DealLawyers.com Blog

This Sheppard Mullin blog discusses the Chancery Court’s recent decision in Wiengarten v. Monster Worldwide – which held that the language of Section 220(c) of the DGCL does not provide a stockholder with inspection rights following cancellation of the stockholder’s shares in a merger.  This excerpt summarizes the court’s analysis:

Section 220(c) requires that that the stockholder establish that “(1) such stockholder is a stockholder; (2) such stockholder has complied with this section respecting the form and manner of making demand for inspection of such documents; and (3) the inspection is for a proper purpose.” If the stockholder can establish those three things, then the corporation has the burden to show the purpose was not proper in order to prevent inspection of the books and records.

In construing the statute, the Court hewed closely to the plain meaning of the text to “give effect to the expressed intent of the legislature.” The Court first agreed that petitioner had satisfied the Section 220(b) requirement, permitting him to seek relief under Section 220(c).  However, the Court found that Weingarten could not meet the requirements of 220(c).  Calling the language of the statute “plain and unambiguous,” the Court emphasized that the statute requires a plaintiff “to demonstrate that it ‘has’ — past tense — complied with the demand requirement and ‘is’ a stockholder . . . .”

The Court concluded through the use of past and present tense, the legislature “made clear” that only stockholders at the time of filing have standing to pursue a Section 220(c) action.  The Court then distinguished cases where a plaintiff loses his or her stock in a merger during the pendency of the action, pointing out that at the time of filing, unlike here, such plaintiffs were then-present stockholders.  Because petitioner was not a stockholder as defined by Section 220 when he commenced his action, he did not have standing.

– John Jenkins