Title: Chitwood v. Vertex Pharmaceuticals, Inc.
Citation: N/A
Docket Number: SJC-12101
State: Massachusetts
Issuer: Massachusetts Supreme Court
Date: March 20, 2017

NOTICE:  All slip opinions and orders are subject to formal 
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SJC-12101 
 
FRED CHITWOOD  vs.  VERTEX PHARMACEUTICALS, INC. 
 
 
 
Suffolk.     November 9, 2016. - March 20, 2017. 
 
Present:  Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & 
Budd, JJ.1 
 
 
Corporation, Stockholder, Custodian of corporate records. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
August 15, 2013. 
 
 
The case was heard by Janet L. Sanders, J. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Steven J. Purcell, of New York (Justin Sherman, of New 
York, & Mitchell J. Matorin also present) for the plaintiff. 
 
R. Todd Cronan (William B. Brady also present) for the 
defendant. 
 
Ben Robbins & Martin J. Newhouse, for New England Legal 
Foundation, amicus curiae, submitted a brief. 
 
 
 
GANTS, C.J.  Under G. L. c. 156D, § 16.02 (b), of the 
Massachusetts Business Corporation Act (act), a shareholder of a 
                     
 
1 Justice Botsford participated in the deliberation on this 
case prior to her retirement. 
 
 
2 
corporation, upon written notice, is entitled to inspect and 
copy various categories of corporate records if the shareholder 
makes the demand "in good faith and for a proper purpose," and 
if the particular records sought to be inspected are "directly 
connected" with that purpose.  The plaintiff, Fred Chitwood, a 
shareholder of the defendant Vertex Pharmaceuticals, Inc. 
(Vertex or the corporation), made a demand for corporate records 
pursuant to § 16.02 (b), claiming that inspection of the records 
was needed to investigate his allegation that the board of 
directors had committed a breach of its fiduciary duty of 
oversight with regard to Vertex's financial reporting and 
insider stock sales.  Vertex "rejected" the demand, claiming 
that the demand was "invalid under Massachusetts law" and that 
it was improper because the board, following a reasonable 
inquiry by a special committee of independent directors, had 
rejected his earlier demand to commence derivative litigation 
based on the same allegations of misconduct.  The plaintiff 
commenced an action in the Superior Court, seeking an order 
compelling Vertex to make the requested corporate records 
available to the plaintiff.  After a bench trial, the judge 
dismissed the complaint with prejudice, concluding that the 
plaintiff had failed to meet his burden of showing a proper 
purpose. 
 
 
3 
 
The issue on appeal is whether the judge applied the 
correct standard regarding the proper purpose required to 
inspect corporate records under § 16.02 (b).  We conclude that 
she did not.  Because the judge applied too demanding a standard 
and because the scope of the demand made by the shareholder far 
exceeded the authorized scope of inspection under § 16.02 (b), 
we vacate the judgment dismissing the shareholder's claim for 
inspection and remand the case for further proceedings 
consistent with this opinion.2 
 
The right of inspection.  Under § 16.02, a shareholder of a 
Massachusetts corporation is entitled to inspect two categories 
of corporate records.  The first category of records, delineated 
in G. L. c. 156D, § 16.01 (e), includes the corporation's 
articles of organization and bylaws (and all amendments 
thereto); resolutions adopted by the board of directors creating 
one or more classes of shares, and setting the rights, 
preferences, and limitations of those classes of shares (where 
the shares issued are outstanding); the minutes of all 
shareholders' meetings, as well as the records of all actions 
taken by shareholders without a meeting, for the past three 
years; all written communications to shareholders within the 
past three years, including the annual financial statements 
                     
2 We acknowledge the amicus brief submitted by the New 
England Legal Foundation. 
 
 
4 
provided to shareholders, for the past three years; the names 
and business addresses of the corporation's current directors 
and officers; and the corporation's most recent annual report 
delivered to the Secretary of State.  To inspect the corporate 
records in this first category, a shareholder need only provide 
written notice at least five business days before the 
shareholder wishes to inspect and copy; no showing of good faith 
or proper purpose is required.  G. L. c. 156D, § 16.02 (a). 
 
