2011 Ohio 5635
Ohio Ct. App.2011Background
- Dr. Pedro Murati, a shareholder in No-Burn, Inc. (NBI), demanded inspection of eighteen categories of corporate records under R.C. 1701.37(C).
- NBI filed suit for declaratory judgment to define rights and obligations; Murati counterclaimed for injunctive relief and costs, including attorney fees.
- Trial court tried the matter on the merits in December 2008, dismissing NBI’s declaratory judgment and awarding partial relief to Murati on his counterclaim.
- On appeal, the Ninth District dismissed for lack of jurisdiction, then later affirmed after amended judgment in 2010-2011, ordering production of sixteen categories of documents and denying attorney fees.
- Key contested issues were whether the sixteen categories fall within “books and records of account,” whether production would be unduly burdensome, and whether bad faith justified attorney-fee recovery.
- Court held that the sixteen categories are within the scope of inspection for a proper purpose, production would not be unduly burdensome, and no bad faith was proven; judgment affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the sixteen categories fall within books and records of account | Murati's demand seeks books and records under 1701.37(C). | No-Burn argued these items exceed the statutory scope. | Forfeited; court declined to address. |
| Whether the inspection order was overly broad and unduly burdensome | Examining all sixteen categories is necessary to assess general condition. | Production would unduly burden the corporation. | Not overbroad or unduly burdensome; production upheld. |
| Whether the trial court erred in denying Murati attorney fees | Bad faith by NBI warranted fees under the governing statute. | No bad faith proven; fees not warranted. | No abuse of discretion; fees denied. |
Key Cases Cited
- Lake v. Buckeye Steel Castings Co., 2 Ohio St.2d 101 (Ohio 1965) (presumption of good faith in shareholder inspection; proper purpose required)
- William Coale Dev. Co. v. Kennedy, 121 Ohio St. 582 (Ohio 1930) (burden to prove improper purpose lies with corporation; right to inspect underlying documents)
- Cincinnati Volksblatt Co. v. Hoffmeister, 62 Ohio St. 189 (Ohio 1900) (right to inspect at reasonable times; purpose not controlling for right to inspect)
- Danziger v. Luse, 103 Ohio St.3d 337 (Ohio 2004) (fundamental right of stockholders to inspect; related to ownership of corporate assets)
- Millar v. Mountcastle, 161 Ohio St. 409 (Ohio 1954) (property of the corporation belongs to shareholders; inspection as intangible property right)
- Celina Mut. Ins. Co. v. Am. Druggists Ins. Co., 52 Ohio App.2d 304 (Ohio App. 1977) (historical lineage of the right to inspect and reasonable times)