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220 Actions and Tools at Hand

Shareholders have a statutory right to access the books and records of the corporation. This power is an extremely important tool for shareholders to monitor the actions the board of directors and to root wrong-doing or malfeasance. However, the right to monitor a corporation's books and records is also subject to limitations. In the following cases we learn about using the “tools at hand” and the limits to their use.

Courts – as in Beam v. Stewart – regularly exhort plaintiffs to use Section 220 to seek out books and records prior to filing derivative complaints.  However, the 220 process can be lengthy.  Consequently, the economics of plaintiff litigation make it difficult for plaintiffs to both pursue 220 litigation and also maintain control positions in early filed derivative litigation. This challenge makes 220 actions a less than perfect vehicle for curbing the excesses of the litigation industrial complex. 

  • 1 DGCL Sec. 220

    Inspection of Books and Records

    1
    TITLE 8
    2
    Corporations
    3
    CHAPTER 1. GENERAL CORPORATION LAW
    4
    Subchapter VII. Meetings, Elections, Voting and Notice
    5

     

    6 7

    (a) As used in this section:

    8

    (1) "Stockholder" means a holder of record of stock in a stock corporation, or a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person.

    9

    (2) "Subsidiary" means any entity directly or indirectly owned, in whole or in part, by the corporation of which the stockholder is a stockholder and over the affairs of which the corporation directly or indirectly exercises control, and includes, without limitation, corporations, partnerships, limited partnerships, limited liability partnerships, limited liability companies, statutory trusts and/or joint ventures.

    10

    (3) "Under oath" includes statements the declarant affirms to be true under penalty of perjury under the laws of the United States or any state.

    11

    (b) Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from:

    12

    (1) The corporation's stock ledger, a list of its stockholders, and its other books and records; and

    13

    (2) A subsidiary's books and records, to the extent that:

    14

    a. The corporation has actual possession and control of such records of such subsidiary; or

    15

    b. The corporation could obtain such records through the exercise of control over such subsidiary, provided that as of the date of the making of the demand:

    16

    1. The stockholder inspection of such books and records of the subsidiary would not constitute a breach of an agreement between the corporation or the subsidiary and a person or persons not affiliated with the corporation; and

    17

    2. The subsidiary would not have the right under the law applicable to it to deny the corporation access to such books and records upon demand by the corporation.

    18

    In every instance where the stockholder is other than a record holder of stock in a stock corporation, or a member of a nonstock corporation, the demand under oath shall state the person's status as a stockholder, be accompanied by documentary evidence of beneficial ownership of the stock, and state that such documentary evidence is a true and correct copy of what it purports to be. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in this State or at its principal place of business.

    19

    (c) If the corporation, or an officer or agent thereof, refuses to permit an inspection sought by a stockholder or attorney or other agent acting for the stockholder pursuant to subsection (b) of this section or does not reply to the demand within 5 business days after the demand has been made, the stockholder may apply to the Court of Chancery for an order to compel such inspection. The Court of Chancery is hereby vested with exclusive jurisdiction to determine whether or not the person seeking inspection is entitled to the inspection sought. The Court may summarily order the corporation to permit the stockholder to inspect the corporation's stock ledger, an existing list of stockholders, and its other books and records, and to make copies or extracts therefrom; or the Court may order the corporation to furnish to the stockholder a list of its stockholders as of a specific date on condition that the stockholder first pay to the corporation the reasonable cost of obtaining and furnishing such list and on such other conditions as the Court deems appropriate. Where the stockholder seeks to inspect the corporation's books and records, other than its stock ledger or list of stockholders, such stockholder shall first establish that:

    20

    (1) Such stockholder is a stockholder;

    21

    (2) Such stockholder has complied with this section respecting the form and manner of making demand for inspection of such documents; and

    22

    (3) The inspection such stockholder seeks is for a proper purpose.

    23

    Where the stockholder seeks to inspect the corporation's stock ledger or list of stockholders and establishes that such stockholder is a stockholder and has complied with this section respecting the form and manner of making demand for inspection of such documents, the burden of proof shall be upon the corporation to establish that the inspection such stockholder seeks is for an improper purpose. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other or further relief as the Court may deem just and proper. The Court may order books, documents and records, pertinent extracts therefrom, or duly authenticated copies thereof, to be brought within this State and kept in this State upon such terms and conditions as the order may prescribe.

    24

    (d) Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to the director's position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger and the list of stockholders and to make copies or extracts therefrom. The burden of proof shall be upon the corporation to establish that the inspection such director seeks is for an improper purpose. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

    25

    8 Del. C. 1953, § 220; 56 Del. Laws, c. 5063 Del. Laws, c. 25, § 970 Del. Laws, c. 79, §§ 11, 1270 Del. Laws, c. 186, § 171 Del. Laws, c. 339, § 3974 Del. Laws, c. 84, §§ 5-877 Del. Laws, c. 253, §§ 20-23.;

  • 2 Seinfeld v. Verizon Communications Inc.

    Sec 220 – stockholder inspection rights

    1
    909 A.2d 117 (2006)
    2
    Frank D. SEINFELD, Plaintiff Below, Appellant,
    v.
    VERIZON COMMUNICATIONS, INC., Defendant Below, Appellee.
    3
    No. 624, 2005.
    4

    Supreme Court of Delaware.

    5
    Submitted: July 19, 2006.
    6
    Decided: September 25, 2006.
    7

    Robert D. Goldberg, Esquire, Biggs and Battaglia, Wilmington, Delaware, and Irving Bizar, Esquire (argued) and Natalie Marcus, Esquire, Ballon, Stoll, Bader & Nadler, P.C. and A. Arnold Gershon, P.C., New York, New York, for appellant.

    8

    Edward P. Welch, Esquire (argued) and Michael A. Barlow, Esquire, Skadden, Arps, Slate, Meagher & Flom, LLP, Wilmington, Delaware, for appellee.

    9

    Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS and RIDGELY, Justices, constituting the Court en Banc.

    10
    HOLLAND, Justice.
    11

    The plaintiff-appellant, Frank D. Seinfeld ("Seinfeld"), brought suit under section 220 of the Delaware General Corporation Law to compel the defendant-appellee, Verizon Communications, Inc. ("Verizon"), to produce, for his inspection, its books and records related to the compensation of Verizon's three highest corporate officers from 2000 to 2002. Seinfeld claimed that their executive compensation, individually and collectively, was excessive and wasteful. On cross-motions for summary judgment, the Court of Chancery applied well-established Delaware law and held that Seinfeld had not met his evidentiary burden to demonstrate a proper purpose to justify the inspection of Verizon's records.

    12

    The settled law of Delaware required Seinfeld to present some evidence that established a credible basis from which the Court of Chancery could infer there were legitimate issues of possible waste, mismanagement or wrongdoing that warranted further investigation.[1] Seinfeld argues that burden of proof "erects an insurmountable barrier for the minority shareholder of a public company."[2] We have concluded that Seinfeld's argument is without merit.

    13

    We reaffirm the well-established law of Delaware that stockholders seeking inspection under section 220 must present "some evidence" to suggest a "credible basis" from which a court can infer that mismanagement, waste or wrongdoing may have occurred.[3] The "credible basis" standard achieves an appropriate balance between providing stockholders who can offer some evidence of possible wrongdoing with access to corporate records and safeguarding the right of the corporation to deny requests for inspections that are based only upon suspicion or curiosity.[4] Accordingly, the judgment of the Court of Chancery must be affirmed.

    14
    [119] Facts
    15

    Seinfeld asserts that he is the beneficial owner of approximately 3,884 shares of Verizon, held in street name through a brokerage firm. His stated purpose for seeking Verizon's books and records was to investigate mismanagement and corporate waste regarding the executive compensations of Ivan G. Seidenberg, Lawrence T. Babbio, Jr. and Charles R. Lee. Seinfeld alleges that the three executives were all performing in the same job and were paid amounts, including stock options, above the compensation provided for in their employment contracts. Seinfeld's section 220 claim for inspection is further premised on various computations he performed which indicate that the three executives' compensation totaled $205 million over three years and was, therefore, excessive, given their responsibilities to the corporation.

    16

    During his deposition, Seinfeld acknowledged he had no factual support for his claim that mismanagement had taken place. He admitted that the three executives did not perform any duplicative work. Seinfeld conceded he had no factual basis to allege the executives "did not earn" the amounts paid to them under their respective employment agreements. Seinfeld also admitted "there is a possibility" that the $205 million executive compensation amount he calculated was wrong.

    17

    The issue before us is quite narrow: should a stockholder seeking inspection under section 220 be entitled to relief without being required to show some evidence to suggest a credible basis for wrongdoing? We conclude that the answer must be no.

