Heard: November 9, 2016.
action commenced in the Superior Court Department on August
15, 2013. The case was heard by Janet L. Sanders, J.
Supreme Judicial Court on its own initiative transferred the
case from the Appeals Court.
J. Purcell, of New York (Justin Sherman, of New York, &
Mitchell J. Matorin also present) for the plaintiff.
Todd Cronan (William B. Brady also present) for the
Robbins & Martin J. Newhouse, for New England Legal
Foundation, amicus curiae, submitted a brief.
Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy,
& Budd, JJ. 
G. L. c. 156D, § 16.02 (b), of the Massachusetts
Business Corporation Act (act), a shareholder of a
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.
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
right of inspection.
§ 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 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.).
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; 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). 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).
'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 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").
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 requires
"honesty in fact and the ...