Ramirez v. Gilead Scis., Inc.

66 Cal.App.5th 218

280 Cal.Rptr.3d 748

Anthony RAMIREZ, Petitioner and Appellant,

v.GILEAD SCIENCES, INC., Defendant and Respondent.

A159428

Court of Appeal, First District, Division 3, California.

Filed July 2, 2021

Cotchett, Pitre & McCarthy, LLP, Mark C. Molumphy, Burlingame, Noorjahan Rahman, Tyson C. Redenbarger, San Francisco; Bottini & Bottini, Inc., Francis A. Bottini, Jr, for Appellant.

Cooley, LLP, John C. Dwyer, Shannon M. Eagan, Tijana M. Brien, Christopher A. Vail, Palo Alto, Barrett J. Anderson, San Diego, for Respondent.

Wiseman, J.^* Anthony Ramirez filed a petition for writ of mandate under Corporations Code section 1601,¹ seeking to compel Gilead Sciences, Inc. (Gilead) to allow him to inspect its books and records pursuant to his rights as a stockholder. The trial court denied the petition on the ground that Delaware, Gilead's state of incorporation, was the sole and exclusive forum to litigate Ramirez's inspection demand.

Ramirez filed this appeal from the order and, while it was pending, litigated his inspection demand to judgment in Delaware. We conclude Ramirez lacks standing to pursue his California inspection demand under section 1601 because he is not a holder of record of Gilead stock. Accordingly, we affirm.

BACKGROUND

This case arose against a background of investigations and legal actions concerned with whether Gilead, a leader in the development and commercialization of HIV/AIDS treatments, intentionally withheld a safer and potentially more effective medication in order to extend the sales window for its older, more dangerous treatment. In September 2019, Ramirez, a beneficial owner of Gilead shares,² demanded that the company permit him to inspect broad categories of documents for the purpose of "obtaining accurate and complete information about his investment in Gilead, and to find out how the mismanagement and breaches of fiduciary duties at Gilead relating to violations of federal and state laws affect that investment...." The petition asserted Ramirez had a "credible basis to investigate whether the Gilead board of directors ... and certain senior Gilead executives may have breached their fiduciary duties to the Company by engaging in massive and long-standing wrongdoing in connection with the Company's development, patenting, marketing of, and restraints related to, its antiviral HIV/AIDS drugs."

Gilead rejected the inspection request, outlining various ways it failed, in Gilead's view, to comply with California and Delaware law. Ramirez then filed a petition for writ of mandate in the superior court asserting common law and statutory rights to inspect the documents described in his demand letter. The petition sought access to five categories of materials: (1) "All Board Material^{[ ]} and Senior Management Material^{[ ]} constituting, concerning or relating to" 10 categories of documents related in various ways to Gilead's possible anti-competitive activities in marketing and price-setting for HIV/AIDS medications; (2) "All communications by members of the Board .. concerning" the same 10 categories; (3) "All Board Material and Senior Management Material" produced or to be produced in response to any other stockholder demand regarding the same matters; (4) "Board Material and Senior Management Material sufficient to establish any policies that exist to ensure Gilead's compliance with state or federal laws and regulations with respect to antitrust and consumer protection and any topic discussed in this inspection demand as well as any assessment by the Board or senior management of the effectiveness of these policies ...."; and (5) "director questionnaires completed by members of the Board for each of the last five years."³

In opposition to the petition, Gilead argued the Delaware Court of Chancery was the sole and exclusive forum for litigating Ramirez's inspection demand pursuant to a mandatory forum selection clause that encompassed "any action asserting a claim against the Corporation or any director, officer, employee or agent of the Corporation governed by the internal affairs doctrine." (Italics omitted.) Gilead also asserted the demand was overbroad, Ramirez lacked standing under section 1601 to assert it, and that he failed to state a proper purpose for his request or show he had no adequate remedy at law.

The trial court denied the petition on the ground California was an improper forum. It explained: "Under Gilead's Certificate of Incorporation, claims falling within the internal affairs doctrine are subject to the ‘sole and exclusive forum’ of Delaware.... Petitioner's request for inspection and the present Petition for Writ of Mandate, fall within the internal affairs doctrine.... The sole forum for this petition is Delaware."