    18
    Stockholder Inspection Rights
    19

    Delaware corporate law provides for a separation of legal control and ownership.[5] The legal responsibility to manage the business of the corporation for the benefit of the stockholder owners is conferred on the board of directors by statute.[6] The common law imposes fiduciary duties upon the directors of Delaware corporations to constrain their conduct when discharging that statutory responsibility.[7]

    20

    Stockholders' rights to inspect the corporation's books and records were recognized at common law because "[a]s a matter of self-protection, the stockholder was entitled to know how his agents were conducting the affairs of the corporation of which he or she was a part owner."[8] The qualified inspection rights that originated at common law are now codified in Title 8, section 220 of the Delaware Code, which provides, in part:

    21
    (b) Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose.
    22

    Section 220 provides stockholders of Delaware corporations with a "powerful right."[9] By properly asserting that right under section 220, stockholders are able to obtain information that can be used in a variety of contexts. Stockholders may use information about corporate mismanagement, waste or wrongdoing in several ways. For example, they may: institute [120] derivative litigation; "seek an audience with the board [of directors] to discuss proposed reform or, failing in that, they may prepare a stockholder resolution for the next annual meeting, or mount a proxy fight to elect new directors."[10]

    23
    Inspection Litigation Increases
    24

    More than a decade ago, we noted that "[s]urprisingly, little use has been made of section 220 as an information-gathering tool in the derivative [suit] context."[11] Today, however, stockholders who have concerns about corporate governance are increasingly making a broad array of section 220 demands.[12] The rise in books and records litigation is directly attributable to this Court's encouragement of stockholders, who can show a proper purpose, to use the "tools at hand" to obtain the necessary information before filing a derivative action.[13] Section 220 is now recognized as "an important part of the corporate governance landscape."[14]

    25
    Seinfeld Denied Inspection
    26

    The Court of Chancery determined that Seinfeld's deposition testimony established only that he was concerned about the large amount of compensation paid to the three executives. That court concluded that Seinfeld offered "no evidence from which [it] could evaluate whether there is a reasonable ground for suspicion that the executive's compensation rises to the level of waste."[15] It also concluded that Seinfeld did not "submit any evidence showing that the executives were not entitled to [the stock] options."[16] The Court of Chancery properly noted that a disagreement with the business judgment of Verizon's board of directors or its compensation committee is not evidence of wrongdoing and did not satisfy Seinfeld's burden under section 220. The Court of Chancery held:

    27
    viewing the evidence in the light most favorable to Seinfeld, the court must conclude that he has not carried his burden of showing that there is a credible basis from which the court can infer that the Verizon board of directors committed waste or mismanagement in compensating these three executives during the relevant period of time. Instead, the record clearly establishes that Seinfeld's Section 220 demand was made merely on the basis of suspicion or curiosity.[17]
    28
    Evidentiary Barrier Allegation
    29

    In this appeal, Seinfeld asserts that the "Court of Chancery's ruling erects an insurmountable barrier for the minority [121] shareholder of a public company."[18] Seinfeld argues that:

    30
    This Court and the Court of Chancery have instructed shareholders to utilize § 220 as one of the tools at hand. Yet, the Court of Chancery at bar, in requiring evidence makes a § 220 application a mirage. If the shareholder had evidence, a derivative suit would be brought. Unless there is a whistle blower, or a video cassette, the public shareholder, having no access to corporate records, will only have suspicions.[19]
    31

    Seinfeld submits that "by requiring evidence, the shareholder is prevented from using the tools at hand."[20] Seinfeld's brief concludes with a request for this Court to reduce the burden of proof that stockholders must meet in a section 220 action:

    32
    Plaintiff submits that in a case involving public companies, minority shareholders who have access only to public documents and without a whistle blower or corporate documents should be permitted to have limited inspection based upon suspicions, reasonable beliefs, and logic arising from public disclosures.[21]
    33

    After oral arguments, this Court asked the parties for supplemental briefs that would address the following questions:

    34
    A. Should a stockholder with a proper purpose be entitled to inspect carefully limited categories of corporate books and records, pursuant to Section 220, upon a showing that the stockholder has a rational basis for the stated purpose and no other purpose that would militate against inspection?
    35
    B. If the standard in question "A" would not be appropriate, is there any reduced burden of proof under Section 220 that would improve stockholders' ability to obtain the "tools" to pursue derivative claims without disrupting corporations' orderly conduct of business and without inappropriately interfering with corporate decision-making? If so, articulate the reduced burden of proof. If not, explain why not.
    36

    We asked these questions in order to review the current balance between the rights of stockholders and corporations that is established by Thomas & Betts Corp. v. Leviton Mfg. Co.[22] and Security First Corp. v. U.S. Die Casting & Dev. Co.[23] and their progeny.

    37
    Credible Basis From Some Evidence
    38

    In a section 220 action, a stockholder has the burden of proof to demonstrate a proper purpose by a preponderance of the evidence.[24] It is well established that a stockholder's desire to investigate wrongdoing or mismanagement is a "proper purpose."[25] Such investigations are proper, because where the allegations of mismanagement prove meritorious, investigation furthers the interest of all stockholders and should increase stockholder return.[26]

    39

    [122] The evolution of Delaware's jurisprudence in section 220 actions reflects judicial efforts to maintain a proper balance between the rights of shareholders to obtain information based upon credible allegations of corporation mismanagement and the rights of directors to manage the business of the corporation without undue interference from stockholders. In Thomas & Betts, this Court held that, to meet its "burden of proof, a stockholder must present some credible basis from which the court can infer that waste or mismanagement may have occurred."[27] Six months later, in Security First, this Court held "[t]here must be some evidence of possible mismanagement as would warrant further investigation of the matter."[28]

    40

    Our holdings in Thomas & Betts and Security First were contemporaneous with our decisions that initially encouraged stockholders to make greater use of section 220. In Grimes v. Donald, decided just months before Thomas & Betts, this Court reaffirmed the salutary use of section 220 as one of the "tools at hand" for stockholders to use to obtain information.[29] When the plaintiff in Thomas & Betts suggested that the burden of demonstrating a proper purpose had been attenuated by our encouragement for stockholders to use section 220, we rejected that argument:

    41
    Contrary to plaintiff's assertion in the instant case, this Court in Grimes did not suggest that its reference to a Section 220 demand as one of the "tools at hand" was intended to eviscerate or modify the need for a stockholder to show a proper purpose under Section 220.[30]
    42

    In Security First and Thomas & Betts, we adhered to the Court of Chancery's holding in Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc. that:

    43
    A mere statement of a purpose to investigate possible general mismanagement, without more, will not entitle a shareholder to broad § 220 inspection relief. There must be some evidence of possible mismanagement as would warrant further investigation of the matter.[31]
    44
    Standard Achieves Balance
    45

    Investigations of meritorious allegations of possible mismanagement, waste or wrongdoing, benefit the corporation, but investigations that are "indiscriminate fishing expeditions" do not.[32] "At some point, the costs of generating more information fall short of the benefits of having more information. At that point, compelling production of information would be wealth-reducing, and so shareholders would not want it produced."[33] Accordingly, this [123] Court has held that an inspection to investigate possible wrongdoing where there is no "credible basis," is a license for "fishing expeditions" and thus adverse to the interests of the corporation:[34]

    46
    Stockholders have a right to at least a limited inquiry into books and records when they have established some credible basis to believe that there has been wrongdoing. . . . Yet it would invite mischief to open corporate management to indiscriminate fishing expeditions.[35]
    47

    A stockholder is "not required to prove by a preponderance of the evidence that waste and [mis]management are actually occurring."[36] Stockholders need only show, by a preponderance of the evidence, a credible basis from which the Court of Chancery can infer there is possible mismanagement that would warrant further investigation[37] — a showing that "may ultimately fall well short of demonstrating that anything wrong occurred."[38] That "threshold may be satisfied by a credible showing, through documents, logic, testimony or otherwise, that there are legitimate issues of wrongdoing."[39]

    48

    Although the threshold for a stockholder in a section 220 proceeding is not insubstantial,[40] the "credible basis" standard sets the lowest possible burden of proof. The only way to reduce the burden of proof further would be to eliminate any requirement that a stockholder show some evidence of possible wrongdoing. That would be tantamount to permitting inspection based on the "mere suspicion" standard that Seinfeld advances in this appeal. However, such a standard has been repeatedly rejected as a basis to justify the enterprise cost of an inspection.[41]

    49

    In Delaware and elsewhere,[42] the "credible-basis-from-some-evidence" standard [124] is settled law. Under the doctrine of stare decisis, settled law is overruled only "for urgent reasons and upon clear manifestation of error."[43] A review of the cases that have applied the "credible basis" standard refutes Seinfeld's premise that requiring "some evidence" constitutes an insurmountable barrier for stockholders who assert inspection rights under section 220.

    50

    Requiring stockholders to establish a "credible basis" for the Court of Chancery to infer possible wrongdoing by presenting "some evidence" has not impeded stockholder inspections. Although many section 220 proceedings have been filed since we decided Security First and Thomas & Betts, Verizon points out that Seinfeld's case is only the second proceeding in which a plaintiff's demand to investigate wrongdoing was found to be entirely without a "credible basis."[44] In contrast, there are a myriad of cases where stockholders have successfully presented "some evidence" to establish a "credible basis" to infer possible mismanagement and thus received some narrowly tailored right of inspection.[45]

    51

    [125] We remain convinced that the rights of stockholders and the interests of the corporation in a section 220 proceeding are properly balanced by requiring a stockholder to show "some evidence of possible mismanagement as would warrant further investigation."[46] The "credible basis" standard maximizes stockholder value by limiting the range of permitted stockholder inspections to those that might have merit.[47] Accordingly, our holdings in Security First and Thomas & Betts are ratified and reaffirmed.

