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KT4 Partners LLC v. Palantir Technologies Inc.

Supreme Court of Delaware

January 29, 2019

KT4 PARTNERS LLC, Plaintiff Below, Appellant,
v.
PALANTIR TECHNOLOGIES INC., Defendant Below, Appellee.

          Submitted: December 12, 2018

          Court Below: Court of Chancery of the State of Delaware, C.A. No. 2017-0177-JRS

         Upon appeal from the Court of Chancery. AFFIRMED in part, REVERSED in part, and REMANDED.

          Bartholomew J. Dalton, Esquire, Michael C. Dalton, Esquire, DALTON & ASSOCIATES, P.A., Wilmington, Delaware; Barry S. Simon, Esquire (Argued), Jonathan B. Pitt, Esquire, Stephen L. Wohlgemuth, Esquire, WILLIAMS & CONNOLLY LLP, Washington, District of Columbia, for Appellant, KT4 Partners LLC.

          Blake Rohrbacher, Esquire, Kevin M. Gallagher, Esquire, Kelly L. Freund, Esquire, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Kevin J. Orsini, Esquire (Argued), Rory A. Leraris, Esquire, CRAVATH, SWAINE & MOORE LLP, New York, New York, for Appellee, Palantir Technologies Inc.

          Before STRINE, Chief Justice; SEITZ and TRAYNOR, Justices.

          STRINE, CHIEF JUSTICE

         This appeal arises from a less-than-summary books and records action brought under Section 220 of the Delaware General Corporation Law. The stockholder and plaintiff below, KT4 Partners LLC, appeals from the Court of Chancery's post-trial order granting in part and denying in part KT4's request to inspect various books and records of appellee Palantir Technologies Inc., a privately held technology company based in Palo Alto, California.

         After extensive motion practice and a one-day trial, the Court of Chancery found that KT4 had shown a proper purpose of investigating suspected wrongdoing in three areas: (1) "Palantir's serial failures to hold annual stockholder meetings"; (2) Palantir's amendments of its Investors' Rights Agreement in a way that "eviscerated KT4's (and other similarly situated stockholders') contractual information rights after KT4 sought to exercise those rights"; and (3) Palantir's potential violation of two stockholder agreements by failing to give stockholders notice and the opportunity to exercise their rights of first refusal, co-sale rights, and rights of first offer as to certain stock transactions.[1] The Court of Chancery therefore ordered Palantir to produce the company's stock ledger, its list of stockholders, information about the company's directors and officers, year-end audited financial statements, books and records relating to annual stockholder meetings, books and records relating to any cofounder's sales of Palantir stock, each notice that Palantir sent to any "Major Investor" relating to certain offerings or sales of Palantir stock, and certain books and records relating to the Investors' Rights Agreement amendments.[2] The court otherwise denied KT4's requests, including its request to inspect emails related to the Investors' Rights Agreement amendments and its request for an exception to a jurisdictional use restriction that the court imposed.

         The Court of Chancery dealt skillfully and expeditiously with the myriad issues dividing the parties in this contentious litigation, which is but one lawsuit among several between them. Consistent with their feisty relationship, the parties raise many issues on appeal. In our view, the Court of Chancery correctly applied the law and was within its discretion in resolving most of these issues, and we need not use many bytes addressing them.[3] But, as to two issues, we do conclude that the Court of Chancery erred.

         We first hold that the Court of Chancery abused its discretion by denying wholesale KT4's request to inspect emails relating to the amendments of Palantir's Investors' Rights Agreement. Section 220 entitles a stockholder to inspect all books and records that are necessary to accomplish that stockholder's proper purpose, and on our review of the record below, KT4 made a sufficient showing that emails were necessary to investigate potential wrongdoing related to the Investors' Rights Agreement amendments. Given that discovery is limited in § 220 actions, KT4 discharged its evidentiary burden by presenting evidence that Palantir did not honor traditional corporate formalities (as suggested by its "serial failures to hold annual stockholder meetings"[4]) and had acted through email in connection with the same alleged wrongdoing that KT4 was seeking to investigate. Faced with that evidence, Palantir failed to present any evidence of its own that more traditional materials, such as board resolutions or minutes, even existed. And although the Court of Chancery may have credited Palantir's implicit suggestion that more formal books and records would be adequate for KT4's purposes, Palantir concedes on appeal that no such documents exist.

