Court Opinion

ID: 9470650
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:12:13.963326+00
Date Added: 2024-06-11T17:42:02.084619
License: Public Domain

HARRISON L. WINTER, Chief Judge,
dissenting:
The sole question before us is whether a shareholder of a Maryland corporation has a common law right to inspect the stockholder list of that corporation for a “proper purpose,” irrespective of the extent of his holdings. The district court ruled that he did not, and the majority affirms. Because I think that there is such a right, I respectfully dissent.
I.
The parties, the majority and I are agreed that, at common law, a stockholder in a Maryland corporation, irrespective of the extent of stock holdings, enjoyed a right to inspect corporate records, including stockholders lists, provided there was a proper purpose for the inspection.1 See Parish v. Maryland & Virginia Milk Producers Association, 250 Md. 24, 242 A.2d 512, 547 (1968). We are agreed also that Article 5 of the Maryland Declaration of Rights continues in force in Maryland the common law of England, subject only to revisions, amendments or repeal by the Maryland General Assembly. The right of inspection claimed by Caspary is one such common law right.2
In 1868, the Maryland legislature first enacted a comprehensive statute governing the formation of business corporations, their powers and their governance and defining the rights of stockholders, (Chapter 471 of the Laws of 1868), revised it in 1908 (Chapter 240 of the Laws of 1908), and revised it again from time to time thereafter. The text of the present statute with respect to the right of stockholders to inspect and copy a corporation’s stock ledger is found in § 2-513, Annotated Code of Maryland, Corporations and Associations, set forth below.3 This section should be *795read in tandem with § 2-512 which sets forth a stockholder’s other rights of inspection.4 Briefly stated, § 2-513 gives an unqualified right to inspect and copy stock ledgers to any one or more persons who together own at least 5 percent of the stock of any class of the corporation for at least six months.
As the majority implicitly acknowledges, see ante at 788-791, neither § 2-513 nor any uncodified language of any Act which either enacted or amended it expressly repealed the common law qualified right of inspection.5 Thus we must consider if there has been an implied repeal.
II.
The Maryland precedents give ample recognition to the constitutional right of the Maryland legislature to revise, amend or repeal the common law. However, because the Declaration of Rights guarantees an entitlement to the common law, the Maryland courts have generally inferred a presumption of common law vitality absent specific conflicting legislation. See, e.g., Gray v. State, 43 Md.App. 238, 403 A.2d 853, 856-57 (1979) (citing cases). In the leading decision of the Maryland Court of Appeals, Lutz v. State, 167 Md. 12, 15, 172 A. 354, 356 (1934), the principles announced were that “to hold that a statute has abrogated common law rights existing at the time of its enactment, it must clearly appear that they are repugnant to the act, or the part thereof invoked, that their survival would in effect deprive it of its efficacy and render its provisions nugatory.” As an additional category of cases in which implied repeal may be found, Lutz also recognized that “a statute which deals with an entire subject-matter is generally construed as abrogating the common law as to that subject.” Id.
An important correlative principle was enunciated by the Maryland Court of Special Appeals in Neal v. State, 45 Md.App. 549, 413 A.2d 1386, 1387 (1980). There the defendant, charged with the common law crime of indecent exposure, argued that the *796common law in the area had forever been extinguished by the passage in 1967 of an express statutory provision dealing with the same conduct. The court noted that the common law crime had in fact been supplanted by statute during the life of the statute, but looked to a subsequent legislative revision amending the 1967 statute in a way no longer inconsistent with the common law. Rejecting defendant’s contention regarding the permanent death of the common law because “he misconstrues the principles applied in Lutz”, the Court of Special Appeals followed the rule of construction that “[wjhen a statute abrogating a principle of the common law is repealed, the common law principle is revived.” Id. at 1387. That such a principle obtains in the field of criminal law, where constitutionally rooted considerations of fair warning and avoidance of unfair surprise are central to a valid conviction, provides all the more reason for rejecting the notion that the common law right at issue was buried forever in 1868.6
As an exercise of reasoning in applying the Maryland authorities, then, I would conclude that the legislature did not abrogate sub silentio the common law right by enactment of the statutory right. The former is a qualified right exercisable only upon a showing of a proper purpose. The latter is a much more expansive unqualified right exercisable just by virtue of 5 percent ownership existing for at least six months prior to its exercise.7 The two rights supplement one another; while, in a given situation, there may be some overlap, each can be enforced without rendering the other nugatory. There is no inconsistency.
