supports Maya’s right to inspect the stockholder list?

Explanation. A stockholder list may be inspected for a purpose reasonably related to the requester’s interest as a stockholder. The majority held that communicating with other stockholders about specific matters of corporate concern, especially in connection with a pending stockholders’ meeting, is a proper purpose. Maya’s stated goal concerns alleged economic risks that could affect stock value, so that supports inspection. (Derived from Conservative Caucus Research Analysts & Education Foundation v. Chevron Corp. (n.d.).)