Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS: Craig Dyer and Joseph Geeting formed Dyer Custom Installation in January 2001, with each owning a 50 percent share. By December 2003, Dyer resigned as president. Dyer immediately served a request on DCI to inspect the corporate books and records, as is generally allowed by Business Corporation Act Art. 2.44(c). Dyer listed seven categories of items he wanted to see, and item six had six subparts. Dyer then filed suit seeking damages on various causes of actions, and filed for a writ of mandamus to compel inspection of the books. DCI claimed that Dyer sought the records for “an improper purpose,” citing Art. 2.44(D). DCI claimed Dyer wanted to see the records: 1. to gain a competitive advantage; 2. to harass officers and directors to gain “shareholder capital” or dissolve the business; 3. to force DCI to purchase his stock at an inflated price; 4. to gain the upper hand in litigation; and 5. to continue to interfere with DCI’s business relations and contracts in an attempt to dissolve the company. Geeting further testified at the hearing on the application for the writ that Dyer had mismanaged the company, had embezzled from it, continued to hold himself out as its representative, was in competition with the company, and made disparaging remarks about the company, vowing to shut it down. The trial court ordered DCI to turn over all records. DCI then filed for a writ of mandamus with this court, alleging the trial court abused its discretion in ordering the documents disclosed without first holding a jury trial on whether Dyer had a proper purpose for looking at them. In the interim, DCI turned over all of the documents in the first five categories, and agreed to turn over the documents in two of the six subparts of the sixth category. HOLDING: Writ partially and conditionally granted. The court confirms that a shareholder of at least six months has a right to inspect company records under Art. 2.44(c), and that a writ of mandamus is the proper remedy for a wrongful withholding. However, the court also confirms that a defense to such a mandamus motion is found under Art. 2.44(D): proof that the shareholder has violated company trust, misused corporate information or was not acting in good faith or for a proper purpose in making his demand. If the corporation pleads sufficient facts to raise an issue on the shareholder’s proper purposes, the corporation is entitled to a jury trial on the issue. The court notes several examples of improper purposes, as held by Texas cases, such as wanting to harass the corporation or gain a competitive advantage. DCI waived its right to a jury trial on all the categories of information it already has agreed to turn over or has agreed to turn over, but the remaining four subparts of the sixth category should be subject to a jury trial on proper purpose, the court concludes. The trial court abused its discretion by not ordering a jury trial, when DCI’s response to the first mandamus action, and Geeting’s testimony was sufficient to raise a fact issue as to Dyer’s proper purpose. The court adds that mandamus is an adequate remedy in this case. “Requiring DCI to wait until after trial on the merits, and after inspection, to pursue its complaint that it was wrongfully denied a jury trial would cause it to lose the remedy it seeks. This Court would be unable to cure the error because, even were we to rule DCI was entitled to a jury trial, the inspection would have been done and the issue moot.” OPINION: Whittington, J.; Whittington, O’Neill and Lang, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.