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.

Court 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

Court 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.

Court 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.

Court 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.

Court 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.

Court Of Chancery Explains Scope Of Inspecton

Rock Solid Gelt, Ltd. v. The SmartPill Corporation,  C.A. 7100-VCN (October 10, 2012)

This decision addresses one of the more perplexing problems of book and records litigation - what exactly is the plaintiff entitled to review? The Court of Chancery expects plaintiffs to limit their demands to what is really necessary and to explain to the Court, sometimes with witnesses, exactly what should be inspected to meet the proper purpose established at trial.  A blunderbuss approach is likely to irritate the Court and get you less than you really want.  This decision spells out the sort of evidence that should be presented to inspect specific records.

Court Of Chancery Explains Sufficient Basis For Inspection

Louisiana Municipal Police Employees' Retirement System v. Lennar Corporation, C.A. 7314-VCG (October 5, 2012)

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.

Supreme 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.

Court 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.

Court 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.

Supreme Court Clarifies Inspection Rights

Espinoza v. Hewlett-Packard Company, C.A. 208, 2011 (November 21, 2011)

This decision clarifies the scope of the right to inspect a company's records to investigate allegations of wrongdoing.  The decision is somewhat unique becasue it also raised issues of attorney-client privilege and work product protection that the Supreme Court did not need to decide. Briefly, a document may be subject to inspection when it is "essential" to accomplish the purpose of the inspection.  That in turn means the document must address the issue involved, such as the alleged wrongdoing, and not just be information otherwise made available to the inspector.

Obviously, this is a fact intensive test.  In this case, for example, the information sought was contained in other documents provided and the document sought did not really add much to the mix of information addressing the key question the stockholder wanted to investigate.

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.

Court 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.

Court Of Chancery Explains Right To Inspect After Demand Refused

Louisiana Municipal Police Employees Retirement System v. Morgan Stanley & Co. Inc., C.A. 5682-VCL (March 4, 2011)

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.

Court Of Chancery Permits Inspection of Pre-Ownership Events

Sanders v. Ohmite Holding LLC, C.A. 5145-VCL ( February 21, 2011)

This decision determines that an owner of an LLC interest may obtain inspection of its books and records even with respect to events that occurred before he became a member.

Supreme Court Upholds Late Inspection Suit

King v. Verifone Holdings Inc.,  No. 330, 2010  (January 28, 2011)

This decision reinstates a books and records case that was dismissed by the Court of Chancery. The Court of Chancery held that a stockholder who first files a derivative complaint may not later file a books and records case.  The Supreme Court overturned that bright line test.

Instead, the Supreme Court held that when a stockholder suit might prove useful even after a derivative suit is filed, the books and records case may proceed.  Thus, if the derivative suit is still pending or even after it has been dismissed if it may be refiled, the inspection of company records may be requested by a book and records suit.  If, however, the derivative suit is dismissed with prejudice, then inspection serves no proper purpose and will be denied.

Court Of Chancery Explains Expedited Procedures

Lavi v. Wideawake Deathrow Entertainment LLC, C.A. 5779-VCS (January 18, 2011)

The Delaware corporate and alternative entity laws have several provisions for expedited treatment of corporate disputes, such as over the right to inspect corporate records. Those matters are to go to trial quickly and, as this decision explains, are seldom subject to motion practice such as for summary judgment.  Thus, the better practice is to ask for a trial date, soon.

A word of caution is in order on this point, however.  When the Court calls in response to a request for a fast schedule, you had better be prepared to say why any trial is needed.  At least in some cases, the Court has been known to rule on the merits during such a call when faced with a lawyer who has no good reason to oppose inspection or a decision on entitlement to vote stock.

Court Of Chancery Again Dismisses Late Books And Records Case

Baca v. Insight Enterprises. Inc., C.A. 5105-VCL (June 3, 2010)

Just as it did last month in the King case, the Court of Chancery has again dismissed a complaint for inspection of a company's books and records when that complaint was filed after a derivative suit was filed and is an effort to find a a basis to sustain the derivative case.