         Ultimately, if a company observes traditional formalities, such as documenting its actions through board minutes, resolutions, and official letters, it will likely be able to satisfy a § 220 petitioner's needs solely by producing those books and records. But if a company instead decides to conduct formal corporate business largely through informal electronic communications, it cannot use its own choice of medium to keep shareholders in the dark about the substantive information to which § 220 entitles them.

         As to the second issue, we hold that the Court of Chancery abused its discretion by refusing KT4's modest requests to temper the jurisdictional use restriction the court imposed. At Palantir's request, the Court of Chancery imposed a broad restriction on the use of the materials KT4 was entitled to inspect, such that KT4 could not use them in litigation outside the Court of Chancery (except perhaps in another court located in Delaware, should the Court of Chancery decline jurisdiction). In imposing that limitation, the court rejected KT4's requests that it be allowed to bring suit: (1) in the first instance in the Superior Court, where other litigation between the parties was already pending; and (2) for any non-derivative action where one of Palantir's directors, officers, or agents is named as a defendant and that person would not consent to personal jurisdiction in Delaware, in a court located in another jurisdiction. Given that the court found a credible basis to investigate potential wrongdoing related to the violation of contracts executed in California, governed by California law, and among parties living or based in California, the basis for limiting KT4's use in litigation of the inspection materials to Delaware and specifically the Court of Chancery was tenuous in the first place, and the court lacked reasonable grounds for denying the limited modifications that KT4 requested.

         As this Court observed in United Technologies Corp. v. Treppel, the Court of Chancery must be cautious about limiting the jurisdictions in which a petitioner can use in litigation the books and records it receives from a § 220 action.[5] That is for an obvious reason: § 220 itself does not contain any statutory language restricting stockholders from using the books and records they inspect in lawsuits brought outside of Delaware. Accordingly, Treppel rested on the premise that restrictions of this kind are not routine and must be justified by "case-specific factors."[6] In that case, for example, the petitioner was limited to using the records in Delaware courts because, under the respondent corporation's bylaws, that was the only permissible forum in which the petitioner could bring suit, and because the other pertinent circumstances weighed toward restricting litigation use outside of Delaware. Here, the situation is quite different. The party seeking to impose the restriction, Palantir, had itself sued KT4 in California. And Palantir's bylaws did not contain a forum selection clause limiting suit to any particular jurisdiction. Not only that, but the two major stockholder agreements at issue in this case contained California choice of law clauses, which would give KT4 a rational basis for preferring that California courts resolve any disputes related to those contracts. Even in the face of those facts, KT4 did not contest being restricted to filing in Delaware in the first instance, but only asked for limited modifications that would allow it to file suit in the Delaware Superior Court in the first instance (instead of just the Court of Chancery) and in a court located in another jurisdiction if potential defendants do not consent to personal jurisdiction in Delaware.

         We affirm in part and reverse in part the Court of Chancery's final order and judgment and remand for further proceedings consistent with this opinion.

         I. Background

         A. Facts[7]

         i. KT4's Investments in Palantir and the Stockholder Agreements

         Around 2003, KT4's principal, Marc Abramowitz, met with Palantir's CEO, Alex Karp, and KT4 made an initial $100, 000 investment in Palantir. KT4 made several more investments in Palantir, ultimately reaching an estimated $60 million in value. For the next twelve years or so following KT4's initial investment, Abramowitz was "a trusted advisor to Palantir" with "unique access" to its executives.[8]

         In connection with these investments, KT4, Palantir, and other stockholders entered the Investors' Rights Agreement in June 2006; the Amended Investors' Rights Agreement in February 2008; and, without KT4's involvement, the Amended and Restated Investors' Rights Agreement in July 2015. These agreements give "Major Investors" (including KT4) two rights central to this dispute. First, Major Investors get a "right of first offer" as to future stock offerings, which essentially requires Palantir to notify Major Investors whenever Palantir seeks to offer its stock and allows Major Investors an opportunity to buy stock in the offering.[9] Second, Major Investors get "Inspection" rights, which include not only the right to inspect books and records, but also the rights to inspect Palantir properties and discuss Palantir's business with its officers.[10]

