Corwin v. Abbott Laboratories

• Decision Date: 06 December 2004
• Docket Number: No. 2-03-1283.,2-03-1283.
• Citation: 819 N.E.2d 1249,289 Ill.Dec. 449,353 Ill. App.3d 848
• Parties: Robert CORWIN, Petitioner-Appellee, v. ABBOTT LABORATORIES, Respondent-Appellant.
• Court: United States Appellate Court of Illinois

819 N.E.2d 1249

353 Ill. App.3d 848

289 Ill.Dec. 449

Robert CORWIN, Petitioner-Appellee, v. ABBOTT LABORATORIES, Respondent-Appellant.

No. 2-03-1283.

Appellate Court of Illinois, Second District.

December 6, 2004.

Rehearing Denied January 5, 2005.

Michele L. Odorizzi, Javier H. Rubinstein, Michael A. Scodro, Cristina C. Tilley, Mayer, Brown, Rowe & Maw LLP, Chicago, for Abbott Laboratories.

Richard N. Kessler, Jasmine De La Torre, Harris, Kessler & Goldstein, LLC, Chicago, Paul O. Paradis, Gina M. Tufaro, Abbey Gardy, LLP, New York, NY, Laurence D. Paskowitz, Paskowitz & Associates, New York, NY, for Robert Corwin.

Justice McLAREN delivered the opinion of the court:

Respondent, Abbott Laboratories (Abbott), appeals the trial court's judgment ordering Abbott to produce certain documents for inspection by a shareholder, petitioner, Robert Corwin. We affirm.

The following facts are taken from the record. Abbott is a large publicly held pharmaceutical company with its principal offices in Lake County, Illinois. Abbott owned 50% of TAP Pharmaceutical Products, Inc. (TAP) which manufactured and sold a drug called Lupron, a prostate cancer drug. TAP employees were indicted for the illegal marketing of Lupron. The federal government alleged that TAP gave doctors free samples of Lupron and then sought reimbursement from government insurers. On October 3, 2001, TAP announced that it had entered into a settlement, pleading guilty to federal charges and paying $875 million in fines and penalties. Two days after TAP's announcement Corwin filed a shareholder derivative action in federal court. Shortly after, other shareholders filed similar derivative actions in Cook County. Corwin voluntarily dismissed his federal lawsuit and joined in the state action. After Abbott refused Corwin's request for certain documents, Corwin filed a mandamus action in Lake County seeking to inspect certain Abbott documents pursuant to section 7.75 of the Business Corporation Act of 1983 (Act) (805 ILCS 5/7.75 (West 2002)). The trial court denied Abbott's motions to dismiss and for summary judgment. After a bench trial, the trial court granted Corwin's petition and ordered Abbott to produce the documents sought by Corwin. This timely appeal followed.

On appeal, Abbott argues that the trial court misconstrued the scope of the term "books and records of account" as contained in section 7.75(b) of the Act (805 ILCS 5/7.75(b) (West 2002)). Corwin had requested internal investigatory reports and any and all "document[s] received by any" board member of Abbott's relating to the federal investigation of TAP. Abbott asserts that these documents are not "books and records of account" because they are not financial records.

Pursuant to section 7.75(b) of the Act, a shareholder may obtain access to a corporation's "books and records of account, minutes, voting trust agreements filed with the corporation and record of shareholders." 805 ILCS 5/7.75(b) (West 2002). The Act does not define "books and records of account." However, in Weigel v. O'Connor, 57 Ill.App.3d 1017, 15 Ill.Dec. 75, 373 N.E.2d 421 (1978), this court held that once a proper purpose has been established, "the shareholder's right [to inspect] extends to all books and records necessary to make an intelligent and searching investigation" and "`from which he can derive any information that will enable him to better protect his interests.'" (Emphasis added.) Weigel, 57 Ill.App.3d at 1027, 15 Ill.Dec. 75, 373 N.E.2d 421, quoting 5 Fletcher, Cyclopedia Corporations § 2239, at 779 (1976). The documents at issue in Weigel included television logs, contracts with advertisers, and reports that the corporation had filed with the Federal Communications Commission (FCC). The Weigel court held that "[a] shareholder is legitimately entitled to know anything and everything which the records, books, and papers of the company would show so as to protect his interest." Weigel, 57 Ill.App.3d at 1025, 15 Ill.Dec. 75, 373 N.E.2d 421.

Abbott argues that Weigel is not dispositive in this case because "most of what the shareholder sought in that case were financial records." Abbott ignores that the shareholder in Weigel also sought nonfinancial records such as television logs, contracts with advertisers, and reports that the corporation had filed with the FCC. Accordingly, Abbott's attempt to dilute Weigel's application to this case is not borne out by the facts contained in Weigel.

Abbott also argues that Weigel was not properly decided because it relied on an 1896 case, Stone v. Kellogg, 165 Ill. 192, 46 N.E. 222 (1896), which was decided before a 1933 amendment, changing "records and books of accounts" to "books and records of account." We believe this is a distinction without a difference. We also note that the legislature had occasion to clarify its intent in light of the 1978 Weigel decision when it amended other provisions of the Act in 1988. The legislature is presumed to act with knowledge of the prevailing case law in enacting an amendment, and the legislature can amend a statute if it intends a construction different from that given by a court. See People ex rel. Department of Labor v. K. Reinke, Jr., & Co./Reinke Insulation, 319 Ill.App.3d 721, 728, 253 Ill.Dec. 770, 746 N.E.2d 12 (2001). When amending the Act, the legislature let Weigel stand without changing or clarifying the language at issue. Accordingly, Weigel is controlling here.

Abbott also argues that the trial court erred by finding that Corwin had a proper purpose in requesting the documents at issue. The Act provides that a shareholder may inspect corporate books and records "for a proper purpose." 805 ILCS 5/7.75 (West 2002). Taghert v. Wesley, 343 Ill.App.3d 1140, 1146, 278 Ill.Dec. 659, 799 N.E.2d 377 (2003). A proper purpose is shown when a shareholder has an honest motive, is acting in good faith, and seeks to protect the interests of the...