Court Of Chancery Upholds Right To Member List

Brown Investment Management L.P.  v.  Parkcentral Global L.P., C.A. 5248-VCL (May 24, 2010)

 A member of a LLC  or LP has the right to a list of its members even after it has gone bust.

Court of Chancery Explains Beneficial Ownership Proof Requirement

Smith v Horizon Lines, Inc., C.A. 4573-CC (August 31, 2009)

When the statute governing demands for inspection rights was changed to permit a demand by a beneficial owner, it also required proof of beneficial ownership. This decision explains what form that proof must take. An account statement that just has the owner's last name and does not indicate the date is not good enough. You would think that someone named "Smith" would have been told by now to be more explicit.

Court of Chancery Acts to Resolve Inspection Suit

Bosse v. WorldWebDex Corp. C.A. 4443-CC (July 30, 2009).

The Court of Chancery frequently acts to promptly resolve actions seeking inspection rights even faster than the parties might expect or ask. This is an example of the Court reviewing the complaint and response and deciding to grant judgment on the pleadings when there does not seem to be any valid defense.

Court of Chancery Applies Corporate Law to Books and Records of LLC

Mickman v. American International Processing LLC, C.A. 3869-VCP (July 28, 2009).

This decision applies corporate case law to a demand for the records of an LLC. The Court held that a right to review "all books and records" under the LLC agreement means just that, all the pertinent records. It also held that the grant of access to the records includes the right to copy them.

Court of Chancery Limits Inspection Rights in LLC

Jakks Pacific, Inc.v. THQ/Jakks Pacific LLC, C.A. 4295-VCL (May 5, 2009)

When the business of an LLC is limited, so too may inspection rights be limited. Here the "business" was to exploit a license that was about to come to an end, and the Court held there was no need to inspect business records to value the business as there may well be nothing left to value.

Further, the Court held that mere allegations, unsupported by facts at trial, do not provide a basis to inspect records to determine if there has been any wrongdoing.

 

Court of Chancery Explains Interaction with PSLRA

Beiser v. PMC-Sierra Inc., C.A. 3893-VCL (Del. Ch. Feb. 26, 2009)

 

Under the federal PSLRA, discovery may be stayed while a motion to dismiss is pending. Parties have tried to get around this stay by filling a books and records complaint in the Court of Chancery. This decision explains when you can get away with that, and holds, not very often.

 

Briefly, a books and records action may only proceed when the plaintiff is not already involved in a federal case over the same issues, when the plaintiff's attorney is also not involved in a pending federal case, and where the plaintiff agrees not to use the materials produced in the Delaware case to prosecute a pending federal case.

Court of Chancery Denies Redundant Inspection

Norfolk Country Retirement System v. Jos. A. Bank Clothiers, Inc., C.A. 3443-VCP (Del. Ch. Feb. 12, 2009)

 

Repeated books and records demands by different stockholders should be viewed favorably. When, as here, a special litigation committee (SLC) has reviewed the conduct sought to be investigated by the plaintiff, and the independence and diligence of the SLC cannot be fairly questioned, then a stockholder who demands inspection may receive the SLC report and some backup materials, but no more absent a stronger showing of real justification to think the SLC did not do its job.

Court of Chancery Upholds Corporate Documentation

Tanyous v. Happy Child World, Inc., C.A. 2947-VCN (Del. Ch. July 18, 2008)

This decision holds that when the corporate internal documents say the plaintiff is a stockholder, an alleged oral agreement that he was really just a lender with the stock as security is not to be believed. What is striking about this case is the extraordinary patience the Court gave to what seems to be a pretty far-fetched story that documents do not mean what they say.