    52
    Conclusion
    53

    The judgment of the Court of Chancery is affirmed.

    54

    [1] Thomas & Betts Corp. v. Leviton Mfg. Co., Inc., 681 A.2d 1026, 1031 (Del.1996); Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 567 (Del.1997); Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d 160, 166 (Del.Ch.1987).

    55

    [2] Plaintiff's Opening Brief, p. 11 (February 13, 2006).

    56

    [3] Id.

    57

    [4] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 571.

    58

    [5] Malone v. Brincat, 722 A.2d 5, 9 (Del.1998).

    59

    [6] Del.Code Ann. tit. 8, § 141(a)(2006).

    60

    [7] Malone v. Brincat, 722 A.2d at 9-10.

    61

    [8] Saito v. McKesson HBOC, Inc., 806 A.2d 113, 116 (Del.2002) (citing Shaw v. Agri-Mark, Inc., 663 A.2d 464, 467 (Del.1995)).

    62

    [9] Disney v. Walt Disney Co., 857 A.2d 444, 447 (Del.Ch.2004).

    63

    [10] Saito v. McKesson HBOC, Inc., 806 A.2d at 117.

    64

    [11] Rales v. Blasband, 634 A.2d 927, 934-35 n. 10 (Del.1993) (quoted in Grimes v. Donald, 673 A.2d 1207, 1216 n. 11 (Del.1996)).

    65

    [12] For an excellent discussion and analysis of these developments, see Stephen A. Radin, The New Stage of Corporate Governance Litigation: Section 220 Demands, 26 Cardozo L.Rev. 1595, 1647 (2005).

    66

    [13] Grimes v. Donald, 673 A.2d at 1216 (citing Rales v. Blasband, 634 A.2d at 934-35 n. 10). See also Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 833 A.2d 961, 981 nn. 65-66 (Del.Ch.2003) (collecting cases).

    67

    [14] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 571 (Del.1997). See also E. Norman Veasey & Christine T. DiGuglielmo, What Happened in Delaware Corporate Law and Governance from 1992-2004? A Retrospective on Some Key Developments, 153 U. Pa. L.Rev. 1399, 1466-69 (2005) (discussing the use of section 220 and cases that have applied it).

    68

    [15] Seinfeld v. Verizon Commc'ns, Inc., 2005 WL 3272365 at *3 (Del.Ch.).

    69

    [16] Id.

    70

    [17] Id. (footnote omitted).

    71

    [18] Plaintiff's Opening Brief, p. 11 (February 13, 2006).

    72

    [19] Id.

    73

    [20] Id. at 3.

    74

    [21] Id. at 12.

    75

    [22] Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1031 (Del.1996).

    76

    [23] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563 (Del.1997).

    77

    [24] Del.Code Ann. tit. 8, § 220(c)(2006).

    78

    [25] Nodana Petroleum Corp. v. State ex rel. Brennan, 123 A.2d 243, 246 (Del.1956).

    79

    [26] See Saito v. McKesson HBOC, Inc., 806 A.2d 113, 115 (Del.2002) ("where a [section] 220 claim is based on alleged corporate wrongdoing, and assuming the allegation is meritorious, the stockholder should be given enough information to effectively address the problem, either through derivative litigation or through direct contact with the corporation's directors and/or stockholders").

    80

    [27] Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d at 1031 (emphasis added).

    81

    [28] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 568 (original emphasis omitted; emphasis added)(quoting Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d 160, 166 (Del.Ch.1987)).

    82

    [29] Grimes v. Donald, 673 A.2d 1207, 1216 n. 11 (Del.1996).

    83

    [30] Thomas & Betts Corp. v. Leviton Mfg. Co., Inc., 681 A.2d 1026, 1031 n. 3 (Del.1996).

    84

    [31] Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d at 166 (emphasis added); see also Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 568; Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d at 1031.

    85

    [32] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 571 (Del.1997).

    86

    [33] Fred S. McChesney, "Proper Purpose," Fiduciary Duties, and Shareholder-Raider Access to Corporate Information, 68 U. Cin. L.Rev. 1199, 1207-08 (2000).

    87

    [34] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 571. See also Skouras v. Admiralty Enters., Inc., 386 A.2d 674, 679 (Del.Ch.1978) (noting that the use of a books and records inspection to harass the corporate defendant is improper); Skoglund v. Ormand Indus., Inc., 372 A.2d 204, 210 (Del.Ch. 1976) (noting that the pursuit of a fishing expedition would be improper).

    88

    [35] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 571.

    89

    [36] Thomas & Betts Corp. v. Leviton Mfg. Co. Inc., 681 A.2d 1026, 1031 (Del.1996) ("In order to meet that burden of proof, a stockholder must present some credible basis from which the court can infer that waste or mismanagement may have occurred.").

    90

    [37] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 567-69. Accord Brehm v. Eisner, 746 A.2d 244, 267 n. 75 (Del.2000).

    91

    [38] Khanna v. Covad Commc'ns Group, Inc., 2004 WL 187274 at *6 n. 25 (Del.Ch.). See also Forsythe v. CIBC Employee Private Equity Fund (U.S.) I.L.P., 2005 WL 1653963, at *5 (Del.Ch.) (finding that "[w]hile the [ ] facts fall well short of actually proving wrongdoing, they do provide a credible basis for inferring mismanagement").

    92

    [39] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 568.

    93

    [40] Id.

    94

    [41] E.g., White v. Panic, 783 A.2d 543, 557 n. 54 (Del.2001); Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 568; Mattes v. Checkers Drive-In Rests., Inc., 2001 WL 337865, at *5 (Del.Ch.); Dobler v. Montgomery Cellular Holding Co., 2001 WL 1334182, at *3; Sahagen Satellite Tech. Group, LLC v. Ellipso, Inc., 791 A.2d 794, 796 (Del.Ch. 2000).

    95

    [42] The "credible basis" standard is also settled law in those states that look to Delaware law for guidance on matters of corporation law. See, e.g., Arctic Fin. Corp. v. OTR Express, Inc., 272 Kan. 1326, 38 P.3d 701, 703-04 (2002) (looking to Security First and Thomas & Betts for guidance regarding a books and records inspection under Kansas law); Towle v. Robinson Springs Corp., 168 Vt. 226, 719 A.2d 880, 882 (1998) (in a books and records case under Vermont law, citing Thomas & Betts for the proposition that "[c]laims of mismanagement, however, must be supported by evidence").

    96

    [43] Oscar George, Inc. v. Potts, 115 A.2d 479, 481 (Del.1955).

    97

    [44] See Mattes v. Checkers Drive-In Restaurants, Inc., 2001 WL 337865, at *5 (Del.Ch.) (finding that "[t]he evidence at trial did not show `a credible basis'" to support plaintiff's allegations of corporate wrongdoing when the evidence represented mere curiosity and disagreement with various business decisions and where there was a "substantial delay" in the plaintiff asserting his rights).

    98

    [45] Sutherland v. Dardanelle Timber Co., 2006 WL 1451531, at *8 (Del.Ch.) (finding that the plaintiffs demonstrated a "credible basis" to support allegations of management entrenchment and waste); Haywood v. Ambase Corp., 2005 WL 2130614, at *5-6 (Del.Ch.) (finding "by a preponderance of the evidence, a credible basis" to support allegations of excessive executive compensation); Deephaven Risk Arb Trading Ltd. v. UnitedGlobalCom, Inc., 2005 WL 1713067, at *9-10 (Del.Ch.) (finding that the plaintiff proved "by a preponderance of the evidence a credible basis" to support allegations of mismanagement based on "sufficiently inconsistent" corporate press releases appearing to contain false or misleading information); Forsythe v. CIBC Employee Private Equity Fund (U.S.) I.L.P., 2005 WL 1653963, at *5 (Del.Ch.) ("finding a credible basis for inferring mismanagement"); Cohen v. El Paso Corp., 2004 WL 2340046, at *2. (Del.Ch.) ("finding that two incidents provide a credible basis upon which [the shareholder] alleges a proper purpose in investigating waste and mismanagement."); Deephaven Risk Arb. Trading Ltd. v. UnitedGlobalCom, Inc., 2004 WL 1945546, at *7 (Del.Ch.) (holding that a "credible basis" was established based on the shareholder's claims); Marathon Partners, L.P. v. M & F Worldwide Corp., 2004 WL 1728604, at *9 (Del.Ch.) (shareholders presented sufficient evidence to support a claim of corporate wrongdoing); Marmon v. Arbinet-Thexchange, Inc., 2004 WL 936512, at *4 (Del.Ch.) (finding a "credible basis" where there was credible testimony presented in support of the various claims of corporate wrongdoing); Khanna v. Covad Commc'ns Group, Inc., 2004 WL 187274, at *6 (Del.Ch.) (holding that the shareholder has shown a "credible basis" by a preponderance of the evidence for his allegations of self-dealing with respect to a number of corporate transactions); Freund v. Lucent Technologies, Inc., 2003 WL 139766, at *3 (Del.Ch.) (finding "some credible basis" for an inspection pursuant to claims of corporate waste and mismanagement); Magid v. Acceptance Ins. Cos., Inc., 2001 WL 1497177, at *3 (Del.Ch.) (holding that expert testimony provided a "credible basis" from which a court could infer that corporate wrongdoing took place.); Dobler v. Montgomery Cellular Holding Co., Inc., 2001 WL 1334182, at *4 (Del.Ch.) (holding that the plaintiff-shareholders demonstrated a "credible basis" for its § 220 claim "[t]hrough the testimony of their two trial witnesses and the documents introduced as evidence" regarding the actions of the corporation's board of directors, through evidence of suspicious expense figures); Saito v. McKesson HBOC, Inc., 2001 WL 818173, at *4 (Del.Ch.), aff'd in part, rev'd in part on other grounds, 806 A.2d 113 (Del.2002) (finding a "credible basis" for wrongdoing where the corporation restated its financials and federal authorities commenced criminal proceedings); Carapico v. Phila. Stock Exch. Inc., 791 A.2d 787, 792 (Del.Ch.2000) (finding a "credible basis" to support an investigation of corporate mismanagement where misconduct was identified in an SEC Order and plaintiff produced testimony showing a credible basis to suspect mismanagement); Sahagen Satellite Tech. Group, LLC v. Ellipso, Inc., 791 A.2d 794, 796-99 (Del.Ch.2000) (granting limited relief under the credible basis standard to allow investigation of documents related to a corporate computer purchase).

