A recent decision from the Delaware Court of Chancery addressed an issue of first impression, and the court ruled that: In order to maintain a suit under DGCL Section 220 for corporate books and records, the plaintiff must be a stockholder at the time suit is filed.Weingarten v. Monster Worldwide, Inc., C.A. No. 1293-VCG (Del. Ch. Feb. 27, 2017).
Background: The facts of this case involved a pre-suit demand for books and records under Section 220 of the DGCL. The demand was made shortly before a merger was scheduled to close, but suit was not filed until after the merger closed. The merger extinguished the stockholder status of the plaintiff.
Court’s Reasoning: The court conducted a thorough statutory interpretation of Section 220 and determined that the statutory prerequisite was clear and unambiguous to the extent that it requires that a plaintiff in a Section 220 case be a stockholder at the time suit is filed. Other Delaware decisions were distinguished to the extent that they involved a stockholder who lost that status after suit was filed.
Commentary: The multitude of court decisions interpreting Section 220 belie the facial simplicity of the statute. This well-reasoned decision provides another example of how Section 220 can be a complicated and expensive – – and unsuccessful – – method for obtaining books and records. Notably, this is a post-trial opinion, which implies that substantial fees were incurred before the plaintiff found that its efforts were not fruitful.