Showing 84 posts in Books and Records.
Former Director Loses Right To Inspect
King v DAG SPE Managing Member Inc., C.A. 7770-VCP (December 23, 2012)
This decision holds that after a director ceases to be a director, he loses any statutory or other right as a director to inspect a corporation's books and records.
ShareCourt Of Chancery Limits Inspection From Third Party
Florida R&D Fund Investors LLC v. Florida BOCA, C.A. 8400-VCN (August 30, 2013)
This decision illustrates the danger in vesting practical control of the records an entity in a non-Delaware "agent." Simply put, as the agent is not subject to the statutory duty to produce those records and may not even be subject to Delaware jurisdiction, the Delaware forum is not available to enforce inspection rights
ShareCourt Of Chancery Permits Access To Litigation Reserves
JP Morgan Chase & Co. v. American Century Companies Inc., C.A. 6875-VCN (April 18, 2013)
This decision explains the rare case when a litigant may gain access to the opposing party's litigation reserves. That information is usually subject to attorney-client privilege.
ShareCourt Of Chancery Explains Limits On Inspection
Doerler v. American Cash Exchange Inc., C.A. 7640-VCG (February 19, 2013)
This books and records case provides a good summary of the law limiting inspection to what the petitioner really needs to fulfill her proper purpose in seeking inspection. The decision covers both inspection to value shares and to investigate alleged wrongdoing.
ShareCourt Of Chancery Permits Interlocutory Appeal In 220 Case
In Re Freeport-McMoRan Copper & Gold Inc. Derivative Litigation, C.A. 8145-VCN (February 14, 2013)
In recent years, the Delaware Supreme Court has stressed that it is desirable to file a books and records case before starting derivative litigation. But do you need to do that every time? In the unusual situation presented by this case, the Court of Chancery declined to hold up a derivative case to permit a books and records case to go first. In granting an immediate appeal, the Court recognized that the Supreme Court may want to clarify the law in this area.
ShareCourt Of Chancery Limits Claims In Section 220 Cases
The Ravenswood Investment Company LP v. Winmill & Co. Incorporated, C.A. 7048-VCN (January 31, 2013)
In a books and records action, may the plaintiff also add a count for breach of duty? This decision holds that he cannot do so. After all, a books and records action is meant to be summarily litigated. That fast track cannot be achieved if other claims must also be decided at the same time.
ShareCourt Of Chancery Explains Scope Of Inspection
Court Of Chancery Explains Sufficient Basis For Inspection
To inspect corporate records to see if there has been "wrongdoing," a stockholder has to have a basis to suspect that wrongdoing has occurred. The evidence needed has been described as the lowest level possible if there is to be any standard at all. This decision illustrates that a standard does exist. Past lawsuits that have been settled are not sufficient to show present wrongdoing. General news articles about an industry-wide investigation are not sufficient. Both together do not get there either and the suit was dismissed.
ShareSupreme Court Upholds Section 220 Jurisdictional Rules
Central Laborers Pension Fund v. News Corporation, No. 682, 2012 (May 29, 2012)
The right of a stockholder to inspect a company's books and records is govenned by Section 220 of the DGCL. A beneficial owner must first show proof of beneficial ownership, however, and Section 220 tells how to do so. Here the plaintiff for some reason just ignored Section 220's requirements to show beneficial ownership. When then faced with a motion to dismiss, he argued that he could supply that proof later because it was just a clerical mistake to not do so when his complaint was filed. The Delaware Supreme Court forcefully rejected that argument and upheld the dismissal of his complaint.
Note that the Supreme Court sidestepped the holding of the Court of Chancery that once it filed a derivative suit, this plaintiff lost its rights under Section 220.
ShareCourt Of Chancery Appoints Books And Records Receiver
Jagodzinski v. Silicon Valley Innovation Company LLC, C.A. 6203-VCP (February 14, 2012)
This is an interesting decision because the Court appointed a receiver to enforce its orders granting a right to inspect an LLC's records when the LLC management did not comply with those past orders. How far that receiver might go in his inspection is not clear but given that the receiver is the plaintiff's own agent, pretty far seems likely.
ShareCourt Of Chancery Limits Inspection When Prior Case Filed
Amalgamated Bank v. NetApp Inc., C.A. 6772-VCG (February 6, 2012)
The interaction between two cases in two jurisdictions is again examined in this decision. The court held that a Section 220 books and records case may not be pursued to provide discovery to support the amendment of a complaint in a case pending elsewhere when the time to amend that complaint has passed. The mere possibility that the time to amend may be extended is not enough to get under the rule in the King decision that permitted a books and records action to proceed when the right to amend a complaint was still present.
ShareSupreme Court Clarifies Inspection Rights
Court Of Chancery Explains Books And Records Rights In An LLC
DFG Wire Company LLC v. Eight Estates Wine Holdings LLC, C.A. 6110-VCN (August 31, 2011)
Inspection rights in LLCs are different from those in corporations. The statute is different and the relationship between the owners is different. This decision does a good job of explaining inspection rights in an LLC, including when those rights may reach the records of a subsidiary.
ShareCourt Of Chancery Denies Fruitless Inspection
Graulich v. Dell Inc., C.A. 5846-CC (May 16, 2011)
The Court denied a petition to inspect corporate records for the purpose of determining if a suit should be filed against the Board when the plaintiff lacked standing to file such a suit, the statute of limitations barred the claim, and the potential claim was already the subject of a settlement of a prior suit. One has to wonder why this petition was ever filed.
ShareCourt Of Chancery Explains Right To Inspect After Demand Refused
This decision explains why a stockholder is entitled to inspect the documents surrounding a corporation's refusal to pursue derivative litigation when the board appears independent enough to be able to properly refuse the demand to sue. The Court carefully reviews past Delaware precedent and outlines what documents the stockholder may review.
The decision makes major points. First, the stockholder who has made a pre-suit demand does not thereby conclusively concede the board is independent and disinterested. Second, the decision to not sue is subject to the business judgment rule but that presumption may be rebutted by a showing the decision was not in good faith or was unreasonable. [Note that it is generally thought that the BJR precludes a reasonableness review but we will see if that is still true in this limited area. Most likely what the Court meant is that the decision has to be so unreasonable that no director in good faith could reach that conclusion.] Third, the Court of Chancery has, according to a federal court, exclusive jurisdiction over books and records cases under Delaware law.
This is an important decision because it shows the way much future derivative litigation must proceed. Books and records cases are fairly easy to litigate. This then permits plaintiffs to get behind the usual demand-refused letter that just states the process used and the conclusion not to sue and fails to say why. Of course, it remains to be seen if any plaintiff can make a showing after inspection to overcome a rejection of a demand to sue.
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