I recognize also that § 2-513 is only one section of a comprehensive compilation of enactments relating to corporations, but I do not see how the Corporations and Associations article of the Maryland code can be said to displace the common law of corporations in its entirety. First, there is the savings clause in § l-102(c) and the legislative declaration in § l-102(d) that the implied repealing effect of the article is limited to inconsistent provisions of “the Code.” See supra at n. 5. More importantly, the Corporations article, unlike some other enactments such as the Workmen’s Compensation article,8 has not been construed by the Maryland courts to occupy the field of corporate law so completely as to abrogate all applicable common law. For example, the duties and liabilities of corporate officers and directors are extensively regulated in §§ 2-401 through 2-418, yet the Maryland courts have looked to common law fiduciary standards to supply the basic law governing their relationship to the corporation unless there is a specific contrary statutory provision. See, e.g., Merchants Mortgage Company v. Lubow, 275 Md. 208, 339 A.2d 664, *797669 (1975); Rolling Inn v. Iula, 212 Md. 596, 130 A.2d 758, 759-60 (1957) (self-dealing); Levin v. Levin, 43 Md.App. 380, 405 A.2d 770, 777 (1979) (constructive presidency of corporation, imposing fiduciary duties on officeholder).9
My view that a common law right of inspection exists in Maryland despite § 2-513 has impressive support. Section 2-513 was first enacted in 1908, and, contemporaneous with its enactment, Arthur W. Machen, a respected Maryland authority, wrote, in II Modern Law of Corporations, § 1100, p. 896 (1908), that, in his view, such statutes generally did not supplant the common law, because “statutes which confer upon shareholders a limited right to inspect the company’s books should not be construed to restrict by implication their common-law rights.” While Machen’s view is not, of itself, dispositive, it is the strongest statement available to us of what the understanding of the legislature of his day would have been in passing a 5 percent unqualified inspection right, i.e., that the courts would presume not to construe a restriction on the common law by implication.
After § 2-513 was re-enacted to cast it in substantially its present form, Machen’s early view was echoed years later by Herbert M. Bruñe, an equally respected Maryland authority, in Maryland Corporation Law and Practice, Section 383, p. 445 n. 26 (Rev. ed. 1953):
The further restriction of the statutory right under the 1951 revision would permit a persuasive argument to a court of equity to grant an application by a substantia] stockholder for leave to examine the books, although he had not held his stock for a sufficient period or could not otherwise qualify under the statute. The Court of Appeals has stated that, fundamentally, the right to inspect the books rests on the proposition that those in charge of the corporation are, in substance, merely the agents of the stockholders who are the real owners of the property .... The basic relationship of the stockholder to his corporation is not altered by the statutes, and it may well be that these statutes are intended to grant additional and supplementary rights of inspection, in aid of the basic general right. (Emphasis added).
The majority artfully intimates that by referring to a “substantial” shareholder, the author impliedly embraced the majority’s view that the 5 percent stock holdings requirement was exclusive. Ante, at 790 n. 8. Yet the text accompanying the cited footnote shows that his belief as to the state of the law was precisely the opposite:
The statutory right, however, is possibly supplemental to the common-law right of reasonable access to by-laws, minute books and stockholders’ lists, and may not supersede such right altogether.
Brune, supra, at 445. This conclusion is not limited to the six months’ holding requirement added in 1951, but rather when examined in full discloses that, except for some residual qualification attendant to the absence of a state court decision squarely so holding, Bruñe was in accord with Machen’s view that the common law right survived the 5 percent statute.10
The cases in other jurisdictions and nonjudicial authorities are either fully in accord with my conclusion that a statute broadening the right of inspection but conditioning *798it upon the duration and extent of stock ownership does not abrogate the common law right of inspection, or else recognize that the ousting of the common law by such a statute does not necessarily obtain. See Tucson Gas & Elec. Co. v. Schantz, 5 Ariz. App. 511, 428 P.2d 686 (1967); State ex rel. Grismer v. Merger Mines Corporation, 3 Wash.2d 417, 101 P.2d 308 (1940); Estate of Bishop v. Antilles Enterprises, 252 F.2d 498 (3 Cir.1958); State ex rel. Great Fidelity Insurance Company v. Circuit Court of Posey County, 259 Ind. 441, 288 N.E.2d 143 (1972); State v. Crookston Trust Co., 222 Minn. 17, 22 N.W.2d 911 (1946); Sivin v. Schwartz, 254 N.Y.S.2d 914 (1964).11 Other New York cases express the same holding.12 See also Watson, Protecting the Shareholders’ Right to Inspect the Share Register in Corporate Proxy Contests for the Election of Directors, 50 So.Cal.L.Rev. 1273, 1280 n. 39 (1977); H. Henn, Handbook of the Law of Corporations, 397 (2d ed. 1970); 5 Fletcher, Cyc. of Corporations, § 2215.1 (1976 rev. ed.). This overwhelming trend cannot be ignored; we have previously recognized that where no Maryland case is directly on point, interpretation of another state’s law, even by another federal court, will be taken as controlling on a materially similar issue. Tillman v. Wheaton-Haven Recreation Assoc., Inc., 580 F.2d 1222, 1227-28 (4 Cir.1978).13
