State Ex Rel. Pillsbury v. Honeywell, Inc.
291 Minn. 322, 191 N.W.2d 406, 50 A.L.R. 3d 1046 (1971)
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Rule of Law:
A shareholder's right to inspect corporate records is limited to instances where the shareholder has a proper purpose germane to their economic interest in the corporation. A purpose motivated solely by social or political beliefs, without concern for investment return or the corporation's well-being, is not a proper purpose.
Facts:
- Petitioner learned that Honeywell, Inc. had a large government contract to produce anti-personnel fragmentation bombs for use in the Vietnam War.
- As a long-time opponent of the war, petitioner was shocked and decided he must stop Honeywell's munitions production.
- To gain a voice in the company's affairs, petitioner purchased one share of Honeywell stock in his own name.
- Petitioner admitted in a deposition that his sole purpose for buying the stock was to persuade Honeywell to cease producing munitions.
- After purchasing the stock, petitioner made two formal demands to Honeywell to inspect its shareholder ledger and all corporate records dealing with weapons and munitions manufacture.
- Honeywell refused both of petitioner's demands.
Procedural Posture:
- Petitioner filed a petition for a writ of mandamus in the district court (trial court) to compel Honeywell, Inc. to produce its shareholder ledgers and other corporate records.
- Honeywell answered the petition and took petitioner's deposition.
- The trial court held a hearing and considered the pleadings and petitioner's deposition.
- The trial court dismissed the petition, holding that the request was for an improper and indefinite purpose.
- Petitioner (appellant) appealed the dismissal to the Supreme Court of Minnesota, and Honeywell is the respondent.
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Issue:
Does a shareholder's motivation to change corporate policy for social and political reasons, absent any economic interest in the corporation, constitute a 'proper purpose' that entitles the shareholder to inspect corporate books and records?
Opinions:
Majority - Kelly, Justice.
No. A shareholder's desire to change corporate policy for purely social or political reasons does not constitute a proper purpose for inspecting corporate records. The court held that a proper purpose must be germane to the shareholder's economic interest, contemplating a concern with investment return. The court reasoned that the power to inspect corporate records is a powerful tool that could be weaponized to disrupt or destroy a company if not limited to those with a bona fide investment interest. Here, petitioner's own testimony revealed he had no interest in Honeywell's financial affairs and bought the stock solely to advance his political and social agenda. While a desire to solicit proxies to elect new directors is typically a proper purpose, it is insufficient here because the underlying motivation was not connected to any economic interest in the corporation.
Analysis:
This decision clarifies and narrows the 'proper purpose' doctrine for shareholder inspection rights by explicitly linking it to an economic motive. It establishes that courts can look beyond a shareholder's stated purpose (e.g., to solicit proxies) to their underlying motivation. The ruling serves as a significant protection for corporations against shareholder activism motivated purely by social or political agendas, preventing individuals from buying a nominal amount of stock simply to gain access to internal records for disruptive or non-investment-related campaigns. This precedent reinforces the view that corporate governance tools are intended to protect economic interests, not to serve as a forum for broader societal debates.
