Crane Co. v. Anaconda Co.
39 N.Y.2d 14, 346 N.E.2d 507, 382 N.Y.S.2d 707 (1976)
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Rule of Law:
A shareholder's request to inspect a corporation's stock ledger for the purpose of communicating a tender offer to fellow shareholders constitutes a proper purpose related to the business of the corporation. The corporation bears the burden of proving that the inspection is sought for a purpose that is improper or inimical to the interests of the corporation or its stockholders.
Facts:
- In August 1975, Crane Company publicly announced an offer to exchange its debentures for up to 5 million shares of Anaconda Company's common stock.
- Anaconda's management actively opposed the offer, sending letters to its shareholders asserting the offer was not in their best interests.
- After its registration statement became effective, Crane, which owned no Anaconda stock at the time, requested Anaconda's shareholder list to communicate its offer, but Anaconda refused.
- Through its tender offer, Crane acquired approximately 2,350,000 Anaconda shares by December 11, 1975, making it Anaconda's largest stockholder.
- The next day, Crane, as a qualified stockholder, made a formal written demand to inspect the stock book, submitting an affidavit that its purpose was related to the business of Anaconda.
- Anaconda again rejected the demand but offered to mail Crane's prospectus to shareholders at Crane's expense, an offer Crane declined as it sought to communicate directly and selectively.
Procedural Posture:
- Crane Company commenced an article 78 proceeding in the New York Supreme Court, Special Term (the trial court of first instance), to compel Anaconda Company to produce its shareholder list for inspection.
- The Special Term found Crane's purpose to be improper and dismissed the petition.
- Crane Company, as appellant, appealed to the Appellate Division of the Supreme Court (an intermediate appellate court).
- The Appellate Division reversed the Special Term's decision, ordering Anaconda to produce the list.
- Anaconda Company, as appellant, appealed the reversal to the Court of Appeals of New York, the state's highest court.
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Issue:
Does a qualified shareholder have a right to inspect a corporation's shareholder list for the purpose of communicating a tender offer and soliciting stock tenders from fellow shareholders?
Opinions:
Majority - Wachtler, J.
Yes. A qualified stockholder may inspect the corporation’s stock register to ascertain the identity of fellow stockholders for the purpose of informing them directly of an exchange offer and soliciting tenders of stock. The right of inspection is based on the shareholder’s beneficial ownership of corporate assets and the right to protect that investment. Under New York's Business Corporation Law, a qualified shareholder is presumed to have a proper purpose, and the burden is on the corporation to prove otherwise. A tender offer has a potential substantial effect on the corporation's well-being and the value of its stock, which necessarily involves the business of the corporation. Therefore, a shareholder's desire to communicate with fellow shareholders about such an offer is a proper purpose. The court rejected Anaconda's argument that soliciting share sales is not a corporate purpose, noting that personal gain for the offeror and benefit to the corporation or its shareholders are not mutually exclusive.
Analysis:
This decision clarifies the scope of a "proper purpose" for shareholder list inspections under New York law, particularly in the context of a tender offer. It establishes that communicating a tender offer is a legitimate shareholder interest directly related to the corporation's business, as such offers significantly impact corporate control, direction, and share value. The ruling strengthens the position of corporate acquirers who become shareholders, providing them a crucial tool to bypass hostile management and communicate directly with the target's shareholders. This holding firmly places the burden on corporate management to demonstrate that the shareholder's purpose is genuinely harmful, rather than merely self-interested.
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