Studebaker Corp. v. Gittlin

Supreme Court of New York, Special Term · 1966 · Corporations

CorporationsShareholder inspection rightsForeign corporationsinspection rightsshareholder listforeign corporationcommon lawBusiness Corporation Law section 1315

Facts

Richard D. Gittlin sought an order directing Studebaker Corporation, a foreign corporation licensed to do business in New York, to provide a shareholder list as of March 11, 1966. He had been a record stockholder only since February 29, 1966, so he did not meet section 1315's six-month record ownership requirement. Although he claimed written authorizations from holders of more than 5% of the outstanding common stock, a federal court order had enjoined him from using those authorizations in this proceeding until he complied with applicable SEC regulations. Gittlin therefore relied on the common-law right of inspection as an alternative basis for relief.

Issue

Whether a stockholder of a foreign corporation licensed to do business in New York may obtain inspection of the shareholder list under the common law when he does not satisfy the statutory qualifications of Business Corporation Law section 1315. More specifically, the question was whether section 1315 preserves or abolishes the common-law right to inspect records containing the names and holdings of shareholders.

Rule

Business Corporation Law section 1315 does not abolish or qualify the common-law right of a stockholder to inspect the shareholder list of a foreign corporation licensed to do business in New York. Under the common law, inspection may be compelled if the stockholder seeks it in good faith and for a proper purpose.

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

Nadia Flores, a New York resident, bought 800 shares of Lakefront Robotics Ltd., a Delaware corporation licensed to do business in New York, three weeks ago. She asks the company in Buffalo for the shareholder list so she can contact other shareholders about proposing changes to executive compensation at the next annual meeting, but she does not satisfy the six-month ownership requirement and has no written authorizations from 5% holders.

If Nadia petitions a New York court to compel production of the shareholder list, which is the best answer?

Explanation. The majority held that the statutory inspection right for shareholders of a foreign corporation licensed to do business in New York is not exclusive. Even if the shareholder does not meet the statute's six-month or 5% authorization requirements, the court may still compel production under the preserved common-law right if the request is made in good faith and for a proper purpose. The shareholder list is within the books and records subject to that common-law power.