         Palantir and its investors, including KT4, also entered a First Refusal and Co-Sale Agreement (the "First Refusal Agreement").[11] The First Refusal Agreement gives Palantir a right of first refusal when specific investors try to sell their Palantir stock, and certain investors (including KT4) a co-sale right and right of first refusal second to Palantir's right of first refusal. In essence, these provisions give Palantir the first option to buy any or all of the block of shares that a selling investor tries to sell, and then qualifying investors get the option to buy their own pro rata portion of the shares within the block after Palantir.[12] Relevant to this appeal, the First Refusal Agreement also contains a choice of law clause providing that the Agreement "shall be interpreted under the laws of the State of California."[13]

         ii. The Falling Out and the Amendments to the Investors' Rights Agreement

         In the summer of 2015, Abramowitz's favored status ended after Palantir's CEO, Karp, accused Abramowitz of stealing Palantir's intellectual property. On that phone call, Karp "verbally abused" Abramowitz "in a manner that [Abramowitz] thought was irrational, somewhat unhinged, and completely contradictory to any relationship [he] had had with [Karp] in the past."[14] After the call, Abramowitz tried to sell KT4's stake in Palantir to a private equity fund, but the sale fell through. At trial, Abramowitz testified that the deal fell apart because Palantir had intentionally thwarted the transaction, which is currently the subject of a tortious interference and civil conspiracy lawsuit brought by KT4 against Palantir and its broker in the Superior Court of Delaware.[15]

         On August 16, 2016, after Abramowitz's attempt to sell KT4's Palantir position failed, KT4 sent Palantir an information request under the Investors' Rights Agreement. At that time, KT4 had enough Palantir stock to give it informational rights under the Investors' Rights Agreement as a Major Investor. Palantir wrote back five days later "stating that it was reviewing the request and would respond soon."[16]

         But Palantir did not respond soon. Instead, on September 1, 2016, Palantir executed a new set of amendments to the Investors' Rights Agreement (the "September 2016 Amendments") and, on that same day, filed a lawsuit against KT4 in the Superior Court of California alleging, among other things, theft of Palantir's trade secrets.

         The September 2016 Amendments reduced KT4's rights under the Investors' Rights Agreement in three key ways. First, they increased the Major Investor threshold from five million to ten million shares, which meant that KT4-which owned 5, 696, 977 shares-would no longer qualify for the right of first offer or have inspection rights under the Investors' Rights Agreement. Second, they gave Palantir the right to deny an inspection request if Palantir and enough Major Investors consider the request to have been made in bad faith or for an improper purpose. Third, they gave Palantir the right to deny access to information it "reasonably considers to be a trade secret or similar confidential information."[17] These amendments purported to retroactively alter KT4's rights under the Investors' Rights Agreement, effectively mooting its August 16 informational request.

         Summing up the circumstances surrounding the execution of the amendments, the Court of Chancery found that Palantir had "led KT4 to believe that it was considering KT4's information request, and then pulled the rug out from under KT4 (and other similarly situated stockholders) eleven days later by eviscerating its contractual right to seek information."[18]

         Like the First Refusal Agreement, each amendment to the Investors' Rights Agreement also contains a choice of law clause providing for California law to govern the amendment: "This Amendment shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California and without giving effect to principles of conflicts of law."[19]

         iii. KT4's § 220 Demand

         On September 20, 2016, KT4 sent a written demand to Palantir requesting to inspect its books and records under 8 Del. C. § 220 (the "Demand"). As the Court of Chancery put it, the Demand's stated purpose was:

"to investigate fraud, mismanagement, abuse, and breach of fiduciary duty committed by [Palantir], its officers, its directors, its agents, and its majority shareholders" relating to the following issues: (1) interference with KT4's efforts to sell its Palantir shares; (2) Palantir's practice of improperly favoring certain stockholders; (3) corporate waste; (4) Palantir's actions that deprived certain investors of the full value of their investments; (5) Palantir's actions that deprived certain investors of their [right of first refusal] to purchase Palantir shares and (6) securities fraud.[20]

         The Demand requested general "access to the books and records of the Corporation (including hardcopy and electronic documents and information)," as well as twenty more specific requests, ranging from general information like financial statements to more specific information such as books and records related to the September 2016 Amendments and Palantir's potential breach of the First Refusal Agreement.[21]

         About a week later, Palantir rejected the Demand. Over the following months, the parties tried to reach an agreement as to KT4's inspection rights, with Palantir offering KT4 in February 2017 its most recent financial statements and a capitalization table. But KT4 rejected that limited offer.

