Loew's Theatres, Inc. v. Commercial Credit Company

Delaware Court of Chancery · 1968 · Corporations

243 A.2d 78 (1968)

Updated August 22, 2026

CorporationsStockholder inspection rightsForeign corporation capacity to sueCharter limits on statutory rights8 Del. C. § 220inspection rightsstockholder listproper purpose

Facts

Loew's, a New York corporation, held of record 100 shares of Commercial Credit common stock and claimed beneficial ownership of 1,000,700 shares out of about 10,533,628 outstanding shares. After Commercial Credit refused Loew's written demand to inspect its stock ledger and stockholder list, Loew's brought this action under 8 Del. C. § 220. Commercial Credit did not claim that Loew's purpose was improper, but argued that Loew's lacked capacity to sue because it was doing business in Delaware without qualification, that Commercial Credit's charter limited inspection to holders of 25% of a class, and that SEC approval had not yet been obtained for Loew's planned communication with stockholders. Loew's submitted an affidavit stating it did no business in Delaware directly and that a Delaware theater was owned and operated by its wholly owned subsidiary, not by Loew's itself.

Issue

Whether a stockholder that made a demand under 8 Del. C. § 220 was entitled to inspect Commercial Credit's stockholder list and stock ledger when the corporation did not allege an improper purpose but asserted that the stockholder lacked capacity to sue, was barred by a charter provision requiring 25% ownership, and had not yet obtained SEC approval for its planned communication. The court also addressed whether portions of Loew's supporting affidavit could be considered despite mixing facts with advocacy.

Rule

A court may disregard inadmissible portions of an affidavit and consider severable portions that comply with Rule 56(e). Under 8 Del. C. § 220, any stockholder who seeks a stockholder list for a purpose germane to stockholder status, such as proxy solicitation, is entitled to production unless the corporation proves an improper purpose. A charter provision that attempts to waive or restrict this statutory inspection right is void, and extraneous matters such as SEC approval issues are irrelevant in an action to compel inspection.

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

Mira Patel owns 50 shares of Bay Harbor Finance, a Delaware corporation headquartered in Chicago. She makes a sworn written demand to inspect the stockholder list so she can solicit proxies for a proposed change in the board, and the corporation refuses without claiming her purpose is improper.

If Mira files an action to compel inspection, which result is most likely?

Explanation. Under the majority opinion, once a stockholder establishes stockholder status and seeks a stockholder list for a purpose germane to that status, such as proxy solicitation, the stockholder is entitled to production unless the corporation proves an improper purpose. The statute contemplates prompt, summary relief.