State ex Rel. Pillsbury v. Honeywell Inc.

1- Parties' Names:
Petitioner: Sate ex Rel. Pullsbury
Respondent: Honeywell Inc.
2- Facts:
Petitioner, Sata ex. Rel. Pullsbury had great interested stopping the production of anti-personnel
fragmentation bombs produced by Honeywell and used during the war in Vietnam. To that end,
he purchased 100 shares of Honeywell Inc. and requested from the board the list of shareholders
to solicit proxies for the election of a new board of directors for the sole purpose of halting the
production process. When the board refused, he brought a writ of Mandamus. The court denied
relief and the plaintiff appealed.
3- Plaintiff's claim and reasoning:
Plaintiff argues that as a shareholder he is entitled to inspect for proper purpose germane
the business' list of shareholders. He asserts that shareholders who disagree with management have
the absolute right to inspect the corporate records for the purpose of soliciting proxies.
4- Defendant's claim and reasoning:
Defendant argues that shareholders have the right to inspect corporate records for a proper
purpose. Defendant asserts that investment return is a proper purpose whereas Plaintiff's reasons
behind the inspection do not serve the proper purpose clause.
5- Court's reasoning:
The court affirms Honeywell's argument claiming that the stockholder is entitled to inspect
the corporate records for a proper cause, where return on investment and other financial purposes
are deemed to fit this clause. Furthermore, it states that although in previous cases courts asserted
that the mere desire to communicate to other shareholders may be deemed as "proper purpose",
the court sees otherwise. Based on the belief that the inspection of corporate records holds a huge
power that may destroy the firm if abused, the court suggests a better rule by looking at the real
purpose and intentions behind said communication. As such, the court argues that only those with
true genuine interest and proper standing in the corporation should enjoy and exercise such power.

Afterwards, the court examines the standing intentions and interest of the petitioner with
respect to the corporation. The court argues that courts have shown a tendency to deny the right to
expose corporate records to shareholders with immaterial amount of stock in the company.
Petitioner initially had one share in his name which is insignificant in nature. He had asked his
agent to buy 100 additional shares just for the sole purpose of imposing his ethical and moral
beliefs on the board as well as halt the product process. Thus, he portrayed no intent to investment
or interest to participate in the operations and decision making of the company. In addition, the
court highlights the fact that the Petitioner's agent had rights to sell the shares at his discretion
suggests that the petitioner's standing as a shareholder is weak. The petitioner was also unaware
of the contingent beneficial interests in 242 shares. As such, the court decides to disregard his
equitable holdings in said shares and deemed his intentions far from investment and participation
in the decision-making process of the business. The court further expands by stating that had
Honeywell not adopted its current strategy, petitioner would not be interested in buying the shares.
Thus, petitioner is interested in halting the production rather than interested in the corporation as
whole. As such, the shares were used as an instrument to promote and force his own personal and
moral beliefs on the company, as such the transaction lacks proper purpose. Since the petitioner
does not live up to the intent and the standing conditions, his use for the corporate records is not
deemed proper, and such request was denied by the court.

6- Verdict:
The ruling of the trial court was affirmed, and the petitioner was denied the shareholder
listing.
Aurer v. Dressel

1- Parties' Names:
Petitioner: Dresser
Respondent: Aurer
2- Facts:
Aurer submitted a written request on the behalf of stockholders (class A) requesting the president
to call forth a special meeting for class A shareholders. The request articulated the shareholders'
desire to discuss the endorsement of Joseph L Aurer as president, the amendment of the articles of
incorporation and the bylaws to provide the vacancies on the board arising from the removal of a
director and a replacement by the shareholders and to consider the vote on charges to remove 4
class A directors and elect replacements. The Company's president did not call a meeting as in his
opinion there were no sufficient reasons to do so. In light of the refusal, Aurer brought forth a law
suit.
3- Plaintiff's claim and reasoning:
Aurer argues that the articles of incorporation state that the president has the duty to call
forth a special meeting upon the request of the majority of the shareholders (class A) when raised
in written by the latter.
4- Defendant's claim and reasoning:
The president argues that none of the stated reasons for the meeting is proper subjects for
Class A shareholder meetings.
5- Court's reasoning:
The Court recognized that there is no reason that prevents the shareholders of class A shares
from voting on such proposals. It suggests that shareholders have the right to express their opinions
when it comes to the director to stand in the elections. As they have seen Aurer's conduct and
performance during his tenure as president, the court recognizes that although the shareholders of
class A shares will not be able to directly change the officers, it is their inherent right to participate
and express their opinions in the matter (purpose A). As for purpose B, since the shareholders of
Class A have participated in the election of the directors that represent them, it is an inherent power
to participate in removing them so long as they have proper cause. Since the shareholders want to
consider and vote on removing four Class A directors if the charges are proven, then the court
recognizes that there is due cause. The court also argues that although the certificate of
incorporation authorizes the board to remove any director any charges, this does not negate the
shareholders' inherent power to remove their own directors when the setting gives rise to it. This
is to provide the shareholders with a remedy in case the majority of the directors were accused of
wrongdoing.

6- Verdict:
The ruling of the appeal court is affirmed.