    99

    [46] Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 568.

    100

    [47] Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d at 1031. Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d at 571.

  • 3 LAMPERS v Lennar Corp

    What are the standards for a 220 books and records action? PL must have a proper purpose and a credible basis for believing further investigation will uncover mismanagement

    1
    LOUISIANA MUNICIPAL POLICE EMPLOYEES' RETIREMENT SYSTEM, Plaintiff,
    v.
    LENNAR CORPORATION, Defendant.
    2
    Civil Action No. 7314-VCG.
    Court of Chancery of Delaware.
    Submitted: September 17, 2012.
    3
    Decided: October 5, 2012.
    4

    Jay W. Eisenhofer, and John C. Kairis of GRANT & EISENHOFER P.A., Wilmington, Delaware; Attorneys for Plaintiff.

    5

    Kevin R. Shannon, and Tyler J. Leavengood of POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Attorneys for Defendant.

    6
    MEMORANDUM OPINION
    7
    GLASSCOCK, Vice Chancellor.
    8

    Two news articles report that a corporation is included in an industry-wide investigation by government agencies concerning compliance with the Fair Labor Standards Act ("FLSA").[1] Is that fact, together with the existence of a handful of old employee lawsuits alleging corporate violations of the FLSA, sufficient to support a books-and-records demand to investigate a potential Caremark claim? Under the facts below, I conclude that the answer is no.

    9

    This matter involves a demand by the Louisiana Municipal Police Employees Retirement System ("LAMPERS") for books and records from Lennar Corp. ("Lennar") pursuant to Section 220 of the Delaware General Corporation Law ("DGCL").[2] LAMPERS, a Lennar stockholder, seeks to investigate possible mismanagement at Lennar—specifically, Lennar's compliance with labor, tax, and immigration law.[3] LAMPERS bases its suspicions on a collection of lawsuits brought between 2007 and early 2009 by former Lennar employees against the company as well as two articles published in the Wall Street Journal in September, 2011. The articles revealed that the Department of Labor was conducting a nationwide investigation of the labor practices of numerous home-building companies, including Lennar. Lennar responds that this evidence is insufficient as a matter of law to support a Section 220 demand and has moved for summary judgment under Rule 56.[4] Neither party disputes any issue of material fact in this case. Accordingly, the only issue for me to decide is whether the evidence LAMPERS has provided constitutes "some credible basis" from which I could infer that further investigation is warranted to explore possible mismanagement at Lennar.[5] For the reasons below, I find that LAMPERS' evidence is insufficient to support its demand, and I therefore grant Lennar's motion.

    10
    I. BACKGROUND
    11

    The facts in this case are relatively straightforward. Between 2007 and 2009, eight plaintiffs alleged that Lennar wrongfully misclassified them as exempt from the FLSA so as to avoid paying overtime.[6] The last such lawsuit was filed February 24, 2009, and all of the lawsuits eventually settled.[7] LAMPERS points to no other relevant legal action against Lennar besides these eight lawsuits.

    12

    On September 8, 2011 the Wall Street Journal ("Journal") published an article revealing that the U.S. Department of Labor ("DOL") was investigating several of the country's biggest home builders, including Lennar, as part of a nationwide effort to enforce compliance with the FLSA.[8] On September 17, the Journal published a follow-up article explaining that state-level labor regulators and the IRS were joining the DOL's investigation.[9] The Plaintiffs point out that in its 2011 10-K Lennar has acknowledged that any failure of Lennar's employees or subcontractors to comply with state and federal labor law could cause financial and reputational harm to the company.[10]

    13

    Shortly after the Journal published these articles, LAMPERS sent its demand letter to Lennar requesting board minutes and other documents related to Lennar's compliance—and Lennar's subcontractors' compliance—with federal and state labor, tax, and immigration laws.[11] LAMPERS' demand letter relied solely on the Journal articles and did not mention the earlier employee lawsuits as a basis for its demand.[12] LAMPERS also requested information about Lennar's directors, ostensibly to assess demand futility.[13] Lennar rejected LAMPERS' demand, saying that it believed that the evidence that LAMPERS relied on did not constitute "a credible basis for thinking there has been wrongdoing."[14] LAMPERS subsequently filed this action, relying on both the settled lawsuits and the DOL investigation as evidence of possible wrongdoing.

    14
    II. ANALYSIS
    15

    Section 220 of Delaware General Corporation Law allows stockholders of companies incorporated in Delaware to inspect the books and records of the company if the stockholders' demand complies with the statute's form and manner requirements[15] and if the stockholders demonstrate "any proper purpose" for the demand.[16] The statute defines proper purpose as "a purpose reasonably related to such person's interest as a stockholder."[17] Once a plaintiff has identified a proper purpose, it has the burden to "show, by a preponderance of the evidence, a credible basis from which the Court of Chancery can infer there is possible mismanagement that would warrant further investigation."[18] This is a low standard. Indeed, "the 'credible basis' standard sets the lowest possible burden of proof. The only way to reduce the burden of proof further would be to eliminate any requirement that a stockholder show some evidence of possible wrongdoing."[19]

    16

    LAMPERS, therefore, must (1) identify a proper purpose for its demand, and (2) support that demand with a "credible basis" from which I can conclude an investigation is warranted.

    17
    A. Proper Purpose
    18

    The Delaware Supreme Court has recognized that an investigation of corporate mismanagement, waste, or wrongdoing is a proper purpose for a Section 220 inspection.[20] However, stockholders are only permitted to investigate those issues that affect their interests as stockholders.[21] In other words, if a stockholder seeks to use Section 220 to investigate corporate wrongdoing for which there is no remedy, or if the stockholder would not have standing to seek a remedy, then that stockholder has not stated a proper purpose.

    19

    LAMPERS's purpose for bringing the demand is not to investigate the past wrongdoing that may have given rise to the litigation in 2007-2009. LAMPERS concedes that it lacks standing to prosecute such an investigation and that the only purpose for which it seeks books and records from Lennar is to investigate ongoing mismanagement concerning compliance with labor law. Because ongoing wrongdoing affects LAMPERS's interests as a current stockholder, I conclude that LAMPERS has stated a proper purpose for investigation under Section 220. I now turn to whether the evidence that LAMPERS has provided gives me a credible basis from which I can infer the possibility of current wrongdoing.

    20
    B. Credible Basis
    21

    While investigating mismanagement is undoubtedly a proper purpose under Section 220, this Court has repeatedly stated that "a mere statement of a purpose to investigate possible general mismanagement, without more, will not entitle a shareholder to broad § 220 inspection relief There must be some evidence of possible mismanagement as would warrant further investigation of the matter."[22] To permit stockholders to demand corporate books and records based on the "mere suspicion" of wrongdoing would "invite mischief and expose companies to "indiscriminate fishing expeditions."[23] This means that "a stockholder making a Section 220 demand does not have to prove mismanagement actually occurred, but must make a credible showing, through documents, logic, testimony or otherwise, that there are legitimate issues of wrongdoing."[24] This requirement strikes an appropriate balance between encouraging productive Section 220 actions where there is a reasonable likelihood of wrongdoing while preventing inspections without a factual basis from draining corporate resources.[25]

    22

    LAMPERS fails to clear the low hurdle that this Court has set for Section 220 plaintiffs, because neither the former lawsuits against Lennar nor the articles from the Journal constitute credible evidence that Lennar is currently engaged in the worker misclassification that LAMPERS seeks to investigate.