The second category of records, delineated in G. L. 
c. 156D, § 16.02 (b), includes records of "excerpts from minutes 
reflecting action taken" by the board of directors or a 
committee acting in place of the board;3 the "accounting records 
of the corporation, but if the financial statements of the 
corporation are audited by a certified public accountant, 
inspection shall be limited to the financial statements and the 
supporting schedules reasonably necessary to verify any line 
item on those statements;" and the list of the names and 
addresses of all corporate shareholders, showing the number and 
class of shares held by each.  See G. L. c. 156D, § 16.01 (c).  
                     
 
3 The full text of G. L. c. 156D, § 16.02 (b) (1), provides 
for the inspection and copying of "excerpts from minutes 
reflecting action taken at any meeting of the board of 
directors, records of any action of a committee of the board of 
directors while acting in place of the board of directors on 
behalf of the corporation, minutes of any meeting of the 
shareholders, and records of action taken by the shareholders or 
board of directors without a meeting, to the extent not subject 
to inspection under [§ 16.02 (a)]." 
 
 
5 
To inspect this second category of corporate records a 
shareholder not only must provide five days' written notice but 
also must meet the following three requirements:  (1) the 
shareholder must show that the "demand is made in good faith and 
for a proper purpose," (2) the shareholder must describe "with 
reasonable particularity his purpose and the records he desires 
to inspect," and (3) the shareholder must show that "the records 
are directly connected with his purpose."  G. L. c. 156D, 
§ 16.02 (c).  In interpreting the meaning of these requirements, 
we are guided by the comments prepared by the task force on the 
revision of the Massachusetts business corporation law that 
drafted the act, "which included more than fifty experienced 
Massachusetts corporate lawyers."  See Halebian v. Berv, 457 
Mass. 620, 625 (2010), citing comment to G. L. c. 156D, 25 Mass. 
Gen. Laws Ann. at 48 (West Supp. 2010). 
 
"A 'proper purpose' means a purpose that is reasonably 
relevant to the demanding shareholder's interest as a 
shareholder."  Comment to G. L. c. 156D, 25A Mass. Gen. Laws 
Ann. at 46 (West Supp. 2016) (comment).  The drafters also noted 
that the phrase "proper purpose" is "well understood" and that 
the "very substantial case law defining 'proper purpose' will 
continue to be applicable."  Id.  That case law recognizes that 
"[s]tockholders are the beneficial owners of all the assets of 
the corporation, and they are entitled to reliable information 
 
 
6 
as to the financial condition of the corporation, the manner in 
which business has been conducted and its affairs have been 
managed, and whether those to whom they have entrusted their 
property have acted faithfully and efficiently in the interests 
of the corporation."  Albee v. Lamson & Hubbard Corp., 320 Mass. 
421, 424 (1946).  A proper purpose is one that protects the 
shareholder's rights as an owner in the corporation and that 
advances the interests of the corporation itself.  Id.  A 
shareholder's purpose is improper where it is driven by "mere 
curiosity," speculation, or vexatious motives (citation 
omitted).  Gavin v. Purdy, 335 Mass. 236, 239 (1957).  See 
Albee, supra (shareholder has no "right to an examination if his 
purpose be to satisfy his curiosity, to annoy or harass the 
corporation, or to accomplish some object hostile to the 
corporation or detrimental to its interests"). 
 
"Good faith," paired as it is with "proper purpose," means 
that the stated proper purpose also must be the shareholder's 
true purpose.  See Gavin, 335 Mass. at 239 (shareholder must act 
with "an honest purpose, not adverse to the interests of the 
corporation"); Albee, 320 Mass. at 424 (stockholder "who is 
acting in good faith" for proper purpose "is generally entitled 
to examine the corporate records and accounts").  This 
understanding of the meaning of good faith is supported by the 
Uniform Commercial Code's definition of "good faith," which 
 
 
7 
requires "honesty in fact and the observance of reasonable 
commercial standards of fair dealing."  G. L. c. 106, § 1-201 
(20). 
 