         B. Procedural History

         On March 8, 2017, about half a year after sending the Demand to Palantir, KT4 brought this § 220 action in the Court of Chancery to compel Palantir to provide KT4 with access to the books and records requested in the Demand. Extensive motion practice, a one-day trial, and additional post-trial motion practice ensued.

         On February 22, 2018, the Court of Chancery issued a post-trial opinion holding that KT4 had shown a proper purpose of investigating suspected wrongdoing in three areas: (1) "Palantir's serial failures to hold annual stockholder meetings"; (2) Palantir's amendment of its Investors' Rights Agreement in a way that "eviscerated KT4's (and other similarly situated stockholders') contractual information rights after KT4 sought to exercise those rights"; and (3) Palantir's potential violation of the Investors' Rights Agreement and the First Refusal Agreement by failing to give stockholders notice and the opportunity to exercise their rights of first refusal, co-sale rights, and rights of first offer as to certain stock transactions.[22] In so holding, the court rejected KT4's arguments that the Demand stated a valuation purpose and purposes of investigating wrongdoing related to Palantir's broker's compensation, interference with KT4's attempted stock sale to a private equity fund, a lack of liquidity to stockholders, and Palantir's CEO compensation.

         In its opinion, the Court of Chancery also briefly addressed the scope of documents it would order produced. Overall, the court held that "KT4 is entitled to inspect books and records that are essential to fulfill" its three proper "investigative purposes."[23] The court also specifically held that KT4 was entitled to "all books and records relating to" the September 2016 Amendments.[24] The opinion did not place any explicit limits on scope related to those books and records. The opinion also required the parties to agree to a confidentiality agreement, but it did not place any other limitations on the use of the documents produced.

         The parties thereafter conferred on an implementing final order, but they could not agree on certain issues, two of which are central to this appeal. First, KT4's proposed version of the final order provided that "'[b]ooks and records as used herein shall include electronically stored information ('ESI'), such as emails," whereas Palantir's version struck that provision.[25] Second, Palantir's proposed order contained a jurisdictional use restriction requiring any lawsuit arising out of the inspection to be brought in the Delaware Court of Chancery, whereas KT4 proposed modifications of that restriction that would (1) allow suit to be brought in either the Court of Chancery or the Superior Court in the first instance; and (2) provide for the following exception related to personal jurisdiction (the "Personal Jurisdiction Exception"):

Notwithstanding the foregoing, KT4 may bring any non-derivative suit arising out of the Inspection Information against any director, officer, or agent of the Company in any jurisdiction where such director, officer, or agent is subject to personal jurisdiction. KT4 shall, however, provide the Company notice of such suit prior to filing. If each and every director, officer, or agent of the Company to be named in such a suit submits to personal jurisdiction in Delaware in writing within five days of the Company's receiving notice, KT4 shall bring suit in a Delaware court. If KT4 brings such a non-derivative suit in a jurisdiction outside of Delaware, it agrees to comply with that jurisdiction's procedures for obtaining confidential treatment to the extent it cites or attaches any Confidential Material to its complaint.[26]

         That is, the Personal Jurisdiction Exception would allow KT4 to bring any non-derivative suit outside of Delaware when any Palantir officer, director, or agent who is named as a defendant does not consent to personal jurisdiction in Delaware, acting as a sort of safety valve in cases where personal jurisdiction over potential defendants in Delaware was uncertain.

