Thomas & Betts Corp. v. Leviton Manufacturing Co., Inc.

Delaware Court of Chancery · Corporations

CorporationsStockholder inspection rightsBooks and recordsSection 220DelawareCourt of ChancerySection 220stockholder list

Facts

Thomas & Betts purchased about 29.1% of Leviton's stock from the Blumberg family for $50 million as an initial step toward eventually acquiring all of Leviton, a privately held Delaware corporation controlled by Harold Leviton. After Harold Leviton refused to negotiate a sale or alter Leviton's accounting practices, Thomas & Betts demanded inspection of Leviton's stockholder list and a broad set of corporate records. Thomas & Betts stated four purposes: to communicate with stockholders, to value its investment, to account for that investment on its own financial statements, and to investigate alleged waste and mismanagement. Leviton refused, arguing the purposes were improper and that disclosure of confidential information would harm the company.

Issue

Whether Thomas & Betts was entitled under 8 Del. C. § 220 to inspect Leviton's stockholder list and requested books and records. More specifically, the court considered which of Thomas & Betts' stated purposes were proper and, if any were proper, what categories of documents were essential and sufficient to accomplish those purposes.

Rule

A stockholder seeking a stockholder list under § 220 is presumed to have a proper purpose, and the corporation bears the burden to show the purpose is improper; any technical deficiency in the demand may be cured by later proof of a specific proper purpose. For books and records, the stockholder bears the burden to prove a proper purpose reasonably related to its interest as a stockholder, and the purpose must not be adverse to the corporation's interest. Investigation of waste or mismanagement is a proper purpose only if the stockholder adduces evidence supporting a credible possibility of waste or mismanagement. Valuation of shares in a privately held corporation is a proper purpose, but inspection is limited to those records that are essential and sufficient for that valuation.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Riverview Components, Inc., a privately held Delaware manufacturer in Cleveland, has not paid dividends in years. Maya Patel owns 22% of its stock and demands the stockholder list so she can contact the other owners about either buying enough shares to gain control or selling her minority block to them.

If Riverview refuses and Maya sues under § 220, which is the most likely result?

Explanation. For a stockholder list, the stockholder is presumed to have a proper purpose, and the corporation bears the burden to show impropriety. In a private, non-dividend-paying corporation, a minority stockholder may properly seek the list to contact other stockholders about purchasing their shares or selling her own block, because that objective is reasonably related to her stockholder interest.