JAKKS Pacific, Inc. v. THQ/JAKKS Pacific, LLC, Del. Ch., No. 4295-VCL (May 6, 2009), read opinion here.
Pursuant to Section 18-305 of the Delaware Limited Liability Company Act (6 Del. C. Section 18-305), the plaintiff in this case sought an inspection of the books and records of an LLC. The complaint was filed on January 16, 2009. A one-day trial was held on March 31, 2009. The post-trial briefing concluded on April 27, 2009. One should note the procedural speed with which this matter was decided.
In sum, the court explained that there was not a “proper purpose” as required for a books and records demand. The stated purposed was recounted on page 8 of the slip opinion, but the court “drilled down” to determine that the “real purpose” was not “reasonably related to the specific interests of the member making the demand.” The court found that after trial, the plaintiff did not establish, by a “preponderance of the evidence” the existence of a “proper purpose” for inspection. (citing Somerville S. Trust v. USV Partners, LLC, 2002 WL 1832830, at *5, (Del. Ch.)) At page 10 of the slip opinion the court explained that it will not simply take the “stated proper purpose” at face value. Rather, it will require evidence to support that proper purpose. That requirement was not met in the case. For example, although the court stated that in most circumstances a valid purpose for a demand would be to value the interest one had in a company, in this case the court determined that such a stated purpose was largely meaningless since the valuation was the subject of a previous arbitration, the decision for which was expected at any time.
This decision provides a helpful example of the substantial amount of time and money that can be spent in a books and records demand case–only to "come up dry".