    23
    1. Prior Litigation against Lennar.
    24

    LAMPERS cites one case, Romero v. Career Education Corp., where previous litigation served as the basis for a Section 220 demand.[26] However, Romero does not stand for the proposition that past litigation against a company may support an inference that the company has allowed that conduct to persist to the present day. The plaintiff in Romero sought to investigate possible breaches of fiduciary duty in connection with specific conduct that was itself the subject of several federal securities class-action lawsuits filed against the defendant.[27] Here, LAMPERS explicitly disclaimed any argument that it seeks to investigate the specific wrongful conduct (the pre-2009 misclassification of employees to avoid paying overtime) alleged in the old lawsuits. Instead, LAMPERS argues that the lawsuits (in connection with the DOL investigation, which 1 will discuss shortly) provide a credible basis from which I may infer that misclassification continues today. However, the Court in Romero did not make such a speculative inference as LAMPERS asks me to make here.

    25

    This Court has in fact rejected the argument that past lawsuits against a company constitute credible evidence of similar ongoing malfeasance. Then-Chancellor Chandler stated in Graulich v. Dell Inc. that even though the `"credible basis' standard has been interpreted as a low one . . . simply saying that the company has already been subject to lawsuits, with nothing else, does not cut it."[28] Though the plaintiffs demand letter in Graulich was vague, then-Chancellor Chandler rejected the possibility that the plaintiff could successfully obtain documents under Section 220 by offering a prior lawsuit as evidence suggesting a Caremark claim for gross negligence by the board.[29]

    26

    The facts here well illustrate these lawsuits' low probative value for showing any current wrongdoing by Lennar. The lawsuits were all settled without any admission of wrongdoing by Lennar, and there have been no similar lawsuits filed since 2009. Furthermore, LAMPERS gave no indication in its brief or at oral argument whether the number of lawsuits brought against Lennar, eight, was disproportionate or unusual as compared to similar companies, or in light of the size of Lennar's business. Unsurprisingly, LAMPERS did not even mention the lawsuits in its initial demand letter to Lennar, instead waiting until this action was filed to claim that the lawsuits suggested ongoing wrongdoing. Accordingly, I conclude that the lawsuits do not provide a credible basis for concluding that Lennar is engaging in employee misclassification today.

    27
    2. The Wall Street Journal Articles
    28

    I now consider whether the news reports that LAMPERS relies on support an inference that Lennar is misclassifying employees. Coincidentally, this issue arose in a prior case involving LAMPERS making a § 220 demand based in part on a newspaper article. Louisiana Municipal Police Employees' Retirement System v. Countrywide Financial Corp. involved an attempt by LAMPERS to obtain books and records of Countrywide relating to possible options backdating that was described in an article in the Los Angeles Times ("Times").[30]

    29

    The Court in Countrywide implied that the news articles themselves were of limited probative value. In that case, the Court ultimately granted the Section 220 demand because LAMPERS corroborated the Times article with its own statistical analysis of Countrywide's stock price which suggested that Countrywide backdated or "springloaded" option grants.[31] However, the Court qualified its decision, saying that the decision "probes what would appear to be the outer limits of the minimal quantum of evidence a shareholder must adduce in order to demonstrate a credible basis to suspect corporate wrongdoing that would constitute a proper purpose to inspect corporate books and records under 8 Del. C. § 220."[32] This disclaimer suggests that negative news articles alone are insufficient bases on which to justify a Section 220 demand.

    30

    In any event, the news articles that LAMPERS relies on in the instant case are particularly unconvincing as evidence of Lennar's alleged wrongdoing. The only possible suggestion in the Journal articles of wrongdoing by Lennar is (1) the existence of an investigation by the Department of Labor into worker misclassification, combined with (2) the assertion that Lennar is one of many companies being investigated. In other words, the articles describe actions by regulators, not wrongdoing by companies under investigation.

    31

    This stands in contrast to the news articles that were given little weight in Countrywide. In that case, the Times directly implicated Countrywide in wrongdoing. The lede for the first article read "[a] study by a shareholder advocacy firm suggests that Countrywide Financial Corp. and Occidental Petroleum Corp. have a knack for issuing favorable news releases shortly after they grant stock options to top executives."[33] By contrast, the articles here provide no reportorial suggestion, based on investigation, that Lennar is engaged in wrongdoing. Instead, the articles merely report that Lennar is one of many companies in many industries caught up in the dragnet of a federal investigation. Such evidence does not support an inference of possible wrongdoing.

    32
    3. The Lawsuits and the Articles
    33

    The only remaining question is whether these two independently inadequate pieces of evidence—news reports of Department of Labor investigations on the one hand, and eight lawsuits alleging misconduct from 2007-2009 on the other hand—can together constitute "some evidence" of misconduct sufficient to support a Section 220 demand. I find that the probative value of each item is so negligible that combining them is of no consequence.

    34

    The lawsuits, which were settled without any admission of wrongdoing, suggest only that misconduct could have occurred in the past. The news articles suggest only an intensification of the Department of Labor's enforcement efforts. What LAMPERS lacks is some piece of objective evidence indicating that Lennar is engaging in worker misclassification now. The Plaintiff here has presented only a chain of inferences that never amount to more than speculation.

    35
    III. CONCLUSION
    36

    For the reasons above, Defendant Lennar Corp.'s Motion for Summary Judgment under Rule 56 is granted. The Defendants should provide an appropriate form of order.

    37

    [1] Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201-219 (2006).

    38

    [2] 8 Del C. § 220.

    39

    [3] Compl. 1.

    40

    [4] Del Ch. Ct. R. 56.

    41

    [5] See Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 568 (Del. 1997).

    42

    [6] Compl. ¶ 9.

    43

    [7] Id.

    44

    [8] Id. ¶ 6. See also Pl.'s Br. Opp. Def.'s Mot. Summ. J. 4 ("The misclassification of employees . . . presents a serious problem for . . . the entire economy. . . . The [Department of Labor's] Misclassification Initiative, launched under the auspices of Vice President Biden's Middle Class Task Force, is making great strides in combating this pervasive issue.").

    45

    [9] Id. ¶ 7.

    46

    [10] Id. ¶ 11.

    47

    [11] Id. ¶ 14.

    48

    [12] Pl.'s Br. Opp. Def.'s Mot. Summ. J. 14.

    49

    [13] Compl. ¶ 16. Because of my decision here, I need not reach the issue of whether these requests were overly broad.

    50

    [14] Id. ¶ 19.

    51

    [15] Lennar does not dispute LAMPERS' compliance with the form and manner requirements of Section 220. See Def.'s Br. Supp. Mot. Summ. J. 1.

    52

    [16] 8 Del C § 220(b).

    53

    [17] Id.

    54

    [18] Seinfeld v. Verizon Commc'ns, Inc., 909 A.2d 117, 123 (Del. 2006).

    55

    [19] Id.

    56

    [20] Id. at 121.

    57

    [21] See Graulich v. Dell Inc., 2011 WL 1843813, at *7 (Del. Ch. May 16, 2011) (holding that the plaintiffs Section 220 demand for books and records failed because it was made for the purpose of initiating a derivative suit which the plaintiff lacked standing to bring and which would have been barred by the statute of limitations and claim preclusion).

    58

    [22] Helmsman Mgmt. Servs., Inc. v. A & S Consults., Inc., 525 A.2d 160, 165-66 (Del. Ch. 1987).

    59

    [23] Seinfeld, 909 A.2d at 122.

    60

    [24] Norfolk Cnty. Ret, Sys. v. Jos. A. Bank Clothiers, Inc., 2009 WL 353746, at *6 (Del Ch. Feb. 12, 2009) aff'd, 977 A.2d 899 (Del. 2009) (citations omitted).

    61

    [25] Seinfeld, 909 A.2d at 122-23.

    62

    [26] Romero v. Career Educ. Corp., 2005 WL 1798042 (Del. Ch. Jul. 19, 2005).

    63

    [27] Id. at * 1.

    64

    [28] Graulich, 2011 WL 1843813, at *5 n.49.

    65

    [29] Id. at *1 n.13.

    66

    [30] La. Mun. Police Emps'. Ret. Sys. v. Countrywide Fin. Corp., 2007 WL 4373116, at *2 (Del. Ch. Dec. 6, 2007) ("Sometime in late June or early July 2006, LAMPERS' general counsel, R. Randall Roche ("Roche"), became aware of a Los Angeles Times article noting the consistently fortuitous timing of executive stock option grants at a number of companies, including Countrywide, and suggesting the possibility that grants may have been manipulated by those companies.").

    67

    [31] Id.

    68

    [32] Id. at * 1.

    69

    [33] Kathy M. Kristof, Good-News Link to Options Suggested, L.A. Times, June 7, 2006, at C1.

  • 4 Louisiana Municipal Police Employees Retirement System v. Morgan Stanley

    Using 220 books and records demand to build facts to support derivative litigation. Also, the role of litigation demand and demand refusal.