in summary, in carrying out my obligation in this case to predict Maryland law, I am persuaded that the Maryland courts would continue to recognize and give effect to the common law right of any stockholder to inspect the stock ledger of the corporation in which he owns shares for any proper purpose.
III.
I deal next with the arguments advanced by the defendant and embraced by the majority to reach a contrary conclusion.
The principal thesis advanced in opposition to my view stems from the legislative history of § 2-513. The factual basis for the argument begins in 1868, when the Maryland legislature gave all stockholders and members of corporations the unqualified right to inspect any corporate records at any time (Ch. 471, Acts of 1868). Then, in 1908, this right was limited with respect to stockholders to those who owned 5 percent of any class of stock (Ch. 240, Acts of 1908). Still later the 1908 restriction was lessened with respect to certain records other than stock ledgers (§ 2-512). From this it is argued that statutory law completely occupied the field in 1868, so that when the right of inspection was contracted in 1908, it could not have been intended that a pre*7991868 common law right of inspection be revived.
There are, in my view, two answers. First, as already suggested, the argument flies in the teeth of Neal v. State, supra, because it presupposes that when the legislature codified and expanded the common law right in 1868, the common law would have been wiped out. Neal is specific in saying that “[w]hen a statute abrogating the common law is repealed, the common law principle is revived.”14 Second, the argument is belied by Parish when that decision is closely analyzed.
Parish, so far as is pertinent here, was a derivative suit by a member of a member corporation to redress wrongs done to the corporation by its officers and directors. Among the relief sought was inspection of corporate records including the membership list. Disclosure was resisted on the ground that it was not authorized by the Maryland statutes regulating a member’s right of inspection. In the 1868 statute already referred to, the Maryland legislature had given an unqualified right of inspection to members of non-stock corporations as well as to stockholders of stock corporations. Parish, supra, 242 A.2d at 547-48. In the 1908 revision, no mention of members was made; from this omission it was argued that a member’s right of inspection ceased to exist after 1908. The argument was rejected, however, and the court held that after 1908 a member had a right of inspection of the books and records of the member corporation, including the list of the general membership. Id. at 549-50.
The significance of Parish is that, in full accord with Neal, it rejected the idea that the repeal or modification of a statute abrogating or at least embodying the common law meant that the common law right ceased to exist. If the majority’s premise were correct, the very common law right found in Parish would have ceased for members as of 1868. Instead, the Court of Appeals applied the common law to permit inspection of the membership list. Similarly, when the Maryland legislature broadened the common law right of inspection for shareholders and members in the 1868 act, it did not, to my mind, obviate the qualified right of inspection for a proper purpose which had existed at common law, nor did it do so when it limited the unqualified right of stockholders in 1908.15
IV.
Since I would reverse the judgment of the district court and return the case for *800further proceedings, it is appropriate that I comment on the nature of the relief that should be granted. Although only mildly contested, it has not been judicially determined whether plaintiff seeks to exercise his right of inspection for a “proper" purpose. That issue should not present great difficulty for there is considerable authority for the proposition that inspecting and copying for the purpose of solicitation of proxies is a proper purpose. See, e.g., Protecting Shareholders’ Right, supra, 50 So. Cal.L.Rev. at 1282; 5 Fletcher, supra, § 2223.2; In re LTV Securities Litigation, 89 F.R.D. 595 (N.D.Tex.1981); Weber v. Continental Motors Corporations, 305 F.Supp. 404 (S.D.N.Y.1969); NVF Company v. Sharon Steel Corporation, 294 F.Supp. 1091 (W.D.Pa.1969); Hatleigh Corporation v. Lane Bryant, Inc., 428 A.2d 350 (Del.Ch.1981).16
The annual meeting of the defendant is set for May 12, 1983. Plaintiff sought access to the stockholder’s ledger on April 4, 1983. Since in my view the request has probably been improperly and illegally denied, I would think that the district court upon proper application should give serious consideration to delaying the meeting until plaintiff’s rights have been adjudicated17 and, if plaintiff prevails, thereafter until plaintiff’s rights have been vindicated.
ADDENDUM
Following announcement of the panel decision and the dissent, Appellant, by petition filed April 19, 1983, sought rehearing and made a suggestion for rehearing en banc. Before action could be taken with respect to rehearing or rehearing en banc, Appellant’s counsel, by motion filed April 28, 1983, notified the Court that the case had become moot.

