Under California corporations law, a corporate director generally has an absolute right to inspect the corporation’s books and records. In Wolf v. CDS Devco, the California Court of Appeal held that a trial court properly declined to enforce a director’s demand for inspection where the director’s term expired after the demand for inspection.
The dispute in Wolf arose from a corporate director’s continuing requests to inspect records of the corporation. The corporation provided some information, but the director considered the information incomplete. The director was contemplating suit to enforce his inspection rights and his attorneys drafted a complaint. Unfortunately, the director inadvertently transmitted a copy of the draft complaint to the corporation. Since the director’s term on the board of directors was expiring, the corporation advised him that he would not be renominated. Accordingly, the director’s term expired and he was no longer a member of the board.
The (now former) director then filed suit seeking, among other things, an order directing the corporation to permit him to inspect the corporation’s books and records pursuant to his prior requests for inspection. The trial court ruled that the former director no longer had a right of inspection.
The Court of Appeal affirmed the trial court’s ruling. The appellate court reasoned that although the plaintiff’s demands for inspection were made while he was still a director, his loss of status as a director precluded him from maintaining his suit to enforce his inspection rights. The court indicated that it might rule differently if the director were unlawfully removed, but that the failure to renominate a director for an additional term could not be deemed unlawful.