The plaintiff contended that he was a stockholder entitled to inspection rights. The defense was that despite all the corporate documentation, including tax returns, that said the plaintiff was a stockholder, there really was a side deal that he was only a lender with a security interest in stock. Not surprisingly, that story did not wash.

Court of Chancery Confirms Limits of Inspection Litigation

TravelCenters of America LLC v. Brog, C.A. 3516-CC (Del. Ch. March 31, 2008)

This decision confirms that for limited liability companies the rule applies from corporate law that a suit for inspection of books and records is a limited case that may not also include other claims such as breach of fiduciary duty.

Court of Chancery Extends Books And Records Inspection

Melzer v. CNET Networks, Inc., C.A. No. 3023-CC (November 21, 2007).

The scope of inspection rights may be affected by when a stockholder first acquired her stock. If the inspection is to investigate alleged wrongdoing, the rationale for granting inspection is to permit the filing of a derivative suit if the inspection shows that it is warranted. Hence, prior case law has held that inspection of records existing before the petitioner became a stockholder is not warranted because the stockholder has no right to sue for those pre-ownership wrongs under Delaware law.

This decision extends inspection rights when the potential claim is for a Caremark case alleging a "sustained or systematic failure" of oversight. Then, the Court held, showing past failures is relevant to showing a sustained wrong that culminated in damage to the entity after the petitioner became a stockholder. Under that rationale, the scope of inspection may extend to pre-ownership records.

Court of Chancery Explains The "Some Evidence" Rule In Section 220 Cases

Louisiana Municipal Police Employees Retirement System, C.A. No. 2608-VCN (October 2, 2007).

To obtain inspection of corporate records to investigate allegations of wrongdoing, it has long been held that a stockholder must have "some evidence" that there was indeed wrongdoing to investigate. Otherwise, mere allegations would permit intrusive books and records reviews.

Here, the allegation was that options had been back dated and the Court permitted inspection based on a statistical analysis that showed stock price rises immediately after many option grants. The Court felt this was "some evidence" that warranted inspection. However, the Court was clearly skeptical and cautioned that it was going to continue as the gate keeper to limit inspections that were not justified.

Court of Chancery Limits Inspection Rights

NAMA Holdings LLC v. World Market Center Venture LLC, C.A. No. 2756-VCL (July 20, 2007).

Frequently the rights of a member of an LLC or LP to inspect the entity's records is limited by the governing instrument. Thus, permitting only "reasonable access" is common. In this decision, the Court defines what "reasonable access" means, particularly when confidential information is involved.

Court of Chancery Permits Inspection In Rights Offering

Robotti & Company LLC v. Gulfport Energy Corporation, C.A. No. 1811-VCN (July 3, 2007).

Applying standard books and records inspection law, this decision permitted inspection into the reasons why a subscription rights offering was structured so as to seemingly benefit insiders. This illustrates the reasoning process that the Court goes through to decide if there is enough basis to support a claim of possible wrongdoing that justifies granting a books and records inspection.

Court of Chancery Limits Inspection For Proxy Battle

Pershing Square L.P. v. Ceridian Corporation, C.A. No. 2780-CC (Del. Ch. May 11, 2007).

To obtain inspection of corporate records, a stockholder must show that her purpose is a proper one. This decision holds that determining the suitability of a candidate to serve as a director is a proper purpose. That much is no surprise.

What is potentially more significant is the Court's other holding. This decision protects confidential business information from being used in a proxy contest, at least when the relevance of the confidential materials to the election seems strained. The Court was clearly concerned about discouraging frank communication to the board.

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Court of Chancery Limits Inspection of Partnership Records

Holman v Northwest Broadcasting LP, C.A. No. 1572-VCN (Del. Ch. March 29, 2007).

When a stockholder or, as here, a partner demands inspection of an entity's records, the usual test of what records are to be produced is what is "essential and necessary" to the proper purpose for that inspection. Here the partner seeking inspection rights had been given audited financial information already. Thus, the Court had to decide if he needed more than those audited reports to accomplish his proper purpose, a valuation of his partnership interests.