The other requirements -- that the shareholder state his or 
her purpose and the records sought with reasonable 
particularity, and that the records sought be connected with 
that purpose -- allow a fact finder to test whether the 
shareholder's true purpose is a proper purpose.  See comment, 
supra at 46 (eliciting "more meaningful statements of purpose" 
avoids "harassment under the guise of inspection").  Where the 
specific records sought have no relevant connection to the 
shareholder's stated purpose, a fact finder may infer that the 
stated purpose for inspection is not the true purpose, and that 
inspection of those records is sought for another purpose that 
the shareholder chose not to articulate because it would likely 
be found improper.4 
 
Where a shareholder makes a demand in good faith and for a 
proper purpose, stated with reasonable particularity, for 
records that are relevant to that purpose, the corporation must 
allow the inspection unless it can show that it has "determined 
in good faith that disclosure of the records sought would 
                     
4 The drafters note that, where a corporation disputes the 
"connection" or relevancy of the requested records, a judge may 
review the records in camera before determining the validity of 
the claim.  Comment to G. L. c. 156D, § 16.02, 25A Mass. Gen. 
Laws Ann. at 46 (West Supp. 2016). 
 
 
8 
adversely affect the corporation in the conduct of its business 
or, in the case of a public corporation, constitute material 
non-public information at the time when the shareholder's notice 
of demand to inspect and copy is received by the corporation."  
G. L. c. 156D, § 16.02 (c) (4).  Where the corporation for any 
reason does not allow the inspection and copying of the 
requested records within a reasonable time, the shareholder may 
apply to the Superior Court for an order to permit inspection 
and copying, and that application shall be adjudicated "on an 
expedited basis."  G. L. c. 156D, § 16.04 (b). 
 
The right of inspection under § 16.02 is "an independent 
right of inspection"; it is not intended to substitute for or 
diminish any rights of inspection that may exist under another 
statute, the common law, or the right of discovery in 
shareholder litigation.  See G. L. c. 156D, § 16.02 (e); 
comment, supra at 46. 
 
Background.  We turn now to the complaint under § 16.04 (b) 
that initiated this litigation.  According to that complaint, 
the defendant corporation develops and manufactures drugs for 
the treatment of serious diseases.  In the spring of 2012, the 
corporation announced in a press release the interim results of 
"phase two" of a study regarding the effectiveness of two of its 
drugs to treat cystic fibrosis.  As a result of that 
announcement, which suggested a medical breakthrough, the 
 
 
9 
corporation's stock price "rose precipitously."  Three weeks 
later, the corporation issued a new press release, which 
suggested that the phase two study did not reflect a medical 
breakthrough, and the corporation's stock price declined on this 
news.  Between the first and the second announcement, seven of 
the corporation's officers and directors sold over $37 million 
in corporation stock. 
 
In November, 2012, the plaintiff5 sent a letter to the 
corporation's board of directors detailing what he characterized 
as the "false and misleading statements" in the first 
announcement and identifying the officers and directors he 
contended had wrongfully engaged in insider trading prior to the 
second announcement.  He demanded that the board initiate 
litigation on behalf of the corporation against the parties 
responsible for issuing the false and misleading statements, 
require the insiders who profited from the insider trading to 
disgorge the profits, and that the board institute meaningful 
corporate reforms. 
 
In response, the board established a special committee of 
independent directors to investigate the plaintiff's 
allegations, and retained outside counsel to assist in the 
                     
5 The plaintiff became the interested shareholder and 
replaced the person identified in the November, 2012, letter to 
the corporation's board of directors after it became clear that 
the individual identified in the November letter was not in fact 
a shareholder at the time of the relevant events. 
 
