HGT Law Obtains Order Compelling Nordstrom To Produce Accounting Records And To Pay Plaintiff’s Attorneys’ Fees And Costs Under Washington Business Corporation Act
In one of the very few decisions considering the right of a shareholder to inspect corporate records under the Washington Business Corporation Act, the Washington Superior Court for King County (Hon. David J. Whedbee) ordered Nordstrom, Inc. (“Nordstrom” or the “Company”) to produce accounting records and to pay for Plaintiff’s related attorneys’ fees and costs.
On February 26, 2018, Plaintiff, a Nordstrom shareholder, made a litigation demand (“Litigation Demand”) on the Nordstrom board of directors (“Board”) to review the costs of certain personal corporate aircraft transactions between the Company and the Nordstrom family, and to seek reimbursement for any under-payments by the Nordstrom family. Plaintiff had previously commenced a derivative lawsuit alleging that, for years, Nordstrom maintained and operated a vast and costly aviation department that far exceeded the Company’s own aviation requirements. Plaintiff also alleged that the Nordstrom flight department was used to operate, service and repair the large fleet of personal planes owned by members of the Nordstrom family and their affiliated entities, but that the Nordstrom family did not pay its fair share of the costs.
In response to Plaintiff’s Litigation Demand, the Nordstrom Board appointed a “Demand Review Committee” to investigate Plaintiff’s claims. The Demand Review Committee recommended that the full Board reject Plaintiff’s Litigation Demand and, on February 27, 2019, the Nordstrom Board rejected Plaintiff’s Litigation Demand.
On March 20, 2019, Plaintiff sent a request to Nordstrom pursuant to RCW § 23B.16.020 (the Washington Business Corporation Act), seeking to inspect certain corporate records of Nordstrom, including board minutes and accounting records, related to the Demand Review Committee’s investigation and the Board’s rejection of Plaintiff’s Litigation Demand. RCW § 23B.16.020 requires that a Washington corporation permit a shareholder who demonstrates good faith and a proper purpose to inspect, among other things, (a) excerpts from minutes of any meeting of the board or a committee of the board, and (b) accounting records of the corporation. Under RCW § 23B.16.040, if a shareholder is required to seek a court order to compel a corporation to allow inspection, the court “shall also order the corporation to pay the shareholder's costs, including reasonable counsel fees, incurred to obtain the order unless the corporation proves that it refused inspection in good faith.” Nordstrom refused to produce the records.
On May 2, 2019, Plaintiff commenced a lawsuit pursuant to RCW § 23B.16.040 seeking the requested records. A copy of the complaint is attached here. Nordstrom filed a motion to dismiss the lawsuit. The Court heard oral argument on November 8, 2019.
On November 12, 2019, the Court issued its written order compelling Nordstrom to provide accounting records related to Company’s flight department and the Company’s commercial airfare expenditures. The Court also granted Plaintiff’s request for attorneys’ fees and costs with respect to these accounting records. In so ordering, the Court held that Plaintiff had a “proper purpose” in seeking the accounting records and there was “no reasonable basis to refuse the request for these records.” A copy of the Court’s decision is available here.
For more information about the Nordstrom action or any of our other cases, please contact us at (646) 453-7288 or via email at info@hgtlaw.com.