As to those items in the audited report that were in enough detail to be used for valuation purposes, the Court denied further inspection. However, the result was different in the case of the audited reports' treatment of executive compensation. In that case, the Court concluded, the information was too general to be useful. How the compensation was allocated was important to any determination of whether that cost could be cut and the entity's value thereby increased. Therefore, the Court ordered that further information breaking down that cost be provided.

Court of Chancery Grants Limited Inspection Rights

Shamrock Activist Value Fund LP v. iPass Inc., C.A. No. 2462-N (Del. Ch. December 12, 2006).

When seeking to inspect corporate records, the stockholder needs to have a reasonable purpose for doing so. If the stated purpose is to investigate wrongdoing, there must be a real basis to suspect wrongdoing or the demand will be denied. Here the demand was at least partially deficient because allegations of improper conduct seemed to be little more than that the company had not met its predicted financial results. The plaintiff escaped dismissal of its suit on narrow grounds that there were also allegations of a failure to carry out a plan that was more definite than just a prediction,  something closer to a promise that was broken.

Court of Chancery Rejects Challenge To Stockholder Consent

B.F. Rich Co., Inc v. Gray,  C.A. No. 1896-N (Del. Ch. November 9, 2006) refused to consider the defense in Section 225 case that the plaintiff would hurt the corporation if he took it over. As the Court noted, the issues in Section 225 cases are tightly confined to the validity of the stockholder consent.  Any abuse of the power gained by use of those consents is for a later proceeding. Continue Reading...

Court of Chancery Denies Books And Records Inspection

Polygon Global Opportunities Master Fund v. West Corporation, C.A. No. 2313-N (Del. Ch. October 12, 2006).

Stockholders may seek inspection of corporate records to investigate potential wrongdoing. However, as this case holds, when they have purchased their stock after the wrongdoing is alleged to have occurred, they lack standing to pursue a claim for breach of duty and the court will therefore deny their request to inspect records on that claim.

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Supreme Court Affirms the Credible Basis Rule

Seinfeld v. Verizon Communications Inc., C.A. No. 624 (Del. Supr. September 25, 2006).

The Delaware Supreme Court has affirmed that the "credible basis" test applies to determine if a stockholder is entitled to inspect corporate records to investigate alleged wrongdoing. The stockholder argued that Delaware should permit his records inspection even if he lacked enough facts to convince the trial court that he had a credible basis to believe that the corporation was paying three top officers inappropriate compensation. He asserted that to require any real proof of his claims before inspection was an insurmountable burden. Both the Court of Chancery and now the Supreme Court rejected his argument and noted that there is considerable precedent granting inspection rights to show that this remedy is available in the right circumstances.

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Court of Chancery Denies Stay In Books and Records Case

Wynnefield Partners Small Cap Value L.P. v. Niagara Corp., C.A. 1261-N, 2006 WL __________ (Del. Ch. Aug. 9, 2006).

The normal rule in a books and records case is that a stay of the inspection will be granted when there is an appeal. In this case, however, the Court of Chancery denied a stay because the records related to a stockholder meeting that was about to occur. Subsequently, the Supreme Court granted the stay of inspection but ordered an expedited appeal to be able to issue an opinion before the stockholders' meeting.

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Court of Chancery Limits Use of Demand for Records

Highland Select Equity Fund, L.P. v. Motient Corp., C.A. No. 2092-N, 2006 WL 1903129 (Del. Ch. July 6, 2006).

In this case, the Court of Chancery dismissed a demand to inspect the records of a Delaware corporation because the demand for inspection was abusive. A demand to inspect corporate records must be based on a good reason and when the request is to inspect allegations of wrongdoing, those allegations must have some basis. While the Court here felt that part of the test for inspection had been met, the way the plaintiff went about its request cost it the litigation.