 
10 
investigation.  In April, 2013, the board informed the plaintiff 
by letter that the special committee had completed its 
investigation and reported its findings to the board, and that a 
majority of the independent directors had determined that there 
was no breach of fiduciary duty by any officer or director of 
the corporation and that a shareholder derivative action was not 
in the best interests of the corporation.  The letter briefly 
described the conduct of the investigation and provided a 
summary of its principal findings, but did not append the 
written report provided by the special committee to the board. 
 
On June 19, 2013, the plaintiff shareholder made a written 
demand under § 16.02 to inspect the corporation's books and 
records "to investigate potential wrongdoing, mismanagement, and 
breaches of fiduciary duties by the members of the [b]oard or 
others in connection with the events, circumstances, and 
transactions" described earlier.  The shareholder asserted that 
he did not believe the corporation's investigation "properly or 
adequately responded to the concerns expressed" in the November, 
2012, letter demanding the initiation of shareholder derivative 
litigation.  The shareholder demanded the inspection and copying 
of seven categories of records, including the records and 
minutes of all meetings of the board and the special committee 
regarding these issues, the special committee's final report and 
any drafts of the report, all documents distributed at any 
 
 
11 
meeting of the board or the special committee, all documents 
concerning the results of the internal review of the phase two 
study, copies of all policy and procedure manuals and other 
documents describing the corporation's internal control 
practices regarding the selection and oversight of contractors 
to perform drug trials and studies for the corporation, and 
calendars to show the number and duration of meetings of the 
board and the special committee. 
 
On June 26, the board, through counsel, rejected the June 
19 demand for inspection and identified four reasons for the 
rejection.  First, the board contended that the demand was not 
made for a "proper purpose" because the shareholder sought the 
inspection of the corporation's books and records under § 16.02 
for the purpose of investigating potential wrongdoing but had 
failed to present any credible basis to infer that that were 
legitimate issues that warranted further investigation. 
 
Second, the board contended that the demand lacked a 
"proper purpose" because it essentially sought discovery in 
support of the shareholder's derivative demand allegations that 
the shareholder would be barred from obtaining had he brought a 
shareholder derivative action under G. L. c. 156D, § 7.44.  The 
board noted that § 7.44 provides that a derivative action 
commenced after rejection of a demand shall be dismissed on 
motion of the corporation where a judge finds that a majority of 
 
 
12 
the independent directors present at a meeting of the board of 
directors (where the independent directors constitute a quorum) 
had determined in good faith after conducting a reasonable 
inquiry that a derivative action would not be in the best 
interests of the corporation.  The board also noted that a court 
may stay discovery in a derivative proceeding while the 
corporation's motion to dismiss is pending.  See G. L. c. 156D, 
§ 7.43. 
 
Third, the board claimed that the demand was "overbroad and 
far exceeds the narrow scope of records available for 
inspection" under § 16.02. 
 
Fourth, the board claimed that it had made a good faith 
determination that disclosure of the records sought would 
adversely affect the corporation in the conduct of its business, 
and that the requests call for the disclosure of non-public 
material information. 
 
On August 15, 2013, the shareholder filed suit under G. L. 
c. 156D, § 16.04, seeking an order compelling the corporation to 
allow the inspection and copying of the books and records he had 
demanded in his June 19 letter.  The shareholder's complaint, 
which, under § 16.04 (b), was to be resolved on an "expedited 
basis," was not resolved for nearly two years when, on August 4, 
2015, final judgment entered dismissing the complaint with 
prejudice.  During those two years, cross motions for judgment 
 
 
13 
on the pleadings were denied, as was the corporation's motion 
for summary judgment, and evidence was taken during a one-day 
bench trial where the plaintiff shareholder and a board member 
of the corporation, who also served as chair of its audit 
committee, testified. 
 
