Citation. 681 A.2d 1026 (Del. 1996)
Brief Fact Summary. Thomas & Betts Corporation, (Appellant), appeals the Court of Chancery holding granting in part and denying in part its request for inspection of certain books and records of Leviton Manufacturing Co., Inc., (Appellee).
Synopsis of Rule of Law. Where substantial evidence supports a finding that plaintiff’s primary motives for the inspection are improper, plaintiff has a greater-than-normal evidentiary burden to adduce evidence from which a credible possibility of mismanagement and waste may be inferred and to adduce specific evidence of waste and mismanagement.
Facts. Appellee is a closely held corporation. Appellant is a publicly traded business that was interested in either acquiring or engaging in some sort of joint venture with Appellee. Appellee was not interested in either. Appellant decided to seek a minority position in Appellee to force a sale of the company. Appellant purchased Thomas Blumberg’s 29.1% share of Appellee and promised to pay Blumberg more should Appellant acquire Appellee.
Harold Leviton, President, CEO, and majority stockholder in Appellee, rebuffed Appellant’s attempts to establish an amicable relationship and offered to buy Appellant’s shares. Appellant requested to review all the books and records of Appellee. Appellee allowed Appellant only limited access. Appellant served a formal demand to Appellee. In an associated letter Appellant threatened litigation if Leviton should continue to refuse to sell his stocks. Leviton formally refused both the demand for inspection and the acquisition offer.
Appellant brought suit to compel inspection of Appellee’s books and records. The Court of Chancery held that Appellant served the demand in order to gain leverage in its efforts to acquire Appellee. This was antithetical to Appellee’s interests. However, a limited inspection was permissible so Appellant could value its shares since a fundamental change of circumstances had occurred.
Whether the Plaintiff has a greater than normal evidentiary burden to adduce evidence from which a credible possibility of mismanagement and waste may be inferred and to adduce specific evidence of waste and mismanagement.
Whether the Court of Chancery abused its discretion in limiting the scope of its inspection of Appellee’s books and records.