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Court of Chancery Determines Criteria To Decide Inspection Rights

Wynnefield Partners Small Cap Value LP v. Niagara Corp., C.A. No. 1261, 2006 WL 1737862 (Del. Ch. June 19, 2006).

This is Section 220 action where the principal issue is whether the plaintiff had satisfied the criteria to inspect records related to alleged wrongdoing. The Court of Chancery held that merely alleging that wrongdoing had occurred was not sufficient to warrant inspection of corporate records. However, in some areas the Court held that sufficient facts had been alleged to justify record insepction.

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Court of Chancery Aids The Missing Stockholder

Gildor v. Optical Solutions, Inc., C.A. No. 1416-N, 2006 WL 1596678 (Del. Ch. June 5, 2006).

It is often not clear what a corporation is to do when it cannot find a missing stockholder. While 8 Del. C. §230 answers that question for stockholder meetings, what to do in other circumstances is less clear. In this decision, the Court of Chancery held that the corporation should at least look through its records to try to find the missing stockholder to give him notice of the right to acquire corporate stock. The failure to try harder led the court to extend the stockholder's time when he finally appeared.

Court of Chancery Orders Production of Documents in Books and Records Action

Sutherland v. Dardanelle Timber Co., C.A. No. 671-N (Del. Ch. May 16, 2006).

Defendant objected to Master in Chancery's report granting relief to Plaintiff on majority of her requests in Section 220 action. Plaintiff objected to Master in Chancery's narrowing the scope of documents she demanded.

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Court of Chancery Dismisses De Facto Dividend Claim Because Disguised as Improperly Pled Claim of Self-Dealing

Horbal v. Three Rivers Holdings, Inc., C.A. No. 1273-N, 2006 WL 668542 (Del. Ch. Mar. 10, 2006).

Plaintiffs, founders of a Health Management Organization, alleged that their co-investors abused their positions by siphoning off tens of millions of dollars from the HMO in the form of disguised salaries and corporate perquisites; plaintiffs call these "de facto dividends." The Court of Chancery granted defendants' motion to dismiss because plaintiffs did not adequately allege self-dealing, the center of a de facto dividend claim.

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Court of Chancery Denies Motion to Stay Books and Records Action in Favor of Separate Derivative Action Involving Substantially Similar Matters

Kaufman v. Computer Associates International, Inc., C.A. No. 699-N, 2005 WL 3470589 (Del. Ch. Dec. 13, 2005).

A beneficial stockholder filed a books-and-records action pursuant to 8 Del.C. §220 seeking documents relating to the corporation's decision to settle certain derivative and federal class action litigation in a manner that allegedly benefited the individual wrongdoers at the corporation's expense. A special litigation committee acting on behalf of the corporation moved to stay this action until it completed its investigation on this issue, which had become the subject of new derivative litigation in New York brought by different plaintiffs.

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Books-and-Records Action Dismissed Where No Credible Evidence to Justify Investigation of Alleged Misconduct

Seinfeld v. Verizon Communications, Inc., C.A. No. 1100-N, 2005 WL 3272365 (Del. Ch. Nov. 23, 2005).

Shareholder sought to compel inspection of books and record under 8 Del.C. -220 related to three senior executives' compensation, which Plaintiff claimed to be excessive and wasteful. Plaintiff's complaint claimed that those executives received total compensation of $205 million for ostensibly performing the same services as co-chief executives. The complaint also alleged that Verizon's long-term bonus plan was amended shortly after at least two of the three employee contracts were entered into, which caused a further increase in the executives' total compensation. After discovery, the parties cross-moved for summary judgment, and the court granted judgment in the company's favor.

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Court of Chancery Denies Motion For Continued Sealing Of Portions Of Derivative Complaint

Stone v. Ritter, C.A. No. 1570-N, 2005 WL 2416365 (Del. Ch. Sept. 26, 2005).