In her findings of fact and conclusions of law, the trial 
judge recognized that the plaintiff shareholder's demand was 
overbroad and that, if he prevailed, his right to inspect 
corporate records under § 16.02 (b) would be limited to 
"excerpts from minutes reflecting any action taken at any 
meeting of the board of directors [and] records of any action 
of" the special committee.  The judge concluded that the 
plaintiff was not entitled to inspect even this narrow swath of 
records because he had failed to meet his burden of showing a 
proper purpose.  The judge noted that the chronology of events 
regarding the sale of stock by corporate insiders after "the 
admittedly erroneous May 7 press release" and before the "May 29 
correction" had prompted a United States Senator to ask the 
Securities and Exchange Commission to examine the matter.  But 
the judge declared that, where a shareholder seeks to inspect 
corporate records under § 16.02 (b) to investigate allegations 
of corporate wrongdoing and mismanagement, the shareholder "must 
present some evidence of wrongdoing; simply relying on the 
timing of certain events is not sufficient" (emphasis in 
 
 
14 
original).6  The judge found that the shareholder had offered no 
evidence "calling into question the independence of the 
[s]pecial [c]ommittee or the diligence of its efforts." 
 
The judge found additional support for her conclusion that 
the plaintiff is not entitled to inspection of the records under 
§ 16.02 because she concluded that, if the shareholder were to 
bring a derivative suit under G. L. c. 156D, § 7.44, based on 
the evidence he presented at trial, he would not be entitled to 
any discovery.  The judge noted that a corporation in a 
derivative action is entitled to dismissal if a majority of the 
independent directors present at a board of directors meeting 
(where the independent directors constitute a quorum) determine 
"in good faith after conducting a reasonable inquiry upon which 
its conclusions are based that the maintenance of the derivative 
proceeding is not in the best interests of the corporation."  
§ 7.44 (a).  The judge also noted that, if the corporation were 
to move to dismiss a derivative action, all discovery would be 
stayed pending resolution of the motion unless the judge, on 
                     
 
6 The judge found guidance in a Massachusetts Superior Court 
decision which declared that "a purpose to investigate possible 
waste, mismanagement or other wrongdoing is a proper purpose 
under [the Delaware inspection statute, [Del. Code Ann. tit. 8, 
§ 220 (LexisNexis 2011)], provided that the shareholder presents 
some evidence that establishes a credible basis from which a 
court can infer the existence of legitimate issues as to such 
conduct warranting further investigation."  Gent vs. Teradyne, 
Inc., Superior Court, No. 07-04676-BLS2 (Oct. 8, 2010), citing 
Seinfeld v. Verizon Communications, Inc., 909 A.2d 117, 118, 122 
(Del. 2006). 
 
 
15 
good cause shown, ordered that specified discovery be conducted.  
§ 7.44 (d).  In the absence of good cause, discovery would 
proceed only if the motion to dismiss were denied, and the 
motion would be denied only where the shareholder had alleged 
"with particularity" facts that rebutted the facts presented by 
the corporation showing that a majority of the board of 
directors was independent when the independent directors decided 
not to proceed with the derivative action and that their 
determination was made in good faith after conducting a 
reasonable inquiry.  Id.  The judge concluded that allowing 
inspection under § 16.02 would render those limitations on 
discovery "meaningless." 
 
Discussion.  Viewed from the perspective of the appellate 
bench, this was an expensive litigation war of attrition that 
was fought over nearly nothing.  The seven categories of records 
that the shareholder demanded under § 16.02 far exceed the scope 
of records that are within the right of inspection under 
§ 16.02.  They are precisely the type of records that a 
plaintiff shareholder might seek in discovery in a derivative 
action in an attempt to show that the special committee's 
inquiry into the allegations was not reasonable or that the 
independent directors did not act in good faith.  But, as the 
judge found, within these seven categories of records, the only 
records within the scope of the right of inspection under 
 
