July 15, 2020

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July 15, 2020

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When Demanding Inspection, Don't Overlook The Demand

The wheels of justice turn slowly.  Two years ago, I wrote about Judge Robert C. Jones's ruling in Weinfeld v. Minor, 2016 U.S. Dist. LEXIS 30117 (D. Nev. Mar. 8, 2016).  In that ruling, Judge Jones tackled the question "whether a judgment in an action by a corporation's stockholders suing derivatively on behalf of the corporation is binding under the rules of res judicata in a subsequent action by other stockholders suing derivatively on behalf of the corporation?" He concluded that under Nevada law, the prior lawsuit did not bar a subsequent derivative suit because the plaintiffs in the current suit were "neither parties nor privies to the previous action."

Now, two years hence, Judge Jones has issued a ruling on the parties' motions for summary judgment.   Weinfeld v. Minor, 2018 U.S. Dist. LEXIS 51943.  Although his ruling addresses a number of different issues, I will for today focus only on his decision with respect to the plaintiffs' stockholder inspection claim

Defendants cite six Plaintiff depositions for admissions as to a lack of any written demand. Plaintiffs produce no evidence to the contrary and do not claim the requirements of the statute were satisfied.  They simply argue that the statute should not apply. . . . There is nothing bizarre about 15%-ownership and written-demand requirements before a corporation must allow shareholders to go rummaging through file cabinets in corporate offices. Plaintiffs are free to try to convince the Nevada Legislature to change the requirements,  but the Court cannot rewrite the statute judicially. It clearly applies here, and Plaintiffs clearly have no evidence that they satisfied it. The Court is bound to grant summary judgment against this claim.

I think two conclusions can be drawn from the foregoing.  First, if a statute requires a written demand, it is generally a good idea to make a written demand and be able to evidence that demand.  Second, it is refreshing to see a judge not rewrite a statute, NRS 78.275(1), when it is plain on its face.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume VIII, Number 123


About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...