Weingarten v. Monster Worldwide, Inc., C.A. No. 12931-VCG (Del. Ch. Feb. 27, 2017) (Glasscock, V.C.)
In this post-trial memorandum opinion, the Delaware Court of Chancery held that the Plaintiff lacked standing to proceed with a complaint to compel the inspection of the books and records of a Delaware corporation pursuant to Section 220 of the General Corporation Law of the State of Delaware (“Section 220”) because the Plaintiff’s status as a stockholder of the corporation had ceased as a result of the consummation of a merger prior to the filing of the complaint.
Prior to the consummation of the merger between Monster Worldwide, Inc. (“Monster”) and Randstad North America, Inc. (“Randstad”), the Plaintiff was a stockholder of Monster and delivered a Section 220 demand to Monster. After Monster rejected the Plaintiff’s demand, the Plaintiff contacted Monster seeking to negotiate a voluntary production and indicating that the Plaintiff expected that Monster would not make a standing argument if the Plaintiff did not file a complaint to compel inspection until after the merger closed. The Plaintiff asked Monster to respond by the next day, but Monster did not meet that deadline. The Plaintiff did not immediately file a complaint. Before the Plaintiff eventually filed a complaint, Randstad consummated the merger, resulting in the Plaintiff ceasing to be a stockholder of Monster.
The Court held that the Plaintiff did not have standing, and dismissed the complaint. The Court determined that Section 220(c) unambiguously precludes non-stockholders from bringing a books and records action. The Court reasoned that the statute is unambiguous, and therefore must be interpreted in accordance with its plain meaning. The plain language of the statute requires the stockholder to establish that it complied with the demand requirement and that it is a stockholder at the time of filing the complaint. These two requirements balance the corporation’s interests of being free from burdensome requests and the stockholder’s interests to pursue its ownership rights. While the Court presumed the Plaintiff made a proper demand on Monster, it found that he did not having standing when he filed the complaint because the merger had cancelled the Plaintiff’s stock.
The Court found the Plaintiff’s policy arguments misplaced because the statute is unambiguous. In addition, the case law cited by the Plaintiff involved stockholders who lost stockholder status after filing a complaint. The Court also rejected the Plaintiff’s estoppel argument. The Court found that there was no conduct by Monster on which the Plaintiff purported to rely, and the Plaintiff’s reliance on Monster’s silence to the Plaintiff’s letter was not reasonable.