By Nick Froio
In this opinion, Vice Chancellor Noble considered a dispute involving a minority investor, Caspian Select Credit Master Fund Ltd. (“Caspian”), in a closely-held portfolio company, Key Plastics Corporation (“Key Plastics”), seeking to obtain certain books and records of Key Plastics pursuant to 8 Del. Code § 220. The Court found in favor of Caspian, holding that Caspian had stated proper purposes under Section 220, and that Key Plastics failed to demonstrate that those purposes were false or a pretense.
In initiating this Section 220 action, Caspian argued that the proper purposes for its books and records requests were to investigate the value of its interest and the potential waste, mismanagement, self-dealing, and other improper transactions related to a loan transaction between Key Plastics and an affiliate of Key Plastics’ controlling stockholders (the “Affiliated Loan”). Key Plastics argued that Caspian’s alleged purposes were not its primary motive and that they were a false pretense: Caspian already had the information needed to investigate any potential wrongdoing and was litigating solely to pressure the controlling stockholders to purchase its interest.