Delaware Business Litigation Report

Chancery Curtails Discovery in Appraisal Action Instituted as a Substitute for Books and Records Demand

Wei v. Zoox, Inc, C.A. No. 2020-1036-KSJM (Del. Ch. Jan. 31, 2022)
Often, stockholders who suspect corporate wrongdoing in connection with M&A transactions demand to inspect the company’s books and records under Section 220. But if, through no fault of the stockholder, the timing of a closing makes Section 220 relief more difficult to obtain, may the stockholder use Section 262, the appraisal statute, and its broader available discovery, to accomplish the same goal? In this case, the Court concludes that the answer is a qualified yes. That is, the stockholders are entitled to discovery in the appraisal proceeding. But if it appears the proceeding is just a means to investigate a potential class action for breach of fiduciary duties, the stockholder is entitled to discovery only to the limited extent it would have been available under Section 220, and not to the broader extent typically available under Section 262. 

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