Doerler v. American Cash Exchange, Inc., C.A. No. 7640-VCG (Del. Ch. Feb. 19, 2013).
This gem of a Chancery decision provides an excellent overview of both the basic prerequisites of a claim for books and records under DGCL Section 220 as well as the nuances of certain defenses that may be–and may not be available to the corporation.
Commonly rejected defenses discussed on page 9 include: (1) ulterior motives that may be less honorable than the primary purpose; (2) hostility towards management, which will not defeat a Section 220 claim. (3) The claim was also not defeated even though the court suspected that an ulterior purpose may be to contact shareholder creditors to seek an involuntary bankruptcy–but mere communication with shareholders is a proper purpose. However, the corporation may prevail if it can demonstrate that a request, if granted, would be “adverse to corporate interests”. See footnotes 55 to 58 and related text.
Another useful aspect of this opinion is that it explains why the request is overbroad and how the court tailored the requested documents to a more precise scope that complied with the requirement that the documents requested must related to the proper purpose. This opinion should be consulted by those who are requesting documents for purposes of valuation and to investigate credible claims of mismanagement.