. Plaintiff Caspary, having a current investment of approximately $3,300,000 in defendant, sought inspection to learn of the identity of other stockholders in order to solicit their proxies to oust what he considered to be an inefficient and inept management. The district court did not consider the issue of whether this purpose was a “proper” one, since it held that plaintiff had no common law right of inspection, but instead had an unqualified statutory right of inspection only if he, alone or with others who might join him, owned an aggregate of 5 percent of the outstanding stock of any class. In this case, such a percentage of ownership would represent an investment of in excess of $55,000,000. Notwithstanding that neither the district court nor the majority reaches this issue, it is virtually conceded by defendant that plaintiffs purpose is a “proper” one. See infra at text accompanying n. 16.

. 3 H. Oleck, Modern Corporation Law § 1555, p. 604 (1959) refers to one of the first English cases recognizing the right, Dominus Rex. v. The Fraternity of Hostmen in Newcastie-Upon-Tyne, 25 Str. 1233, 93 Eng.Rep. 1144 (KB 1745).

. Section 2-513 reads as follows:
(a) In general. — One or more persons who together are and for at least six months have been stockholders of record or holders of voting trust certificates of at least 5 percent of the outstanding stock of any class of a corporation may:
(1) In person or by agent, on written request, inspect and copy during usual business hours the corporation’s books of account and its stock ledger;
(2) Present to any officer or resident agent of the corporation a written request for a statement of its affairs; and
(3) In the case of any corporation which does not maintain the original or a duplicate stock ledger at its principal office, present to any officer or resident agent of the corporation a written request for a list of stockholders.
(b) Procedure by corporation after request. —Within 20 days after a request for information is made under subsection (a) of this section, the corporation shall prepare and have available on file at its principal office:
(1) In the case of a request for a statement of affairs, a statement verified under oath by its president or treasurer or one of its vice-presidents or assistant treasurers which set forth in reasonable detail the corporation’s assets and liabilities as of a reasonably current date; and
*795(2) In the case of a request for a list of stockholders, a list verified under oath by one of its officers or its stock transfer agent or registrar which sets forth the name and address of each stockholder and the number of shares of each class which the stockholder holds.