Ramirez filed this timely appeal and, after sending Gilead a second demand letter seeking access to the same records under Delaware law, filed a complaint for inspection of books and records under section 220 of the Delaware General Corporation Law (hereafter section 220) in the Delaware Court of Chancery. In December 2020 the Delaware court issued a final order and judgment ordering Gilead to "produce to Plaintiff the non-privileged portions of the following books and records, for the period of December 1, 2004 through the date of this Order (unless otherwise explicitly provided herein): [¶] a. Formal Board Materials; [¶] b. Antitrust Action Agreements; [¶] c. Policies and Procedures; [¶] d. Senior Management Materials; [¶] e. Government Communications; and [¶] f. Director Questionnaires."⁴

Gilead informed Ramirez the company would produce its records as ordered by the Delaware court and inquired whether he intended to pursue his appeal in the California action. Ramirez responded that he would, indicating his belief he could obtain "a broader or different set of documents upon remand to the trial court." Gilead moved to dismiss this appeal as moot and sought sanctions for pursuing a frivolous appeal. We deferred ruling on those motions until consideration of the appeal on its merits.

DISCUSSION

Ramirez asserts the trial court erred in determining Delaware is the sole and exclusive forum for his petition. He argues generally that the Corporations Code bars companies from limiting shareholders’ inspection rights through any provisions, including forum selection clauses, in their bylaws or articles of incorporation.

More specifically, he contends Gilead's forum selection clause does not control demands under section 1601 because it expressly applies only to claims governed by the internal affairs doctrine, which, he asserts, do not encompass shareholder inspection demands. We need not address these contentions because the trial court's ruling is correct for another reason: Ramirez, as a beneficial owner of Gilead shares, lacks standing to assert an inspection demand under section 1601. " ‘If correct upon any theory of law applicable to the case, the judgment will be sustained regardless of the considerations that moved the lower court to its conclusion.’ [Citation.] Or, as Witkin puts it, ‘If the decision of the lower court is right, the judgment or order will be affirmed regardless of the correctness of the grounds upon which the court reached its conclusion.’ [Citation.]" ( Abouab v. City and County of San Francisco (2006) 141 Cal.App.4th 643, 661, 46 Cal.Rptr.3d 206, italics omitted; Fierro v. Landry's Rest. Inc., 32 Cal.App.5th 276, 286, 244 Cal.Rptr.3d 1 ["we review the trial court's ruling, not the reasons stated for the ruling"].)

Section 1601 extends a right of inspection to "any shareholder or holder of a voting trust certificate."⁵ (Italics added.) Although the provision does not define the term "shareholder," section 185 of the Corporations Code governs its construction and defines the term as "one who is a holder of record of shares." (See § 101 ["Unless the provision or the context otherwise requires, the general provisions and definitions set forth in this chapter govern the construction of this division"].)

We are not, as Ramirez's argument implies, free to ignore that definition. " ‘ " ‘When a statute prescribes the meaning to be given to particular terms used by it, that meaning is generally binding on the courts.’ " ’ " ( Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 84, 259 Cal.Rptr.3d 769, 459 P.3d 1123 ; In re I.A. (2019) 40 Cal.App.5th 19, 22-23, 252 Cal.Rptr.3d 774 [" ‘If the statutory language is clear and unambiguous, we presume the Legislature meant what it said and the plain meaning of the statute governs’ "]; Delaney v. Superior Court (1990) 50 Cal.3d 785, 804, 268 Cal.Rptr. 753, 789 P.2d 934 ["It is bedrock law that if the law-maker gives us an express definition, we must take it as we find it."].) The express definition provided in section 185 compels the conclusion that Ramirez, who undisputedly is not a "holder of record of shares," lacks standing to demand inspection under section 1601. ( §§ 185, 1601 ; see Hagan v. Fairfield (1960) 183 Cal.App.2d 703, 704-705, 7 Cal.Rptr. 248 [reaching same conclusion under predecessor statutes]; Farrington v. Fairfield (1961) 194 Cal.App.2d 237, 239, fn. 1, 16 Cal.Rptr. 119 ; Acosta v. Pacific Enterprises (9th Cir. 1991) 950 F.2d 611, 615, fn. 4.)

Ramirez identifies nothing to indicate that "the provision or the context" of section 1601, as those terms are used in section 101, requires us to conclude the Legislature's definition of "shareholder" for purposes of the division encompassing the shareholder inspection statute does not govern its construction. Instead, resting heavily on policy, he argues that interpreting sections 1601 and 185 as written would "create the absurd result" that beneficial owners of publicly traded stocks have no inspection rights under California law because "the only entity that has any inspection rights" is the bank or broker who holds the title.⁶ Such considerations cannot inform our analysis here because the statutory language is...