Wolst v. Monster Beverage Corp., C.A. No. 9154-VCN (Del. Ch. Oct. 3, 2014), this post-trial Chancery ruling is a another example of why a demand for books and records based on DGCL Section 220 is often an unpredictable exercise, and not inexpensive. In this decision, the Court rejected a Section 220 demand in light of the purpose for the demand relating to actions taken about seven years ago–well beyond the typical three year statute of limitations for derivative breach of fiduciary duty claims. Several highlights of this decision are noteworthy for purposes of corporate litigation:
- The court refused to extend to derivative claims the general rule that a class action tolls the statute of limitations for the putative members of the class pursuing direct claims. See Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974); Dubroff v. Wren Hldgs., LLC, 2011 WL 5137175 (Del. Ch. Oct. 28, 2011).
- Although the Court of Chancery is not bound by statutes of limitations, and a demand may be allowed if there were other potential claims that were not time-barred, the purpose of the demand was to investigate matters that occurred seven years ago, which the court determined would be barred by laches.