Court Grants Summary Judgment Dismissing Claim To Inspect Books And Records

On May 15, 2024, Justice Margaret A. Chan granted summary judgment to defendant American Express Company (“Amex”), dismissing a shareholder’s application to inspect its corporate books and records. Hafeez v American Express Co., Index No. 656656/2022.

Plaintiff Tariq Hafeez, an Amex shareholder, brought suit under New York common law and § 624 of the Business Corporation Law, seeking documents relating to misconduct described in a series of Wall Street Journal articles concerning Amex’s potentially illegal practices in marketing credit cards to small businesses. While the articles focused on improper marketing or renewal of cards to business customers after the 2015 termination of an exclusive agreement with Costco, Hafeez demand sought going back to 2003, based on references in the articles to earlier misconduct in other aspects of Amex’s business. Hafeez, pp. 2-3.

After the BCL claims were dismissed on procedural grounds, Amex moved for summary judgment on the common law claims arguing that, given the production that it ad made in response to Hafeez’s requests, he failed to show the required “proper purpose” for further production.

The Court granted summary judgment to Amex because it had produced "all non-privileged, Board-level documents containing any discussion of consumer sales practices ... from 2015 to 2021". Hafeez, p. 6. While “potential mismanagement by the Board of Directors . . . . is generally an acceptable purpose”, “plaintiff cannot string together different conduct in different parts of defendant's business across several decades to try manufacture a basis for broad inspection.” Hafeez, id., p. 5. Such a demand is too speculative to meet the “proper purpose” requirement, assessment of which lies in the court’s discretion. Id.

The attorneys at Schlam Stone & Dolan frequently counsel clients regarding corporate disputes, including demands to inspect books and records. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.