         On March 20, 2018, the Court of Chancery issued an implementing Final Order and Judgment ruling against KT4 on both of these issues.[27] As to the email issue, the parties read the Final Order to include a categorical exclusion of emails from the documents that Palantir would be required to produce.[28] Two days later, KT4 filed a motion for limited reargument as to that exclusion, particularly as to the September 2016 Amendments. On May 1, 2018, the Court of Chancery denied KT4's motion on two alternative grounds.[29] First, the court held that the Demand's request "for 'access to the books and records of the Corporation (including hardcopy and electronic documents and information)' cannot reasonably be viewed as a targeted request for electronic mail in these circumstances."[30] In reaching that conclusion, the court emphasized that the Demand had specifically requested emails as to another category of books and records, which the court viewed as showing that "KT4 was well aware of the distinction" between emails and electronic documents generally.[31] Second, the court held that "inspection of electronic mail is not essential to fulfilling KT4's stated investigative purpose."[32] The court did not explain why or how the non-email documents that Palantir was offering to provide would be sufficient to allow KT4 to fulfill its investigative purpose. But the court did seem to assume that, under its Final Order, KT4 was entitled to receive "board level documents relating to Palantir's consideration of amendments to the Investors' Rights Agreement."[33]

         As for the jurisdictional use provision, the Court of Chancery adopted Palantir's proposed version word for word (the "Jurisdictional Use Restriction"):

Any claim, dispute, controversy, or cause of action between the Parties that arises out of the Inspection Information (including, for the avoidance of doubt, any derivative action) will be brought exclusively in the Court of Chancery of the State of Delaware, or, if this Court declines to exercise jurisdiction, any other state or federal court of competent jurisdiction located in the State of Delaware.[34]

         The Court of Chancery did not explain its reasons for rejecting KT4's proposed modifications.

         II. Analysis

         A. Issues on Appeal

         On appeal, KT4 argues that the Court of Chancery erred by (1) "denying KT4's request to inspect emails relating to Palantir's conduct in amending the Investors' Rights Agreement and violating KT4's contractual rights";[35] and (2) "imposing the Jurisdictional [Use Restriction]."[36]

         B. Standard of Review

         In a § 220 action, we review for abuse of discretion the Court of Chancery's determination of both the scope of relief and any limitations or conditions on that relief.[37] This standard of review "is highly deferential."[38] "Undergirding this discretion is a recognition that the interests of the corporation must be harmonized with those of the inspecting stockholder."[39] Given "the breadth of this discretion, Delaware courts have viewed the determination of whether to impose a condition or limitation on an inspection as inherently case-by-case and 'fact specific.'"[40]Questions of law, however, "are reviewed de novo."[41]

         As a threshold matter, although the parties generally agree that abuse of discretion is the appropriate standard of review, KT4 argues that de novo review applies to "[t]he issue of whether a Section 220 demand for 'all books and records' includes a particular type of book or record" because that issue "presents a question of law."[42] Palantir, by contrast, contends that the abuse of discretion standard applies to this issue.[43] This appears to be the first time that this Court has been asked to determine what standard of review applies to a dispute over the meaning of a § 220 demand.

         We adopt a de novo standard of review as to which types of books and records are included in the actual written demand, except to the extent that the written demand is ambiguous and there are factual determinations underlying the Court of Chancery's resolution of that ambiguity. We have previously held that, in § 220 cases, abuse of discretion is the appropriate standard of review for the scope of relief and the limitations and conditions imposed on that relief, [44] whereas de novo review applies to questions of law, such as the applicability of attorney-client privilege[45]and whether a stated purpose is proper.[46] Interpreting a written demand is more analogous to contract interpretation, which is subject to de novo review as a question of law, [47] than to the sorts of fact-intensive, judgment-based determinations that are reviewed for abuse of discretion (e.g., the appropriate scope of relief or limitations on relief).[48] Nevertheless, to the extent that factual determinations underlie the Court of Chancery's interpretation of an ambiguous written demand (e.g., where the court evaluated a witness's credibility), then deference to those factual findings must be given.

         C. The Exclusion of Emails Related to the September 2016 Amendments

         KT4 first argues that the Court of Chancery erred by denying its request to inspect emails related to the September 2016 Amendments to the Investors' Rights Agreement. Specifically, KT4 argues that the Court of Chancery erred by holding that (1) the Demand did not request emails; and (2) emails were not necessary for KT4's investigative purpose.[49] As to the first point, KT4 emphasizes that the Court of Chancery has previously held that the term "books and records" can include emails, and the case for including emails is especially strong "where, as here, the request makes explicit reference to electronic documents."[50] As to the second point, KT4 argues that board-level materials are not sufficient in this case given the evidence that Palantir does much of its business informally.[51] And in fact, Palantir has conceded on appeal that other than the September 2016 Amendments themselves, responsive non-email documents do not exist.

