Topic: Information Rights

Court of Chancery Holds That Corwin Defense Is Not Appropriate for the Limited Scope and Purpose of a Books and Records Action Under Section 220

By: David Forney and Tami Mack

In Lavin v. West Corporation, C.A. No. 2017-0547-JRS (Del. Ch. December 29, 2017), the Court of Chancery held that stockholder plaintiff Mark Lavin (“Lavin”) had adequately demonstrated a credible basis from which the Court could infer that wrongdoing had occurred regarding the merger of West Corporation (the “Company”) and Apollo Global Management (“Apollo”) in support of Lavin’s Section 220 demand for inspection, and that a Corwin defense (that the transaction at issue was approved by a majority of disinterested and informed stockholders) is not a bar to an otherwise properly supported Section 220 demand for inspection.

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Chancery Court Finds Unqualified Inspection Right in Statutory Trust Agreement Renders Default Preconditions and Defenses Inapplicable

By: Scott Waxman and Eric Jay

In Grand Acquisition LLC v. Passco Indian Springs DST, C.A. No. 12003-VCMR (Del. Ch. Aug. 26, 2016) the Delaware Court of Chancery found that under the Delaware Statutory Trust Act (the “Act”), the governing instrument of a Delaware statutory trust (DST) does not need to affirmatively disavow the preconditions and defenses applicable to inspection rights related to a DST’s books and records under Section 3819 of the Act in order to create a separate and distinct contractual right that can, in some circumstances, render statutory preconditions and defenses inapplicable to such requests. Read More

Chancery Court Holds That a Proper Purpose with a Credible Basis to Investigate is Required to Grant a Section 220 Action in Pursuit of a Future Derivative Litigation

By Meghan Wotherspoon and Calvin Kennedy

The Chancery Court held that a stockholder must show that there is a proper purpose with a credible basis in order to succeed in a Section 220 action to inspect the books and records of a corporation.

In Southeastern Pennsylvania Transportation Authority v. AbbVie Inc. and James Rizzolo v. AbbVie Inc., the plaintiffs, Southeastern Pennsylvania Transportation Authority (“SEPTA”) and James Rizzolo (“Rizzolo”), as shareholders of defendant AbbVie Inc. (“AbbVie”), made individual written demands on AbbVie for inspection of certain books and records pursuant to Section 220 of the Delaware General Corporation Law (“DGCL”). The plaintiffs sought to obtain records to demonstrate that AbbVie’s directors breached their fiduciary duties. AbbVie rejected the demands for failure to state a proper purpose and each plaintiff then filed a Section 220 Complaint. As the actions stemmed from the same event, the Court utilized a single Memorandum Opinion to deliver its decisions.

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DGCL §220 Does Not Limit Court’s Ability to Restrict Shareholder Inspection Rights

By Eric Freedman and Eric Taylor

In an en banc decision, the Delaware Supreme Court reversed a decision of the Delaware Court of Chancery holding that the court lacked the authority to impose a specific restriction on a shareholder’s inspection of a corporation’s books and records under section 220(c) of the Delaware General Corporation Law (the “DGCL”). United Technologies Corp. (“UnitedTechnologies”) had sought to restrict the use of information obtained in an inspection of the company’s books and recordsby its shareholder Lawrence Treppel (“Treppel”). Specifically, United Technologies asked Treppel to sign a confidentiality agreement that would require Treppel to bring any legal action “arising out of” the inspection in a Delaware court. Treppel refused to sign the agreement and filed a section 220 action seeking access to United Technologies’ books and records without any such restriction. United Technologies challenged whether Treppel had a “proper purpose” for the information request (as required by section 220(b) of the DGCL), but also asked the Court of Chancery to use its legal authority under section 220(c) to limit the use of information gained from Treppel’s books and records inspection to action in a Delaware court. Section 220(c) grants the court the discretion to “prescribe any limitations or conditions with respect to [an] inspection,” or award such further relief as the court deems proper.

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Jefferson v. Dominion Holdings, Inc., C.A. No. 8663-VCN (September 24, 2014) (Noble, V.C.)

By Jamie Bruce and Carty Bibee

On September 24, 2014, Vice Chancellor Noble issued his opinion in Jefferson v. Dominion Holdings, Inc., a matter involving a dispute between a corporation and one of its stockholders over the scope, and attendant confidentiality concerns, in the stockholder’s inspection of the books and records of the corporation under 8 Del. C. § 220.

The Court concluded after trial that the plaintiff stockholder Jefferson (“Plaintiff Stockholder”) demonstrated that valuing his stock in defendant Dominion Holdings, Inc. (“Defendant Corporation”) was a proper purpose for his requested inspection.  In this Order, Vice Chancellor Noble addressed two issues: (1) the scope of the production of books and records and (2) the confidentiality concerns of Defendant Corporation.

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