NCPPR v. United Airlines: The Proper Purpose Problem

Why did NCPPR want to inspect United's books and records? Was that a proper purpose?

In the last two posts, I discussed the National Center for Public Policy Research (NCPPR) lawsuit against United Airlines, which asked the U.S. District Court for Northern Illinois to compel United to produce for inspection a variety of internal corporate documents related to the airline’s decision to suspend flights between Newark and Tel Aviv, including:

a. Board and committee meeting minutes related to service to Israel;

b. Communications among directors, officers, and labor unions concerning flight service to Tel Aviv;

c. Internal risk assessments and financial projections regarding the Tel Aviv route;

d. Any union correspondence or documentation referencing political or operational influence over route decisions.

In the first post of the series, I discussed NCPPR’s decision to file in Illinois federal court under Illinois law instead of filing under Delaware law in Delaware—where United is incorporated. As I explained, the big reform bill Delaware passed in the spring—SB 21—was a game changer that made it much harder to get access to the sorts of documents NCPPR wanted to inspect.

In the second post in the series, I took up the choice of law issue NCPPR’s suit raised: Why would Illinois law apply to a dispute involving a Delaware corporation and one of its shareholders? Most corporate governance disputes are subject to the law of the state of incorporation under the internal affairs doctrine. As we saw, however, shareholder inspection rights are a well established exception to that rule.

I discuss the law governing shareholder books and records inspections in my book Corporate Law Concepts and Insights (4th ed. 2020).

In this post, I turn to the question of whether NCPPR had a proper purpose for seeking to inspect the specified books and records. This question raises three subsidiary questions: What was NCPPR’s claimed purpose? Was that a proper purpose? What if NCPPR had another improper purpose?