Opinion ID: 557367
Heading Depth: 3
Heading Rank: 1

Heading: Eligibility of the Sadlers.

Text: 10 The Sadlers qualify under section 1315 as persons entitled to obtain a record of NCR's shareholders. The Sadlers are residents of New York and have owned NCR stock for six months prior to their demand. The corporation whose stockholder list they seek does business in New York. 11 Nevertheless, NCR challenges the Sadlers' right to invoke section 1315 because of the arrangement between the Sadlers and AT & T under which the Sadlers initiated their request. Since AT & T had not held its NCR stock for more than six months, it sought out a New York resident who qualified under section 1315. AT & T's agreement with the Sadlers provides that the Sadlers will demand the NCR stockholder list, that AT & T will reimburse the Sadlers for any expenses and indemnify them for any losses arising out of the demand, and that the Sadlers will not settle any claim or lawsuit concerning the demand without the consent of AT & T, which will not be unreasonably withheld. Pursuant to this agreement, the Sadlers requested that NCR produce the stockholder records to AT & T, which it characterized as our agent, and informed NCR that AT & T would reimburse NCR for any expenses incurred in complying with the demand. NCR contends that AT & T is not the agent of the Sadlers, but in reality is the principal, using the Sadlers as its agent for a demand that AT & T itself is not entitled to make. 12 We agree with Judge Stanton that the agreement between the Sadlers and AT & T does not disqualify the Sadlers from invoking section 1315. Though section 1315 permits an agent to act for the qualifying New York resident in inspecting the shareholder record, it does not inevitably apply all the technical aspects of the law of agency to the permissible relationship between the requesting shareholder and another entity with whom the shareholder chooses to act. Section 1315 should be liberally construed in favor of the stockholder, Crane Co., 39 N.Y.2d at 20-21, 346 N.E.2d at 512, 382 N.Y.S.2d at 712. Once the resident shareholder alleges compliance with the statute, the bona fides of the shareholder will be assumed ... and it becomes incumbent on the corporation to justify its refusal by showing an improper purpose or bad faith. Id. at 20, 346 N.E.2d at 511, 382 N.Y.S.2d at 711 (citations omitted). 13 We see no reason to believe that New York would deny the Sadlers the right to invoke section 1315 because of the arrangement they have made with AT & T. Though that arrangement gives AT & T considerable control of the demand, particularly the right reasonably to refuse settlement of the demand or litigation arising from it, that control was agreed to by the Sadlers in exchange for AT & T's assurance that they would incur no financial exposure. Since New York wishes to accord its residents the rights specified in section 1315, it is not likely to impose any restrictions upon their exercise of that right, other than those specified in the statute, unless necessary to prevent the statute from being used in bad faith. Nothing in the arrangement between the Sadlers and AT & T creates a risk of using the statute for an improper purpose or in bad faith. The demanding stockholder is entitled to turn the list over to others involved in a proxy contest, see In re Lopez, 71 A.D.2d 976, 420 N.Y.S.2d 225 (1st Dep't 1979), and we see no reason why he may not make reasonable arrangements to avoid his own financial exposure. 14