R.A. Feuer, Plaintiff-Appellant,
Merck & Co., Inc., Defendant-Respondent.
April 24, 2019
certification to the Superior Court, Appellate Division,
whose decision is reported at 455 N.J.Super. 69 (App. Div.
J. Rodriguez argued the cause for appellant (Schnader
Harrison Segal & Lewis, attorneys; Lisa J. Rodriguez, on
Gordon Cooney, Jr., of the Pennsylvania bar, admitted pro hac
vice, argued the cause for respondent (Morgan, Lewis &
Bockius, attorneys; J. Gordon Cooney, Jr., John McGahren,
Marc J. Sonnenfeld, of the Pennsylvania bar, admitted pro hac
vice, and Jason H. Wilson, on the brief).
appeal involves the scope of a shareholder's right to
inspect a corporation's records under N.J.S.A. 14A:5-28
and the common law.
R.A. Feuer, a Merck & Co., Inc. shareholder, 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.
board appointed a "Working Group" of three of its
members to evaluate Feuer's 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 . . . in the exercise of its business
judgment, has rejected all of your demands with respect to
submitted seventeen questions to the attorney. 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. Several months after that, in another letter to the
board, Feuer demanded the documents that lie at the heart of
this appeal. 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. After Feuer agreed to confidentiality
restrictions, the board released to him pertinent minutes of
the board and the Working Group. The board otherwise refused
filed a complaint alleging that he sought the documents for a
proper purpose and was entitled to inspect them under
N.J.S.A. 14A:5-28 and the common law. In lieu of an answer,
Merck filed a motion to dismiss, which the trial court
granted. The court held that Feuer had a "proper
purpose" under N.J.S.A. 14A:5-28 in seeking the
documents but that the documents Feuer sought fell outside
"books and records of account," and the common law
did not expand the statutory inspection right.
Appellate Division affirmed. 455 N.J.Super. 69, 90 (App. Div.
Appellate Division panel first considered Feuer's
contention that N.J.S.A. 14A:5-28(4) entitled him to the
documents that Merck withheld. See id. at 76-83.
panel noted that N.J.S.A. 14A:5-28(1) requires corporations
to maintain "books and records of account and minutes of
the proceedings of its shareholders, board and executive
committee, if any," and its record of shareholders.
N.J.S.A. 14A:5-28(3) entitles certain shareholders, upon a
showing of "any proper purpose," to the
"minutes of the proceedings of its shareholders"
and its "record of shareholders." Finally, N.J.S.A.
14A:5-28(4) -- rather than directly entitle any shareholder
to inspect documents --preserves the court's power to
grant inspection to shareholders, for a proper purpose, of
the "books and records of account, minutes and record of
shareholders of a corporation." That subsection then
authorizes the court to limit or condition such access.
panel observed that the plain language of subsection
four's first sentence authorizes inspection of a
significantly narrower universe of corporate records than
Feuer demanded. The meaning of the word "minutes"
is limited, and "books and records of account"
consist of accounting or financial documents. The panel
reasoned that if it were to expansively define the universe
of documents subject to inspection under subsection four, it
must do the same regarding the universe of documents that the
corporation is required to keep in the first place. Had the
Legislature intended "books and records of account"
in the first sentence to mean books and records and documents
generally, the panel reasoned, it would have said so, as it
did in the third sentence. Based on the wording and structure
of the statute, the panel also rejected Feuer's reliance
on the second sentence of subsection four, which confers
discretion on the court to limit an inspection "or award
any other or further relief". Finally, the panel found
that Feuer is not entitled to broad-ranging ...