Defendants sought continued sealing of portions of derivative complaint.

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Court of Chancery Finds Proper Purpose in Books and Records Case Where Beneficial Owners Demonstrate that CEO Received Excessive Compensation

Haywood v. Ambase Corp., C.A. No. 342-N, 2005 WL 2130614 (Del. Ch. Aug. 22, 2005).

Plaintiffs Haywood and Cronin were beneficial owners of defendant AmBase Corporation's ("AmBase") common stock. Ambase was a publicly held Delaware corporation, and its primary purpose at the time was to pursue pending litigation against the United States government based on the impact of the Financial Institutions Reform, Recovery and Enforcement Act. Richard Bianco was the chairman and chief executive officer of AmBase.

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Court of Chancery Holds that Private Securities Litigation Reform Act and Securities Litigation Uniform Standards Act do not Preempt Books and Records Action

Romero v. Career Educ. Corp., C.A. No. 793-N, 2005 WL 1798042 (Del. Ch. July 19, 2005).

Plaintiff shareholder brought an action against Career Education Corporation ("CEC"), a Delaware corporation, seeking to compel inspection of certain books and records. CEC moved to dismiss the complaint or to stay.

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Court of Chancery Holds Fund to be Beneficial Owner Even When it Holds a Net Short Position or Purchases Shorted Shares from its Other Accounts

Deephaven Risk ARB Trading Ltd. v. UnitedGlobalCom, Inc., C.A. No. 379-N, 2005 WL 1713067 (Del. Ch. July 13, 2005).

Plaintiff Deephaven Risk ARB Trading Ltd. ("Deephaven"), an investment fund, sought to compel inspection of defendant UnitedGlobalCom's ("UGC") books and records to investigate possible wrongdoing in connection with a rights offering. In response, UGC moved to dismiss the complaint, challenging Deephaven's status as a beneficial owner and the purpose for its demand. The court denied UGC's motion.

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Court of Chancery Holds that Unitholders in Private Equity Fund Can Inspect Books and Records After Fund Loses 75% of Value

Forsythe v. CIBC Employee Private Equity Fund, C.A. No. 657-N, 2005 WL 1653963 (Del. Ch. July 7, 2005).

Plaintiffs Forsythe and Tesche, who were unitholders in a Delaware limited partnership, brought an action to inspect the books and records. At the close of trial, two issues remained for post-trial briefing: (1) whether the plaintiffs stated a proper purpose; and (2) whether plaintiffs had a right to demand inspection of documents held or under the control of an entity other than the general partner.

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Court of Chancery Protects Certain Materials Obtained Through Section 220 Action as Confidential

Roy E. Disney v. The Walt Disney Company, C.A. No. 234-N, 2005 WL 1538336 (Del. Ch. June 20, 2005).

The Court of Chancery considered the confidentiality of certain documents on remand from the Supreme Court. Plaintiff moved to lift a confidentiality designation placed on ten documents.

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Court of Chancery Permits 220 Action To Proceed Despite Likelihood that Documents Would Give Rise to Precluded Causes of Action

Amalgamated Bank v. UICI, C.A. No. 884-N, 2005 WL 1377432 (Del. Ch. June 2, 2005)

Plaintiff Amalgamated Bank brought an action under 8
Del. C. § 220 to inspect the books and records of UICI, a corporation in which it was a shareholder.

The Court of Chancery permitted Plaintiff's inquiry, despite the request encompassing documents likely only to reveal time-barred and other precluded causes of action.

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Court of Chancery Holds No Right To Books And Records Without Attested Documentary Evidence Supporting Shareholder Status

Frank D. Seinfeld v. Verizon Communications Inc., C.A. No. 484-N, 2005 WL 147765 (Del. Ch. Jan. 21, 2005)(published at 873 A.2d 316) (revised Jan. 24, 2005).

This is a books and records summary judgment action under 8 Del. C. §220.

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