TRENTON, N.J. (Legal Newsline) – The Supreme Court of New Jersey affirmed an appellate court’s decision to deny a shareholder of an American pharmaceutical company to inspect documents and records outlying the company’s purchase of Cubist Pharmaceuticals.
Plaintiff R.A. Feuer alleged in his lawsuit that defendant Merck & Co.'s acquisition was “ill-advised and reckless,” and that the company was aware that certain Cubist patents were “challenged.” Feuer had sought the documents to prove Merck “acted wrongfully” when it rejected his claims.
Merck’s board of directors had assigned a working group to investigate Feuer’s claims and decide upon a response and the group ruled to decline the plaintiff's request.
Following multiple requests, including one for the company’s board of directors to file suit against the appointed working group, Feuer filed suit alleging he had a proper purpose and right under state law to inspect documents.
The Supreme Court summarized New Jersey Superior Court Appellate Division Judge Mitchel Ostrer’s previous decision. Ostrer, after reviewing the case, found that the plain language of the law “authorizes inspection of a significantly narrower universe of corporate records than Feuer demanded,” and that Feuer is not entitled to “broad-ranging inspection under the statute just because it would be useful,” the syllabus states.
Aside from this fact, a shareholder in this case must prove a “probability that the interests of all will be served by the proposed investigation,” and must hold good faith when doing so, the syllabus states.
The Supreme Court observed that “that the extent of a petitioner’s holdings appears to be a significant factor in balancing the corporation’s burden of compliance with the shareholders’ interest in inspection,” and Feuer fell short of making a reasonable argument that inspection would benefit all shareholders.
Justices Stuart Rabner, Jaynee LaVecchia, Barry T. Albin, Anne M. Patterson, Faustino J. Fernandez-Vina, and Walter F. Timpone joined in the court’s opinion.