. Section 2-512 reads as follows:
(a) In general — Any stockholder, holder of a voting trust certificate in a corporation, or his agent may inspect and copy during usual business hours any of the following corporate documents:
(1) Bylaws;
(2) Minutes of the proceedings of the stockholders;
(3) Annual statements of affairs; and
(4) Voting trust agreements on file at the corporation’s principal office.
(b) Inspection of stock records. — (1) Any stockholder or holder of a voting trust certificate in a corporation other than an open-ended investment company may present to any officer or resident agent of the corporation a written request for a statement showing all stock and securities issued by the corporation during a specified period of not more than 12 months before the date of the request.
(2) Within 20 days after a request is made under this subsection, the corporation shall prepare and have available on file at its principal office a sworn statement of its president or treasurer or one of its vice-presidents or assistant treasurers which states:
(i) The number of shares or amounts of each class of stock or other securities issued during the specified period;
(ii) The consideration received per share or unit, which may be aggregated as to all issuances for the same consideration per share or unit; and
(iii) The value of any consideration other than money as set in a resolution of the board of directors.

. Indeed, another provision of the Maryland general corporation law tends to preserve common law rights. Section 1-102(c) of the Corporations and Associations Article states that “[t]he provisions of this article are in addition to and not in substitution of any other requirements of law relating to any particular corporation or class of corporation.” (emphasis added) Moreover, § l-102(d)(l) which repeals laws inconsistent with the Article limits its repealing effect to any inconsistent “provision of the Code.” (emphasis added). The carefully chosen language establishing the Article as supplementary to other “law” but repealing only inconsistencies within “the Code” supports my view of the statutory regulation of corporations as having not been intended to be the exclusive source of law in the area.

. For still other recent cases consistent with the authorities named in the text, see In re A Special Investigation # 202, 53 Md.App. 96, 452 A.2d 458, 462 (1982); Funkhouser v. State, 51 Md.App. 16, 440 A.2d 1114, 1116 (1982); Keesling v. State, 288 Md. 579, 420 A.2d 261 (1980); Baltimore County v. Xerox Corp., 286 Md. 220, 406 A.2d 917, 921 (1979).

. Parish, supra, 242 A.2d at 549, explains that when the Maryland legislature concluded to broaden the right of inspection by removing the requirement of a proper purpose it adopted the 5 percent restriction “to prevent an abuse of the common law right of a single stockholder to demand inspection . . . when the amount of the stock holding was insignificant compared to the whole stock structure.” (emphasis in original). As will be discussed further, infra at n. 15, the reference in Parish must be to the completely unqualified right existing after the 1868 broadening of the right of inspection. I am not so quick to believe, as the majority appears to be, that the same courts extolled for their care and deliberation will turn a “proper purpose” showing, the burden of which is on the plaintiff, into a meaningless formality under which every holder of a single share can procure the shareholder list at a whim. With the affirmative burden on the party seeking disclosure, see Parish at 547, demonstration of a “proper purpose” requires more than the mere absence of a plaintiff who appears “to be acting malevolently or contrary to corporate best interests.” Ante, at 791. We need not catalogue what purposes are “proper” here, however, because Caspary’s, if genuine, is well-recognized as such. See supra at n. 1; infra at text accompanying n. 16.

. Cf. Honaker v. W.C. & A.N. Miller Development Co., 285 Md. 216, 401 A.2d 1013, 1016 (1979).

. The invocation of common law as a supplement to Maryland’s statutory corporate law has also been accomplished by the federal courts, even where a greater conflict with the statutory provision than is suggested here appeared. For example, despite statutory requirements of two-thirds shareholder approval as prerequisite to the dissolution of corporate property as a whole, “they are not to be taken as in derogation of the [common law] right on the part of the directors, by their own vote, without more, to place the corporation in bankruptcy.” In re Pneumatic Tube Steam Splicer Co., 60 F.2d 524, 526 (D.Md.1932).

. If the majority concedes only that the six months’ holding requirement might be waived upon a showing of proper purpose in an appropriate case, as it apparently does, ante at 790 n. 8, it offers no reason for finding the 5 percent limit inflexible but the six-month provision tempered by common law principles. If one is so qualified, so must be the other.

