## Facts

- Food and Allied Service Trades Department, AFL-CIO (FAST), an unincorporated labor organization, owned a small number of shares of Wal-Mart Stores, Inc. (Wal-Mart), a Delaware corporation.
- In 1992, FAST delivered a written demand under oath to Wal-Mart seeking inspection and copying of Wal-Mart’s stockholder list and related materials.
- FAST stated it wanted the list to communicate with other Wal-Mart stockholders and to solicit proxies in support of a proposed stockholder resolution.
- The proposed resolution asked Wal-Mart’s board to take steps to study and report on Wal-Mart’s buying policies and practices in China to help ensure Wal-Mart did not purchase products made with forced labor.
- Wal-Mart refused to comply with the demand.
- FAST filed an action in the Delaware Court of Chancery seeking an order compelling inspection under Delaware General Corporation Law (DGCL) § 220.
- At trial, FAST’s president, Robert F. Harbrant, testified that FAST’s interest in eliminating purchases of goods produced by forced labor arose from the view that such labor is morally repugnant.
- Harbrant also testified that after Wal-Mart publicly announced a “Buy American” campaign in 1991, FAST circulated information to consumers about how to determine where a product was made.

## Issues

1. Whether FAST’s stated objective—to communicate with other stockholders and solicit proxies in support of a stockholder resolution—was a proper purpose for inspecting Wal-Mart’s stockholder list under DGCL § 220.
2. Whether Wal-Mart could defeat FAST’s § 220 demand by arguing FAST’s union identity and moral or labor-related motives made the request improper.
3. What inspection relief (stockholder list and any related materials) was warranted, given § 220’s requirement that the scope of production match the stated purpose.

## Decision

- The Court of Chancery ordered Wal-Mart to allow FAST to inspect and copy the stockholder list under DGCL § 220.
- The court treated stockholder communications and proxy solicitation connected to a proposed stockholder resolution as a proper stockholder purpose for seeking a stockholder list.
- The court rejected Wal-Mart’s attempt to block inspection based on FAST’s status as a labor organization and on evidence that FAST also acted from moral and labor-policy concerns; those additional motives did not defeat an otherwise proper, vote-related purpose.
- The court granted inspection only to the extent necessary for FAST to carry out its stated stockholder-communication and proxy-solicitation purpose.

## Legal Principles

- DGCL § 220 permits a stockholder, upon a written demand under oath stating a proper purpose, to inspect and copy certain corporate books and records, including a stockholder list.
- A “proper purpose” is a purpose reasonably related to the person’s interests as a stockholder; using a stockholder list to communicate with fellow stockholders and solicit proxies regarding a stockholder vote or proposal can satisfy this requirement.
- When a demand states a facially proper, stockholder-related objective for a stockholder list, the corporation may resist inspection only by proving the stated purpose is not proper (for example, that it is a pretext for an improper objective).
- The existence of additional non-economic, moral, or labor-related motivations does not automatically bar inspection where the demand is tied to stockholder voting rights and corporate decisionmaking through the stockholder franchise.
- Any inspection order under § 220 should be limited in scope to information that is reasonably required for the stated purpose.

## Conclusion

The Delaware Court of Chancery compelled Wal-Mart to provide FAST access to the stockholder list under DGCL § 220 because FAST sought the list to communicate with other stockholders and solicit proxies for a proposed resolution requesting board review and reporting on China sourcing to avoid forced-labor products, and Wal-Mart did not show FAST’s stated stockholder-voting purpose was improper; the court limited relief to what was reasonably necessary for that purpose.


Food and Allied Service Trades Department v. Wal-Mart Stores, Inc., 18 Del. J. Corp. L. 651 (1992)