In Nama Holdings, LLC v. World Market Center Venture, LLC, 2007 WL 2088851 (Del. Ch., July 20, 2007), read opinion here, the Chancery Court ruled that the right to inspect books and records of an LLC pursuant to the terms of an Operating Agreement could be more restrictive than the scope allowable for inspection pursuant to the Delaware Limited Liability Company Act. (See footnote 17 and cases/statute cited therein.) The court cited at footnote 28 to cases that establish the principle that a properly drafted confidentiality agreement is the sine qua non of a books and records inspection in Delaware. (see also note 29: the confidentiality agreement must allow use of the documents obtained for proper purposes.)
Bottom line: the court ruled that the LLC’s manager appropriately limited the inspection pursuant to the terms of the agreement and that the manager retained "substantial discretion to determine the scope and conditions of the investor’s access, and enjoys the power to limit the classes of documents available and to insist upon the investor’s execution of an appropriate confidentiality agreement before such access is granted."
Procedurally, this case was filed on April 27 and a trial was held on May 14. Post-trial briefing was submitted on June 5. This July 20 opinion followed. Here is a summary of a prior decision in this case where the court refused to dismiss the case, finding it beyond the scope of the arbitration clause (last case listed at foregoing link.)
As I have mentioned previously on these pages in connection with the many "books and records" cases I have summarized over the last 2 years on this blog, this case is another example of the large amount of effort and expense incurred to demand books and records–only to come up empty after trial. The only argument here that the person who demanded the documents won is that they were entitled to have a representative do the inspection on their behalf (e.g., an accountant, attorney or other expert–see footnote 30 and the text that follows the note.) On this last point (which did not mean that any more documents would be provided) the court found that the entity failed to substantiate that there was a conflict of interest barring the investor’s representative from doing the inspection.
In addition, I found the following gems in the opinion of hornbook law for contract interpretation:
(i) " the clear, literal meaning of the terms in a legally binding agreement should be given effect when those terms ‘establish the parties’ common meaning so that a reasonable person in the position of either party would have no expectations inconsistent with the contract language’. Indeed, absent contractual ambiguity, a court cannot resort to extrinsic evidence to vary the terms of the agreement or to create uncertainty therein." (see footnote 18).
(ii) "Ambiguity does not occur simply because the parties disagree about the contract’s meaning; rather, a contract is only ambiguous when a disputed provision is ‘susceptible to two reasonable interpretations’". (citations omitted)(emphasis in original)
(iii) as a general matter, courts "attempt to interpret each word or phrase in a contract to have an independent meaning so as to avoid rendering contractual language mere surplusage". (see footnote 23).
NOTE: Here is a post that summarized a prior opinion in this case that denied a motion to dismiss (see the last of three brief blurbs in the linked post).