    1
    LOUISIANA MUNICIPAL POLICE EMPLOYEES RETIREMENT SYSTEM, Plaintiff,
    v.
    MORGAN STANLEY & CO., INC., a Delaware Corporation, Defendant.
    2
    C.A. No. 5682-VCL.
    Court of Chancery of Delaware.
    3
    Submitted: February 17, 2011.
    4
    Decided: March 4, 2011.
    5

    Robert D. Goldberg, BIGGS AND BATTAGLIA, Wilmington, Delaware; Lewis S. Kahn, Michael A. Swick, Albert M. Myers, KAHN SWICK & FOTI, LLC, Madisonville, Louisiana; Attorneys for Plaintiff Louisiana Municipal Police Employees Retirement System.

    6

    Raymond J. DiCamillo, Kevin M. Gallagher, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Gregory A. Markel, Ronit Setton, Amanda L. Kosowsky, CADWALADER, WICKERSHAM & TAFT LLP, New York, New York; Attorneys for Defendant Morgan Stanley & Co., Inc.

    7
    MEMORANDUM OPINION
    8
    LASTER, Vice Chancellor.
    9

    Plaintiff Louisiana Municipal Police Employees Retirement System ("LAMPERS") seeks to inspect books and records pursuant to Section 220 of the Delaware General Corporation Law, 8 Del. C. § 220. The purpose for the inspection is to investigate whether the board of directors of Morgan Stanley & Co., Inc. (the "Board") wrongfully refused LAMPERS's earlier demand that Morgan Stanley initiate litigation against certain of its officers and directors for alleged wrongs arising out of the company's involvement with auction rate securities. Morgan Stanley has moved to dismiss the Section 220 complaint. I deny the motion to the extent that Morgan Stanley has argued that LAMPERS lacks a proper purpose. I grant the motion in part to the extent LAMPERS has sought books and records that are not reasonably required to investigate whether the litigation demand was wrongfully refused.

    10
    I. FACTUAL BACKGROUND
    11

    The facts for purposes of the motion to dismiss are drawn from LAMPERS's complaint and the documents it incorporates by reference. I take judicial notice of filings and rulings in a derivative action pending in the United States District Court for the Southern District of New York (the "Federal Court").

    12
    A. The Original Derivative Suit
    13

    On August 11, 2008, the Office of the New York Attorney General ("NYAG") announced that it was investigating Morgan Stanley's marketing and selling of auction rate securities. On August 14, 2008, NYAG and Morgan Stanley announced a settlement.

    14

    On August 27, 2008, less than two weeks after the announcement of the settlement, LAMPERS filed a stockholder derivative action in the Federal Court on behalf of Morgan Stanley which sought to hold Morgan Stanley's officers and directors liable for the harm the corporation suffered as a result of the conduct that was the subject of the NYAG investigation and settlement. Other stockholder plaintiffs filed similar derivative actions, which were consolidated. LAMPERS became co-lead plaintiff in the consolidated action.

    15

    Before suing derivatively, LAMPERS did not make a litigation demand on the Board. Nor did LAMPERS use Section 220 to obtain books and records that might bolster a claim of demand futility. LAMPERS and its fellow fast-filing plaintiffs simply asserted that demand was excused as futile because the board was "dominated and controlled by wrongdoers who continue to obscure their own misconduct." Consol. S'holder Deriv. Compl. ¶ 78, In re Morgan Stanley & Co., Inc. Auction Rate Sec. Deriv. Litig., No. 08 Civ. 7587 (AKH) (S.D.N.Y. Feb. 2, 2009).

    16

    The defendants moved to dismiss the consolidated complaint pursuant to Rule 23.1 on the grounds that the plaintiffs failed to make a litigation demand and had not adequately alleged that demand was futile. See Fed. R. Civ. P. 23.1. On June 23, 2009, the Federal Court ruled that the complaint had not adequately pled demand futility and granted the defendants' motion to dismiss. The Federal Court entered an order retaining jurisdiction over the litigation and set a schedule providing for (i) the plaintiffs to make a litigation demand on the board, (ii) the board to respond, (iii) the plaintiffs to seek any further relief necessitated by the board's response.

    17
    B. LAMPERS Makes A Litigation Demand.
    18

    In accordance with the Federal Court's order, by letter dated August 24, 2009 (the "Litigation Demand"), LAMPERS demanded that the Board "take action to remedy breaches of fiduciary duties and other misconduct committed by certain officers and directors of the Company with respect to the Company's participation in the market for auction-rate securities." Gallagher Aff. Ex. C. The Board referred the Litigation Demand to the Audit Committee, which retained the law firm of Simpson Thacher & Bartlett LLP ("Simpson Thacher") to investigate the Litigation Demand and advise the Audit Committee regarding what action to take.

    19

    Eight months later, by letter dated April 26, 2010 (the "Demand Refusal Letter"), the Board refused to take any action in response to the Litigation Demand. The Demand Refusal Letter described the process followed by Simpson Thacher in rendering a report to the Audit Committee, by the Audit Committee in making a recommendation to the Board, and by the Board in relying on the Audit Committee's recommendation. The Demand Refusal Letter did not, however, provide any substantive insight into Simpson Thacher's work or the Audit Committee or the Board's determinations, nor did it explain the reasoning behind the decision to refuse the Litigation Demand. In essence, albeit with greater verbosity, the Demand Refusal Letter told LAMPERS that Simpson Thacher talked to a number of people, looked at a slew of documents, researched and pondered the law, then recommended to the Audit Committee that the Litigation Demand be refused. The Demand Refusal Letter next tells LAMPERS that the Audit Committee carefully considered Simpson Thacher's recommendation, then recommended the same thing to the Board. The Board then refused the Litigation Demand in its entirety.

    20

    By letter dated May 12, 2010 (the "Books and Records Demand"), LAMPERS requested that Morgan Stanley make certain books and records available for inspection pursuant to Section 220. LAMPERS sought (i) minutes and notes of Board or Audit Committee meetings where the Litigation Demand was discussed or evaluated; (ii) reports provided to the Board or Audit Committee in connection with those discussions and other documents relied on by the Board or Audit Committee; (iii) documents relied upon by Simpson Thacher in advising the Audit Committee on how to respond to the Litigation Demand; (iv) a report prepared by Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden") following an investigation it conducted in 2007 and 2008 into Morgan Stanley's involvement with auction rate securities (respectively the "Skadden Report" and the "Skadden Investigation"); (v) documents and notes reviewed in connection with the Skadden Investigation; and (vi) the retention agreements for both Skadden and Simpson Thacher. According to the Books and Records Demand, LAMPERS sought these documents "to enable [it] and its legal counsel to evaluate the Board's refusal of the Demand . . . and whether same constituted a reasonable and good-faith exercise of the Board's business judgment." Gallagher Aff. Ex. E. In addition, because the Federal Court retained jurisdiction over the Derivative Action, LAMPERS wrote the Federal Court by letter dated May 12, 2010, to request a case management conference regarding the Books and Records Demand.

    21

    By letter dated May 19, 2010 and copied to the Federal Court, Morgan Stanley rejected the Books and Records Demand on the ground that LAMPERS failed to state a proper purpose for conducting an inspection. Morgan Stanley also argued that the requested case management conference would be improper because the Federal Court lacked jurisdiction over the Section 220 issues. By order dated July 1, 2010, the Federal Court denied LAMPERS's request for a case management conference because "Section 220(c) provides that `[t]he [Delaware] Court of Chancery is vested with exclusive jurisdiction to determine whether or not the person seeking inspection is entitled to the inspection sought.'" Gallagher Aff. Ex. H. The Federal Court ordered the plaintiffs to show cause within 30 days why the case should not be dismissed.

    22

    On July 30, 2010, before responding to the Order to Show Cause, LAMPERS filed this action. On August 2, 2010, LAMPERS responded to the Order to Show Cause by asking the Federal Court to continue to hold the New York Derivative Action "in abeyance" pending the outcome of the Section 220 proceeding. Gallagher Aff. Ex. K. By order dated September 14, 2010, the Federal Court ruled that the derivative action would "be held in abeyance until the Chancery Court renders a decision." Gallagher Aff. Ex. M. On September 27, 2010, Morgan Stanley moved to dismiss LAMPERS's Section 220 complaint.

    23
    II. LEGAL ANALYSIS
    24

    A complaint should be dismissed if it fails to plead a plausible basis on which relief could be granted. See Ct. Ch. R. 12(b)(6); Desimone v. Barrows, 924 A.2d 908, 928-29 (Del. Ch. 2007). In considering a motion to dismiss under Rule 12(b)(6), the Court must assume that all well-pled allegations of fact in the complaint are true. Malpiede v. Townson, 780 A.2d 1075, 1082-83 (Del. 2001).

    25

    "[B]ooks and records actions are summary proceedings" that "are to be promptly tried." Lavi v. Wideawake Deathrow Entm't, LLC, 2011 WL 284986, at *1 (Del. Ch. Jan. 18, 2011). The summary nature of the proceeding "dictate[s] against allowing preliminary motions addressed to the pleadings to be presented and decided . . . . Such a practice would tend to promote delay, thereby undercutting the statutory mandate and policy that the proceeding be summary in character." Coit v. Am. Century Corp., 1987 WL 8458, at *1 (Del. Ch. Mar. 20, 1987). "Rarely is dispositive motion practice efficient when the case can be tried within two months of filing." Lavi, 2011 WL 284986, at *1. A pretrial motion therefore "ought not to be presented for decision in advance of the final hearing on the merits except where necessary to avoid substantial prejudice." Coit, 1987 WL 8458, at *1.