. With regard to this and other New York authorities, the majority seeks to distinguish them on the ground that the New York Corporation statute had a savings clause, expressly preserving a stockholder’s common law right of inspection. As previously suggested in n. 5 and the accompanying text, Maryland does have a counterpart. Moreover, the absence of a savings clause is irrelevant until it is shown that some statute is inconsistent with the common law, and I have shown that there is no inconsistency.

. Pertinent among the New York authorities are: Weisfeld v. Spartan’s Industries, Inc., 58 F.R.D. 570, 579 (S.D.N.Y.1972) (owner of only 50 out of over 3.5 million shares of common stock granted access to shareholder’s list for purpose of soliciting co-plaintiffs in derivative suit); and Rockwell v. SCM Corporation, 496 F.Supp. 1123, 1125-26 (S.D.N.Y.1980) (common law right of access to shareholder list upon showing of “proper purpose” not displaced by statutory unqualified right; “the statutory right of inspection was intended to supplement rather than replace the common law.”).

. I recognize that other than the opinion of the district court in the instant case, there is another contrary authority emanating from the District Court of Maryland in an unpublished opinion on a collateral matter. With it I respectfully disagree. As a rule, we do not even treat unpublished opinions of our own court as binding precedents. That it was rendered by a judge who was a Maryland lawyer before he became a judge does not give it any special persuasiveness for, as a neutralizing factor, I am bound to recognize that he did not previously specialize in corporate practice. Nor is this an issue that repeatedly arises in diversity cases with which the judge of the forum state might be expected to have acquired special facility, as was the situation regarding a state statute of limitations in the case cited by the majority, Hartford v. Gibbons & Reed Co., 617 F.2d 567 (10 Cir.1980).

. This rule is followed in other jurisdictions as well. See, e.g., State v. General Daniel Morgan Post No. 548, V.F.W., 144 W.Va. 137, 107 S.E.2d 353, 357 (1959) (“When a statute repeals the common law and the statute itself is subsequently repealed, the common law is revived and when a statute which is declaratory of the common law is repealed the common law remains in force for the reason that the statute was an affirmance of the common law.”); North Shore Hospital, Inc. v. Barber, 143 So.2d 849 (Fla.1962) (common law supplanted by statute in 1873 revived by repeal of statute in 1955); Lau v. Nelson, 89 Wash.2d 772, 575 P.2d 719, 721 (Wash.1978) (“... the repeal of a statute does not operate to destroy vested rights, or rights of a common law nature which are further embodied in the repealed statute, the latter existing independently as enforceable rights.”); State v. Buck, 275 N.W.2d 194, 197 (Iowa 1979) (criminal law); Makin v. Mack, 336 A.2d 230, 234-35 (Del.Ch.1975) (common law landlord-tenant rule revived upon 1972 statutory recodification not addressing specific issue).

. The majority draws the inference that the 1908 act was specifically intended to abrogate the common law qualified right from Judge Barnes’ elaboration of the history of § 2-513, in which he states that the 5 percent restriction was added to prevent abuse “of the common law right.” Parish, supra, 242 A.2d at 549; see ante, at 787. But there is no solace for the majority to be drawn therefrom. If in 1908 there was an existing common law right to be abused, the majority’s major premise — that the common law right was laid to rest in 1868 — obviously cannot be true. On the other hand, it seems strange that the legislature would have been constricting the common law right in 1908, since for several decades stockholders had no occasion to abuse the right when they could obtain all they wanted under the far more liberal statutory right. With all due respect to the precision of Judge Barnes’ writing, his reference to what was abused can only have been intended to refer to the unqualified right of inspection prevailing prior to the 1908 revision. Parish, even as dictum, cannot sensibly be understood to suggest a legislative intention to abolish the common law right.

. In this connection I note that plaintiff has offered to bear all costs of inspection and copying, thus undercutting any argument of undue burden on defendant in producing such a list.

. The power to do so has long been recognized. See Empire Southern Gas Co. v. Gray, 29 Del.Ch. 95, 46 A.2d 741, 743 (1946); Campbell v. Loew’s, Inc., 36 Del.Ch. 533, 134 A.2d 565, 567 (1957); cf. Vanadium Corp. of America v. Susquehanna Corp., 203 F.Supp. 686, 699-700 (D.Del.1962) (citing cases).