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    Highlights of the ICANNWatch Archive
    (June 1999 - March 2001)

    This discussion has been archived. No new comments can be posted.
    Cavebear meets stonewall | Log in/Create an Account | Top | 36 comments | Search Discussion
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    Re: Cavebear meets stonewall
    by PMaggs (p-maggs @ uiuc . edu) on Thursday December 06 2001, @05:23AM (#3945)
    User #3061 Info
    The following quote is from a California case (45 Cal.Rptr.2d 1) about a different, but identically worded ("absolute right to inspect") section of the California Corporations Code:

    " Moreover, because the right of inspection under Corporations Code section 8334 has no exceptions, a director's motive for requesting an inspection is irrelevant. No reported decisions construe Corporations Code section 8334, but cases involving virtually identical provisions elsewhere in the Corporations Code conclude motive is irrelevant. For example, Valtz v. Penta Investment Corp. (1983) 139 Cal.App.3d 803, 188 Cal.Rptr. 922 concerned the "absolute right" under Corporations Code section 1600 of any shareholder with more than five percent of a company's stock to examine the shareholder list. The corporation contended a shareholder's inspection request was prompted by his desire to form a competing enterprise and refused the demand, asserting an unclean hands defense. (Id. at p. 806, 188 Cal.Rptr. 922.) Rejecting the argument, the Court of Appeal declared, "The California Legislature chose to allow inspection without any restriction based on the shareholder's purpose and we cannot impose such a restriction via the unclean hands doctrine." (Id. at p. 810, 188 Cal.Rptr. 922.)
    True, Valtz involved a shareholder rather than a director. But a director has a stronger case for unqualified inspection rights than a shareholder. A director is a fiduciary charged with running the corporation in an informed manner. (National Automobile and Cas. Ins. Co. v. Payne (1968) 261 Cal.App.2d 403, 412-413, 67 Cal.Rptr. 784.) Because a director, unlike a shareholder, is potentially liable for failure to exercise appropriate oversight, an unconditional right to inspect is essential. (Hoiles v. Superior Court (1984) 157 Cal.App.3d 1192, 1201, 204 Cal.Rptr. 111; see also 1A Ballantine & Sterling, Cal. Corporation Law (4th ed.1995) § 272.02 at p. 22 ["A director must be familiar with the affairs of the corporation in order to perform his duties and the absolute right of inspection is to assist him in performing (those) duties in an intelligent and fully informed manner."].)
    Also, in light of a director's potential exposure, the denial of unconditional access to corporate books and records constitutes poor policy: Well qualified individuals might decline to serve with something less than absolute inspection rights. (Cf. Gould v. American Hawaiian Steamship Co. (D.Del.1972) 351 F.Supp. 853, 859.) As this case illustrates, to allow defenses based on a director's alleged motive would in many cases result in the right to inspect being buried in litigation before it could ever be exercised, good motive or bad.
    Nor does a director's unfettered access to corporate books and records leave the corporation unprotected. Any number of tort theories may be used to redress a misuse of information gleaned via an improperly motivated inspection. (Hoiles v. Superior Court, supra, 157 Cal.App.3d at p.
    1201, 204 Cal.Rptr. 111.) Damages for misapplication of corporate information, rather than a threshold rejection of a director's inspection rights, is the appropriate remedy. [FN2] (Ibid.)
    45 Cal.Rptr.2d 1
    [ Reply to This | Parent ]

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