R.A. FEUER, Plaintiff-Appellant,
MERCK & CO., INC., Defendant-Respondent.
December 4, 2017
appeal from the Superior Court of New Jersey, Chancery
Division, Union County, Docket No. C-000042-16.
J. Rodriguez argued the cause for appellant (Schnader
Harrison Segal & Lewis LLP, attorneys; Lisa J. Rodriguez,
on the briefs).
Gordon Cooney, Jr. (Morgan, Lewis & Bockius LLP) of the
Pennsylvania bar, admitted pro hac vice, argued the cause for
respondent (Morgan, Lewis & Bockius LLP, and J. Gordon
Cooney, Jr., attorneys; John McGahren, J. Gordon Cooney, Jr.,
Jason H. Wilson, and Marc J. Sonnenfeld (Morgan, Lewis &
Bockius LLP), of the Pennsylvania bar, admitted pro hac vice,
on the brief).
Judges Sabatino, Ostrer and Whipple.
appeal involves the scope of a shareholder's right to
inspect a corporation's records under N.J.S.A. 14A:5-2 8
and the common law. Plaintiff, a Merck & Co., Inc.
shareholder, appeals from the dismissal of his complaint
seeking various Merck corporate records. We conclude his
demand exceeds the scope of "books and records of
account, minutes, and record of shareholders, " which
the court was empowered to permit him to inspect under
N.J.S.A. 14A:5-28(4). Plaintiff also misreads a 1988
amendment to the statute, which allows a court to limit a
shareholder's inspection, rather than expand it as
plaintiff contends. Finally, plaintiff misplaces reliance on
the common law. We therefore affirm.
prelude to a threatened shareholder derivative action,
plaintiff R.A. Feuer, the owner of 288 shares of Merck stock,
sought the production of twelve broad categories of documents
from Merck. Feuer intended to search for evidence that Merck
acted wrongfully when it rejected his previous demand that
Merck's board of directors commence suit against itself
and senior management responsible for Merck's acquisition
of another pharmaceutical firm, Cubist Pharmaceuticals, Inc.
asserted the acquisition was ill-advised and reckless. He
alleged Merck proceeded with the transaction although it knew
certain Cubist patents were challenged, and it did not
reserve the right to cancel the acquisition if Cubist lost
the patent litigation. After a decision that invalidated some
Cubist patents, but before the Merck-Cubist transaction
closed, Feuer wrote to Merck's board, demanding it
reconsider or renegotiate the deal; and if it did not, then
to commence litigation against the board and responsible
managers and advisors, to recover the damages that Feuer
alleged Merck would suffer. Shortly after the transaction was
complete, Feuer said in a second letter the board
"should be held accountable to the Company for the
difference between what Merck will be paying for Cubist and
its current value . . . ."
response to Feuer's demands, the board appointed a
"Working Group" of three of its members to evaluate
his demand, retain counsel, conduct an investigation, and
recommend a response. Four months later, the Working
Group's counsel informed Feuer that "following a
thorough and good faith investigation, the Board of Directors
of Merck . . . in the exercise of its business judgment, has
rejected all of your demands with respect to the acquisition
of Cubist Pharmaceuticals, Inc."
submitted seventeen questions to the attorney, inquiring
about the criteria for selecting the Working Group, potential
conflicts, and its internal operations. Dissatisfied with the
lack of response, Feuer then wrote to the board to demand
that the board sue the Working Group's counsel and his
firm, alleging they aided and abetted the board's
"underlying wrongdoing" and were "proceeding
with an effort to 'whitewash it.'"
months after that, in another letter to the board, Feuer
demanded the documents that lie at the heart of this appeal.
He invoked his rights under N.J.S.A. 14A:5-28(4), but not the
common law. He described twelve categories of
"Merck's 'Books and Records'"
pertaining generally to the Working Group's activities,
communications, and formation; documents provided to the
board regarding Cubist and two of its drugs before
Merck's tender offer; and the board's consideration
of Feuer's Demands and the Working Group's
recommendations. Feuer demanded:
1. All documents requested and/or examined by the
"Working Group" and/or its counsel in connection
with Mr. Feuer's Demand Letters and/or the claims made
2. All documents that refer or relate to the selection of
counsel for the "Working Group."
3. All documents which refer or relate to internal
"conflict checks" made by any of the lawyers
considered for representation of the "Working
4. All documents that refer or relate to the selection of the
members of the "Working Group, " including any
investigation regarding bias, conflicts and/or any other
factors that might serve to disqualification [sic] of any
such person from serving.
5. All documents which refer or relate to the manner in which
interviews of witnesses by the "Working Group"
and/or its counsel would be taken (i.e. under oath, recorded,
6. All documents which refer or relate to the amount of time
each of the members of the "Working Group" expended
personally learning about and/or considering the claims made
in the Demand Letters.
7. All documents which refer or relate to communications
between or among any member of the "Working Group"
or its counsel with any Board member (other than Mr. Frazier)
regarding the Demand Letters and/or the claims set forth
8. All documents provided to the Board prior to the
commencement of the tender offer for Cubist shares regarding
Cubicin, Zerbaxa and Cubist generally.
9. All documents including emails and notes referring or
relating to communications between ML&B and any of the
counsel for the "Working Group."
10. All documents which refer or relate to the meeting of the
Board at which the demands made in the Demand Letters were
11. All documents which refer or relate to the amount of time
the Board spent to consider the demands made at such meeting.
12. All minutes of the Board and/or the "Working
Group" at which there was any discussion of the Demand
Letters and/or the demands made therein.
Feuer agreed to confidentiality restrictions, the board
released to him pertinent minutes of the board and the
Working Group. The board otherwise refused Feuer's
two-count complaint followed. Feuer alleged that he sought
the documents for a proper purpose, because his demand was
"reasonably related to his interests as a stockholder .
. . and his forthcoming commencement of a shareholder's
derivative suit on behalf of Merck." In count one, Feuer
sought documents responsive to his twelve demands pursuant to
N.J.S.A. 14A:5-28 and the common law. In count two, he sought
a declaratory judgment that Merck "wrongfully
rejected" his demands in his three letters, and
"that Merck and its Board, in failing to produce . . .
all the documents relating to the Board's investigation
and rejection of Plaintiff's Demands, have failed to, ...