Courtesy of Wilmington attorney David Finger is a summary of a decision in Melzer v. CNET, read transcript here, in which the Chancery Court granted (via conference call), Mr. Finger’s motion for protective order to prevent the deposition of the plaintiff’s attorney in a Section 220 lawsuit. In the course of the decision, the Chancellor sets forth succinctly the prerequisites for demanding books and records under Section 220. A prior decision in the case a few months ago that decided a separate discovery dispute was summarized on this blog here.
Here is the summary of the court’s October 31, 2007 decision, provided this morning by attorney Finger:
In Melzer v. CNET Corp., the plaintiffs seek access to the corporate records of CNET to investigate the extent of backdating (which CNET has admitted to).
In the course of discovery, CNET sought to take the deposition of Robert B. Weiser, Esq., one of the plaintiffs’ lawyers. The argument was that it is not really the plaintiffs who are driving the litigation, it is the lawyers, who hope to use the documents in derivative litigation and, if successful, be awarded a fee.
Chancellor Chandler rejected that argument, and found that taking counsel’s deposition would be "totally wasteful, frivolous and unnecessary. It would be an excursion into irrelevancies that have nothing to do [with the case]." The Chancellor also suggested that if the fact that plaintiffs’ counsel is seeking fees was a reason to deny shareholders access to corporate records, then there would be little litigation in the Court of Chancery. He also wondered wryly whether CNET’s counsel was being paid, and whether that justified their being disqualified.