In Inter-Local Pension Fund GCC/IBT v. Calgon Carbon Corp., C.A. No. 2017-0910-MTZ (Del. Ch. Jan. 25, 2019), the Delaware Court of Chancery enforced an institutional stockholder’s demand for books and records under Title 8, Section 220 of the Delaware General Corporation Law (“Section 220”). The Court found that the stockholder’s affidavit affirming the demand in substantially final form, although not in exact final form, did not violate Section 220’s “under oath” requirements where the only change between the versions was the addition of a signature and the date. The Court also found that the stockholder’s demand was not lawyer-driven under Wilkinson v. A. Schulman, Inc., C.A. No. 2017-0138-VCL (Del. Ch. Nov. 13, 2017), where the stockholder’s goals of the demand and the purposes stated in the lawyer-drafted demand were not fundamentally misaligned, even where the stockholder’s representative could not articulate all the legal nuances of such purposes in deposition testimony.Read More
In Barnes v. Sprouts Farmers Market, Inc., Jennifer Barnes, a stockholder of Sprouts Farmers Market, Inc. (“Stockholder”), sought to inspect the books and records of Sprouts Farmers Market, Inc. (the “Company”) in order to investigate potential breaches of duty, corporate mismanagement, wrongdoing, and unjust enrichment by the Company’s fiduciaries. Section 220 of the Delaware General Corporation Law permits stockholders of a Delaware corporation to inspect a company’s books and records for any proper purpose. Such purpose need only be reasonably related to the person’s interest as a stockholder, and the stockholder need only show “some evidence to suggest a credible basis from which a court can infer” the related conduct.
In Mudrick Capital Management, L.P. v. Globalstar, Inc., C.A. No. 218-0351-TMR (Del. Ch. July 30, 2018), plaintiff Mudrick Capital Management L.P. (“Mudrick Capital”), a minority stockholder of defendant Globalstar, Inc. (the “Company”), brought a demand under Section 220 of the Delaware General Corporate Law (“Section 220”) to inspect certain communications and documents relating to the Company’s proposed merger with Thermo Acquisitions, Inc. (“Thermo”). The Delaware Court of Chancery granted Mudrick Capital’s demand for certain emails, communications and valuation materials relating to the merger, and denied Mudrick Capital’s demand for certain internal draft materials.
In Elow v. Express Scripts Holding Company, C.A. No.12721-VCMR and Khandhar v. Express Scripts Holding Company, C.A. No. 12734-VCMR (Del. Ch. May 31, 2017), the Court of Chancery held that plaintiff shareholder Clifford Elow’s (“Elow”) demand to inspect certain books and records of Express Scripts Holding Company (the “Company”) met all statutory requirements and stated a proper purpose, while plaintiff (and purported shareholder) Amitkumar Khandhar’s (“Khandhar”) demand did not. Thus, the Court granted Elow’s Section 220 demand subject to a confidentiality agreement and denied Khandhar’s demand.
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
In an April 30, 2015 Memorandum Opinion, Vice Chancellor Parsons denied in part and granted in part a motion by two lululemon athletica, inc. (“lululemon” or the “Company”) stockholders to enforce a prior court order directing the Company to produce books and records relating to an investigation of potential insider trading or Brophy claims against the Company’s founder and then-chairman of the board of directors, and potential claims for mismanagement against the other directors. In doing so, the Court held that requiring the Company to search its non-employee directors’ personal email accounts for responsive documents was unwarranted, but determined that certain documents withheld as privileged should be produced pursuant to the fiduciary exception to the attorney-client privilege.
In May and October 2013, respectively, lululemon stockholders Hallandale Beach Police Officers and Firefighters’ Personnel Retirement Fund and Laborers’ District Council Construction Industry Pension Fund (collectively, “Plaintiffs”) commenced separate actions under Delaware General Corporation Law (“DGCL”) Section 220, seeking documents relating to trades of Company stock involving Dennis Wilson, lululemon’s founder and then-chairman of its board in June of 2013. In particular, the timing of the trades — which were made within days of lululemon’s then-CEO’s announcement both to Wilson and the Company’s board that she planned to resign — raised questions, even prompting the Wall Street Journal (“WSJ”) to email the Company for confirmation of certain facts for a story regarding Wilson’s trades for an article which noted their favorable timing for Wilson.
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.
Vice Chancellor Noble denied the demand of plaintiff Fuchs Family Trust to inspect the books and records of defendant Parker Drilling Company under Section 220 of the Delaware General Corporation Law and, in doing so, held that Fuchs’s ability to institute future stockholder derivative litigation — one of the stated purposes underlying its demand — was barred by collateral estoppel based on the dismissal with prejudice of a prior stockholder derivative lawsuit — to which Fuchs was not a party — on procedural grounds.
A Post-Trial Master’s Report ruled that conducting a risk evaluation regarding a company was not a proper purpose for a Section 220 books and records demand, but that valuing the company was.
On February 26, 2015, Master LeGrow issued her Final Report in Southpaw Credit Opportunity Master Fund LP v. Advanced Battery Technologies, Inc., C.A. No. 9542-ML (Del. Ch. February 26, 2015), recommending that the Court order Advanced Battery Technologies, Inc. (“ABAT”) to produce certain books and records for inspection under Section 220 of the Delaware General Corporation Law, subject to a standard confidentiality agreement.
A Final Master’s Report recommended that the Chancery Court deny a plaintiff’s motion for summary judgment and grant the defendant’s cross-motion for summary judgment, relating to plaintiff’s demand to inspect a Delaware corporation’s books and records to investigate possible mismanagement, waste and breaches of fiduciary duty.
In October 2012, the plaintiff, Mr. Walther, made a demand to inspect the books and records of ITT Educational Services, Inc. (“ITT”) under Section 220 of the Delaware General Corporation Law (“DGCL”). The Section 220 request stemmed from ITT’s public disclosures and a Majority Committee Staff Report (“Committee Report”) issued by the U.S. Senate Health, Education, Labor and Pensions Committee relating to ITT’s compliance with federal Title IV student loan eligibility requirements and its student loan default rates.
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.