    26

    Despite the salutary principles counseling against pre-trial motion practice in Section 220 cases, I have entertained the motion to dismiss in this case because it appears that the underlying facts are largely undisputed. Informed by this decision, the parties should be able to agree on an appropriate scope for LAMPERS's inspection.

    27
    A. Proper Purpose
    28

    Section 220(b) provides, in pertinent part, as follows:

    29
    Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to make copies and extracts from: (1) The corporation's stock ledger, a list of its stockholders, and its other books and records . . . .
    30

    8 Del. C. § 220(b). "A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder." Id.

    31

    The Books and Records Demand states that LAMPERS's purpose for conducting its inspection is "to enable [it] and its legal counsel to evaluate the Board's refusal of the [Litigation] Demand . . . and whether same constituted a reasonable and good-faith exercise of the Board's business judgment." Gallagher Aff. Ex. E. Delaware precedents establish that a stockholder plaintiff who filed a demand-excused case and had its complaint dismissed under Rule 23.1 can subsequently make a litigation demand, then use Section 220 to explore whether the demand was wrongfully refused. See Grimes v. Donald (Grimes I), 673 A.2d 1207 (Del. 1996); Grimes v. DSC Commc'ns Corp. (Grimes II), 724 A.2d 561 (Del. Ch. 1998).

    32

    The Grimes I plaintiff filed a derivative action alleging that demand was futile as to certain of its claims. The stockholder had previously made a litigation demand as to other claims, and the Court of Chancery dismissed the derivative action on the grounds that the stockholder had waived its ability to argue demand futility. Id. at 1219-20. On appeal, the Delaware Supreme Court held that the stockholder plaintiff could still pursue a demand-refused claim: "If a demand is made, the stockholder has spent one — but only one — `arrow' in the `quiver.' The spent `arrow' is the right to claim that demand is excused. The stockholder does not, by making demand, waive the right to claim that demand has been wrongfully refused." Id. at 1218-19.

    33

    After the Supreme Court affirmed the dismissal of its demand-excused action, the shareholder made a renewed demand on the board as to all of its claims, which the board rejected. Grimes II, 724 A.2d at 564. In its letter refusing the demand, the board described the procedures it had used to investigate the shareholder's allegations and stated that it had decided, based on that investigation, not to take action. Id. at 564 & n.2. The stockholder then served a Section 220 demand to obtain books and records sufficient "to determine . . . whether the Special Committee and the Board have complied with Delaware law in their analysis and rejection of the Demand." Id. at 564-65. Vice Chancellor Lamb commended the stockholder for "tak[ing] to heart the Supreme Court's admonition" by "attempting to `use the tools at hand,' in order to determine whether his demand was wrongfully refused" before filing a complaint on that basis. Id. at 566. The Vice Chancellor held that "a Section 220 request for documents under these circumstances is proper." Id.; see also Spiegel v. Buntrock, 571 A.2d 767, 777 (Del. 1990) (explaining that after the board refuses a litigation demand, the "good faith and reasonableness of its investigation" may still be examined).

    34

    Morgan Stanley cites a decision from almost ten years before Grimes II in which this Court dismissed a Section 220 action that sought to investigate whether a board of directors, in considering and rejecting the plaintiff's litigation demand, "adhered to the appropriate legal standards and made the required factual determination in arriving at its decision not to pursue any action against the directors and former directors." Weiland v. Cent. & S. W. Corp., 1989 WL 48740, at *1 (Del. Ch. May 9, 1989). After Weiland, the Delaware Supreme Court issued its decisions in Grimes I and Spiegel, and this Court decided Grimes II. The later decisions are controlling: Exploring whether a litigation demand was wrongfully refused is a proper purpose for using Section 220.

    35

    In a further effort to obtain dismissal of the complaint, Morgan Stanley recasts LAMPERS's purpose as seeking to investigate corporate wrongdoing. With LAMPERS's purpose thus reframed, Morgan Stanley asserts that LAMPERS has not shown "a credible basis for an inference that management suffered from some self-interest or failed to exercise due care in a particular decision." Morgan Stanley Op. Br. 16 (quoting Wynnefield P'rs Small Cap Value L.P. v. Niagara Corp., 2006 WL 1737862, at *8 (Del. Ch. June 19, 2006), aff'd in part, rev'd in part on other grounds, 907 A.2d 146, 2006 WL 2727941 (Del. Sept. 1, 2006) (TABLE)). According to Morgan Stanley, because the Demand Refusal Letter described the process used to evaluate the Litigation Demand, and because a stockholder who makes a demand has "conceded the independence and disinterestedness of the Board by making a demand," LAMPERS has no credible basis for questioning the decision to refuse the demand. Morgan Stanley Reply Br. 14 (citing Spiegel, 571 A.2d at 777).

    36

    Contrary to Morgan Stanley's position, the Delaware Supreme Court has held that a stockholder who makes a demand does not concede the independence or disinterestedness of the board for purposes of demand refusal (as opposed to demand futility):

    37
    It is not correct that a demand concedes independence "conclusively" and in futuro for all purposes relevant to the demand. Levine and Spiegel state that, in assessing whether a demand has been wrongfully refused, the Court looks only to good faith and the reasonableness of the investigation. This is completely consistent with the Grimes teaching that a board that appears independent ex ante may not necessarily act independently ex post in rejecting a demand. Failure of an otherwise independent-appearing board or committee to act independently is a failure to carry out its fiduciary duties in good faith or to conduct a reasonable investigation. Such failure could constitute wrongful refusal.
    38

    Scattered Corp. v. Chi. Stock Exch., Inc., 701 A.2d 70, 74-75 (Del. 1997); accord Grimes I, 673 A.2d at 1219. It follows that a stockholder under Grimes I is entitled to use Section 220 to determine whether "an otherwise independent-appearing board or committee" failed "to carry out its fiduciary duties in good faith or to conduct a reasonable investigation." Scattered, 701 A.2d at 75. The fact that a board "appears independent ex ante" does not defeat an inspection under Grimes I.

    39

    More importantly, exploring corporate wrongdoing is not the only proper purpose that will support a Section 220 investigation.

    40
    A stockholder states a "proper purpose" when he seeks to investigate allegedly improper transactions or mismanagement; to clarify an unexplained discrepancy in the corporation's financial statements regarding assets; to investigate the possibility of an improper transfer of assets out of the corporation; to ascertain the value of his stock; to aid litigation he has instituted and to contact other stockholders regarding litigation and invite their association with him in the case; "[t]o inform fellow shareholders of one's view concerning the wisdom or fairness, from the point of view of the shareholders, of a proposed recapitalization and to encourage fellow shareholders to seek appraisal"; "to discuss corporate finances and management's inadequacies and then, depending on the responses, determine stockholder sentiment for either a change in management or a sale pursuant to a tender offer"; to inquire into the independence, good faith, and due care of a special committee formed to consider a demand to institute derivative litigation; to communicate with other stockholders regarding a tender offer; to communicate with other stockholders in order to effectuate changes in management policies; to investigate the stockholder's possible entitlement to oversubscription privileges in connection with a rights offering; to determine an individual's suitability to serve as a director; to obtain names and addresses of stockholders for a contemplated proxy solicitation; or to obtain particularized facts needed to adequately allege demand futility after the corporation has admitted engaging in backdating stock options.
    41

    1 Edward P. Welch et al., Folk on the Delaware General Corporation Law § 220.6.3, at GCL-VII-202 to -206 (5th ed. 2010 Supp.) (internal footnotes omitted), quoted in City of Westland Police & Fire Ret. Sys. v. Axcelis Techs., Inc., 1 A.3d 281, 289 n.30 (Del. 2010). There is no basis for recasting LAMPERS's purpose, because a stockholder who seeks books and records to evaluate demand refusal has identified a proper purpose. Exploring corporate wrongdoing would be a separate and distinct purpose.

    42

    Consistent with this view, a recent decision by the Delaware Supreme Court held that investigating a board's decision "to override an exercised shareholder voting right without prior shareholder approval" constituted a proper purpose under Section 220 even though the stockholder had not established a credible basis to suspect corporate wrongdoing. Axcelis, 1 A.3d at 291. The plaintiff in Axcelis demanded to inspect corporate books and records to investigate whether the board had breached its fiduciary duties by rejecting the resignations that certain directors had submitted under the company's "plurality plus" re-election policy. Id. at 285. The press release announcing the decision explained that the board rejected the resignations after "consider[ing] a number of factors relevant to the best interests of Axcelis," including the directors' experience and knowledge, that their departure would leave the board shorthanded, and that the board needed to consider a pending takeover bid. Id. at 284. The Court of Chancery held that the stockholder failed to establish a credible basis to suspect wrongdoing that would support an inspection. City of Westland Police & Fire Ret. Sys. v. Axcelis Techs., Inc., 2009 WL 3086537, at *5 (Del. Ch. Sept. 28, 2009).