 
16 
§ 16.02 were the excerpts of minutes or comparable records that 
reflected the actions taken at meetings of the board of 
directors or meetings of the special committee.  The drafters' 
comments make clear that they intended "to permit inspection of 
votes or action taken on relevant matters, not of reports, 
discussion or decisions not to act on a matter."  Comment, supra 
at 45.  The drafters added, "Shareholders may have a legitimate 
interest in reviewing whether action was properly taken by the 
board of directors, but giving them a statutory right to examine 
the remainder of the minutes of a board or committee meeting 
could inhibit frank discussion or the disclosure of sensitive 
matters to the directors to enable them to exercise their 
fiduciary responsibilities."  Id.  In short, under § 16.02, a 
shareholder is entitled to inspect the original minutes of a 
board or committee meeting only to learn what action was taken 
at those meetings; it does not provide a right of inspection of 
the documents that were provided to board members for 
consideration of that proposed action or of the minutes 
memorializing the debate at the board or committee meeting as to 
whether to take that action. 
 
Where, as here, a shareholder demands that the corporation  
initiate a derivative action based on allegations of insider 
trading after an inaccurate public announcement of the results 
of drug testing that suggested an apparent scientific 
 
 
17 
breakthrough, and where the corporation declines to do so, a 
shareholder has a proper purpose in asking to inspect the 
excerpts of the original minutes of the meetings of the board of 
directors and the special committee that reflect the actions 
taken at those meetings regarding the requested derivative 
action.7  The minutes may well say nothing different regarding 
these actions from what the corporation's attorney described in 
the letter informing the shareholder of the corporate decision 
to decline to proceed with the derivative action, but the 
shareholder is entitled, as the Russian proverb says, to "trust 
but verify."8  The shareholder need not, as the judge ruled, 
provide evidence of wrongdoing beyond the timing of the press 
releases and the insider trades to obtain these excerpts of the 
original minutes.  The desire to verify the action taken by the 
special committee and the board in response to these allegations 
is a purpose that is "reasonably relevant to the demanding 
shareholder's interest as a shareholder."  See comment, supra at 
46. 
                     
 
7 The mere fact that the plaintiff's request was indeed 
overbroad does not alone establish an absence of good faith. 
 
 
8 The Russian proverb "trust, but verify" became famous in 
the United States when former President Ronald W. Reagan quoted 
it with respect to his nuclear disarmament discussions with the 
Soviet government.  See e.g., The Signing: 'Universal 
Significance for Mankind,' N.Y. Times, Dec. 9, 1987, at A21. 
 
 
18 
 
The judge erred in applying a standard derived from 
Delaware law in determining whether the shareholder had a proper 
purpose.  In Delaware, as in Massachusetts, a shareholder's 
desire to investigate corporate wrongdoing or mismanagement is a 
proper purpose.  See Seinfeld v. Verizon Communications, Inc., 
909 A.2d 117, 121 (Del. 2006); Varney v. Baker, 194 Mass. 239, 
240-241 (1907).  But the scope of corporate records that 
potentially may be inspected to conduct such an investigation 
under the Delaware counterpart of § 16.02 is far greater than 
under § 16.02, because the Delaware statute permits inspection 
of a corporation's "books and records," without specifying which 
books and records.  See Del. Code Ann. tit. 8, § 220(b)(1) 
(LexisNexis 2011).  Under Delaware law, a shareholder may 
identify the category of corporate records he or she seeks to 
inspect, and the scope of inspection is left to the sound 
discretion of the judge.  See Del. Code Ann. tit. 8, § 220(c)(3)  
("The Court may, in its discretion, prescribe any limitations or 
conditions with reference to the inspection, or award such other 
or further relief as the Court may deem just and proper"); 
United Techs. Corp. v. Treppel, 109 A.3d 553, 557-558 (Del. 
2014) (court has broad discretion to determine scope of 
inspection and use of information gathered); Security First 
Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 569 (Del. 
 
 
19 
1997) (judge "has wide latitude in determining the proper scope 
of inspection"). 
 
