A recent post-trial opinion from the Delaware Court of Chancery serves as another example to support the view that demands for books and records pursuant to DGCL Section 220 are not for the faint of heart.
In Wilkinson v. A. Schulman, Inc., C.A. 2017-0138-VCL (Del. Ch. Nov. 13, 2017), the Court denied a request for books and records in a decision supported by copious citations to precedent, based largely on the conclusion that even though the demand may have satisfied the requirement for a “proper purpose” on its face, in reality the true purpose was one crafted by counsel for the stockholder–but that the stockholder himself did not appear too familiar with. During the stockholder’s deposition, it was revealed that the stockholder was not conversant with the details of the demand, or its purpose–and that the stockholder served as a plaintiff in seven other lawsuits for the same law firm that pursued the instant case.
Takeaway: There are many other examples that we have highlighted on these pages over the past nearly 13 years, that demonstrate that Section 220 cases are often hotly litigated and it is not rare to incur the cost of a trial, as in this matter, and “come up dry” in terms of not proving the right to obtain documents from the corporation. Thus, the economics of a Section 220 demand favor those whose stake in a company makes it economically rational to pursue such a claim. See, e.g., Section 220 cases highlighted previously.