    43

    On appeal, the Delaware Supreme Court affirmed the Court of Chancery's decision. 1 A.3d at 288. The Supreme Court then went on to explain "for future guidance" that a stockholder faced with identical circumstances could obtain the same books and records for the different purpose of evaluating the directors' suitability to serve. Id. at 290 (citing Pershing Square, L.P. v. Ceridian Corp., 923 A.2d 810, 817-18 (Del. Ch. 2007)). Notwithstanding that the board had exercised its discretionary authority and provided an explanation for its decision, the Supreme Court held that "the question arises whether the directors, as fiduciaries, made a disinterested, informed business judgment that the best interests of the corporation require the continued service of these directors, or whether the Board had some different, ulterior motivation." Id. at 291. The Supreme Court explained that "[board] accountability should take the form of being subject to a shareholder's Section 220 right to seek inspection of any documents and other records upon which the board relied in deciding not to accept the tendered resignations." Id.

    44

    Here, LAMPERS seeks to investigate why the Board refused its Litigation Demand. The question of whether a corporation should sue its directors and senior officers puts directors in a difficult position where they are subject to potentially subtle influences and pressures. "[N]otwithstanding our conviction that Delaware law entrusts the corporate power to a properly authorized committee, we must be mindful that directors are passing judgment on fellow directors in the same corporation . . . . The question naturally arises whether a `there but for the grace of God go I' empathy might not play a role." Zapata Corp. v. Maldonado, 430 A.2d 779, 787 (Del. 1981); see also Aronson v. Lewis, 473 A.2d 805, 815 & n.8 (Del. 1984) (recognizing "the structural bias common to corporate boards throughout America, as well as the other unseen socialization processes cutting against independent discussion and decisionmaking in the boardroom," but requiring supporting facts to be affirmatively pled with particularity in the complaint for purposes of Rule 23.1). Basic notions of accountability require that stockholders be able to use Section 220 to evaluate whether the demand-refusal decision was made in good faith, after a reasonable investigation, "or whether the Board had some different, ulterior motivation." Axcelis, 1 A.3d at 291.

    45

    I recognize that the Zapata Court was commenting on the decision that a special litigation committee faces when addressing derivative claims being actively pursued by a stockholder plaintiff after demand has been excused. The act of considering a litigation demand without a prior finding of demand excusal presents directors with a decision of the same kind. If the directors take up the invitation to litigate, the outcome for the litigation targets is no different than if an SLC assumed the derivative claims under Zapata. In both cases, the directors have deployed the resources of the corporation against their fellow directors and officers (and theoretically against themselves). It is only if the directors refuse the litigation demand, as typically happens, that the subsequent litigation paths diverge. An SLC's decision to dismiss a post-demand-excusal derivative claim is reviewed under Zapata's two-step standard, which effectively amounts to reasonableness review and a context-specific application of enhanced scrutiny. Cf. Reis v. Hazelett Strip-Casting Corp., 2011 WL 303207, at *8 (Del. Ch. Jan. 21, 2011) ("Enhanced scrutiny is Delaware's intermediate standard of review. . . . Enhanced scrutiny applies when the realities of the decision-making context can subtly undermine the decisions of even independent and disinterested directors."). By contrast, a decision to refuse a litigation demand is reviewed under the business judgment rule, which forces a plaintiff to overcome the rule's powerful presumptions before a court will examine the merits of the directors' decision. See Levine v. Smith, 591 A.2d 194, 212 (Del. 1991). The highly deferential standard for reviewing a demand-refusal decision makes it critical that an accountability mechanism exist in the form of a limited right to information under Section 220.

    46

    Morgan Stanley cannot rely on the Demand Refusal Letter to foreclose LAMPERS's right to use Section 220. The letter describes the Board's process, but it does not provide any substantive insight into the Board's decision. In form, the Demand Refusal Letter is longer than the peremptory refusal found insufficient in Grimes II. In substance, the two letters are identical. A board cannot defeat the use of Section 220 that the Delaware Supreme Court contemplated in Grimes I, Scattered, and Spiegel by sending a self-serving letter describing process sans content. Such an approach would render nugatory the right to use Section 220 to investigate demand refusal.

    47

    LAMPERS recognizes that the deference afforded to the Board's decision means it faces long odds in showing that the refusal was wrongful. Whether the Board in fact acted wrongfully is not currently at issue. Rather, the question is whether LAMPERS's purpose for inspection is proper. It is.

    48
    B. The Scope Of The Inspection
    49

    A stockholder's inspection is limited to those books and records that are necessary to accomplish the stated purpose. See Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 570 (Del. 1997). "The core inquiry . . . is whether the requested documents are `reasonably required to satisfy the purpose of the demand.'" Sanders v. Ohmite Hldg., LLC, 2011 WL 598436, at *7 (Del. Ch. Feb. 21, 2011) (quoting Carapico v. Phila. Stock Exch., Inc., 791 A.2d 787, 793 (Del. Ch. 2000)).

    50

    In Grimes II, Vice Chancellor Lamb held that

    51
    [t]he right to obtain corporate records for the purpose of determining whether or not a demand was improperly refused focuses on the committee process itself and extends at least to reports or minutes, reflecting the corporate action. Thus, plaintiff is entitled to receive copies of the Special Committee's report, minutes of the meetings of the Special Committee and minutes of any meeting of the board of directors relating to the creation or functioning of the Special Committee, including any meeting of the board of directors at which the recommendation of the Special Committee was considered or approved.
    52

    724 A.2d at 567 (internal quotation marks omitted). The scope of relief granted in Grimes II anticipated Axcelis, where the Delaware Supreme Court held that "[board] accountability should take the form of being subject to a shareholder's Section 220 right to seek inspection of any documents and other records upon which the board relied." Axcelis, 1 A.3d at 291.

    53

    LAMPERS has stated a claim to obtain the information contemplated by Grimes II and Axcelis, viz. (i) the minutes of any meeting of the Board or the Audit Committee where the Litigation Demand was discussed or evaluated, (ii) Simpson Thacher's written report and presentation to the Audit Committee in connection with the firm's recommendation to refuse the Litigation Demand, (iii) the Audit Committee's report and presentation to the Board, and (iv) any documents and other records upon which the Board relied. In addition, LAMPERS has stated a claim to obtain Simpson Thacher's engagement letter so that LAMPERS can evaluate the scope of the firm's engagement and its economic incentives. Cf. Grimes II, 724 A.2d at 567 (permitting inspection of "documents reflecting payments made to or on behalf of the members of the Special Committee").

    54

    On the facts pled, LAMPERS also has stated a claim to obtain the Skadden Report and those portions of the record from the Skadden Investigation actually considered by Simpson Thacher. Morgan Stanley's response to the Litigation Demand states:

    55
    In connection with the Audit Committee's review of the matters raised in the [Litigation] Demand Letter, we met with attorneys from [Skadden], which previously conducted a comprehensive investigation of Morgan Stanley's marketing and selling of ARS during 2007 and 2008 in response to several regulatory investigations . . . . During the course of its investigation, Skadden reviewed approximately 2.8 million pages of electronic and hard copy documents, and interviewed twelve Morgan Stanley employees, a number of whom were interviewed multiple times. . ..
    56
    In addition, as part of the Audit Committee's evaluation and investigation of the matters raised in the [Litigation] Demand Letter, we conducted an independent review and analysis of the relevant material from Skadden's prior investigation, and also investigated certain matters that were not a focus of Skadden's prior investigation by requesting and reviewing additional documents and speaking with relevant Morgan Stanley employees.
    57

    Gallagher Aff. Ex. D. The Skadden Report and "the relevant material from Skadden's prior investigation" comprise part of the body of information on which Simpson Thacher, the Audit Committee, and the Board relied in evaluating and responding to the Litigation Demand. LAMPERS is therefore entitled to those materials. Because LAMPERS has stated a claim to obtain the Skadden Report and these aspects of the Skadden Investigation, LAMPERS has stated a claim to obtain the Skadden engagement letter for the same reasons applicable to the Simpson Thacher engagement letter.

    58

    LAMPERS has not stated a claim to obtain the other books and records it seeks, including other materials from the Skadden Investigation. To obtain additional books and records, LAMPERS must make a greater showing of need by articulating in more specific and convincing fashion why the incremental information is reasonably required to evaluate the Board's demand-refusal decision. See Grimes II, 724 A.2d at 567. LAMPERS remains free to attempt such a showing by way of a future Section 220 demand, and in doing so LAMPERS may make arguments based on the materials it obtains through this action. If LAMPERS makes such a demand, then Morgan Stanley will have to consider it in due course. For purposes of the current litigation, to the extent the Books and Records Demand sought materials beyond those identified above, LAMPERS's complaint is dismissed.

    59
    III. CONCLUSION
    60

    For the foregoing reasons, the motion to dismiss is granted in part and denied in part. To the extent the parties cannot resolve their dispute, they will negotiate a schedule that will bring this summary proceeding to a final hearing within sixty days. IT IS SO ORDERED.

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