In Seinfeld, supra at 118-119, the shareholder alleged that 
three corporate executives were paid more than authorized in 
their employment contracts, and the shareholder sought to 
inspect the corporate books and records related to their 
compensation.  Where an inspection's purpose is to investigate 
possible corporate wrongdoing or mismanagement, the Delaware 
Supreme Court requires the shareholder to show, "by a 
preponderance of the evidence, a credible basis from which the 
[court] can infer there is possible mismanagement that would 
warrant further investigation."  Id. at 123.  "That 'threshold 
may be satisfied by a credible showing, through documents, 
logic, testimony or otherwise, that there are legitimate issues 
of wrongdoing."  Id., quoting Security First Corp., 687 A.2d at 
568. 
 
This burden is modest but it is more demanding than is 
appropriate for the more limited scope of books and records 
subject to inspection under § 16.02.  The inverse of the 
Biblical adage that to whom much is given, much is expected is 
that to whom less is given, less is expected.  See Luke 12:48 
(Revised Standard Version).  The corporate records sought in 
Seinfeld might be outside the scope of inspection in 
Massachusetts under § 16.02, as might many investigative 
 
 
20 
requests for corporate books and records that may be permissible 
under Delaware law.  Where a shareholder seeks corporate books 
and records under § 16.02 and claims a proper purpose of 
investigating corporate wrongdoing or mismanagement, the 
shareholder demonstrates a proper purpose where he or she 
identifies particular facts or circumstances that permit a 
reasonable inference that the requested books and records could 
possibly reveal information that would tend to indicate the 
existence of corporate wrongdoing or mismanagement.  Such a 
showing, if made in good faith, suffices to show that the 
shareholder's purpose is not driven by "mere curiosity" or 
speculation.  See Gavin, 335 Mass. at 239. 
 
The judge also erred in concluding that, where a 
shareholder's derivative demand has been declined by the 
corporation, the shareholder, to show a proper purpose, must 
present some evidence that the majority of the board of 
directors who voted to decline were not independent or that 
their determination was not made in good faith or that the 
inquiry on which they based they determination was not 
reasonable.  Essentially, the judge imposed a burden on the 
shareholder seeking to inspect corporate books and records under 
§ 16.02 that was comparable to the burden placed on a plaintiff 
shareholder under § 7.44 (d) to defeat a motion to dismiss 
brought by the corporation that had declined the plaintiff's 
 
 
21 
derivative demand.9  Section 16.02, however, provides "an 
independent right of inspection," and its drafters made clear in 
their comments that the right of inspection under § 16.02 is 
available "at any time."  Comment, supra at 45, 46.  A demand 
for inspection under § 16.02 may be made before or after the 
filing of a shareholder derivative action, and the definition of 
"proper purpose" is not altered by its timing.  Indeed, a 
shareholder has a right of inspection under § 16.02 even if the 
shareholder derivative action he or she sought to initiate has 
been dismissed.  To be sure, the dismissal of a related 
shareholder derivative action may be relevant in determining 
whether the demand for inspection under § 16.02 is made in good 
faith or to harass the corporation, but the right of inspection 
under § 16.02 is not restricted by the limits of discovery under 
§ 7.44 (d).10 
                     
 
9 We understand why the judge believed that the allowance of 
inspection of the plaintiff shareholder's overbroad request for 
books and records would have frustrated the limitations of 
discovery under § 7.44, because the vast majority of those 
documents are outside the scope of § 16.02 and would be 
available only through civil discovery in a shareholder 
derivative suit.  But the appropriate course of action is to 
isolate which of the documents in the inspection request fall 
within the scope of § 16.02, and then determine whether there is 
a proper purpose to order inspection of that subset of 
documents. 
 
 
10 Because the shareholder here did not assert a common-law 
right to inspect corporate books and records, we do not address 
whether the common-law right of inspection survives after the 
enactment of G. L. c. 156D, §§ 16.01 and 16.02, or, if it does 
 
 
22 
 
Conclusion.  The judgment of dismissal is vacated, and the 
case is remanded to the Superior Court for further proceedings 
consistent with this decision. 
 
 
 
 
 
 
 
So ordered. 
 
                                                                  
survive, whether it provides a shareholder with a greater right 
of inspection than provided under these statutes.