         We must first address whether, as a threshold matter, the Demand requested emails related to the September 2016 Amendments. The Court of Chancery held that the Demand does not request emails, reasoning that the Demand's reference to "electronic documents and information" did not identify emails clearly enough.[52]KT4 challenges this ruling on appeal, pointing to cases in which this Court and the Court of Chancery have held or implied that the term "books and records" includes emails and emphasizing that the Demand "makes explicit reference to electronic documents."[53] Palantir responds with an expressio unius argument, contending that the express reference to email in one of the 22 specific requests for books and records means that the Demand requested emails only as to that one specific request.[54]

         We agree with KT4 that the Demand requested emails. As previously noted, the Demand requested, in relevant part:

the books and records of the Corporation (including . . . electronic documents and information), its stock ledger, and the list of shareholders . . . and, without limiting the foregoing, . . . the following materials (again including . . . electronic documents and information): . . . all books and records relating to any amendment or purportedly retroactive amendment to the Investors' Rights Agreement made by Palantir or its shareholders on September 1, 2016 . . . .[55]

         That request is drafted expansively to cover seemingly anything in the general category of "books and records," which has long been understood to cover both official corporate records and less formal written communications.[56] In case the breadth of the Demand wasn't clear enough, the Demand expressly requests-both as part of the general request and as a preface to the specific requests-not only "hardcopy" documents, but also "electronic documents and information."[57] "Emails," of course, are a type of "electronic document."[58] As to the specific request for documents related to the September 2016 Amendments, that request asks for "all books and records, "[59] which is about as broad as one can get. In its opinion, the Court of Chancery appeared to grant that request for "all books and records" in full.[60]

         Palantir's expressio unius argument is unconvincing. Given how many specific requests KT4 made-22 in total-the Demand's specific identification of emails in just one request but not others does not provide a compelling reason to override the apparent breadth of the Demand and the general understanding that the term "books and records" is comprehensive.[61]

         With that threshold issue resolved, we now turn to the core issue: whether the Court of Chancery abused its discretion in ruling that emails were not necessary for KT4's purpose of investigating potential wrongdoing related to the September 2016 Amendments.

         Stockholders of Delaware corporations have "a qualified common law and statutory right to inspect the corporation's books and records."[62] As a general matter, an inspecting stockholder with a proper purpose "bears the burden of proving that each category of books and records is essential to accomplishment of the stockholder's articulated purpose for the inspection."[63] Books and records satisfy this standard "if they address the 'crux of the shareholder's purpose' and if that information 'is unavailable from another source.'"[64] That determination is "fact specific and will necessarily depend on the context in which the shareholder's inspection demand arises."[65] Keeping in mind that § 220 inspections are not tantamount to "comprehensive discovery, "[66] the Court of Chancery must tailor its order for inspection to cover only those books and records that are "essential and sufficient to the stockholder's stated purpose."[67] In other words, the court must give the petitioner everything that is "essential," but stop at what is "sufficient."[68] In other decisions, we have referred to the set of books and records that are essential and sufficient as those that are "necessary."[69] To wit, in Saito v. McKesson HBOC, Inc., we wrote that a stockholder with a proper purpose "should be given access to all of the documents in the corporation's possession, custody or control, that are necessary to satisfy that proper purpose."[70]

         The issue of whether emails are "necessary" to accomplish the stockholder's purpose has come up explicitly in the Court of Chancery on several occasions[71] and implicitly at least once in this Court.[72] In general, these decisions reflect the principle that the Court of Chancery should not order emails to be produced when other materials (e.g., traditional board-level materials, such as minutes) would accomplish the petitioner's proper purpose, [73] but if non-email books and records are insufficient, then the court should order emails to be produced.[74] Indeed, it cannot be otherwise if the statutory purpose of § 220 is to have meaning in a fast-moving society where the forms in which corporate records are kept continually evolve. This understanding-that § 220 must be interpreted in light of companies' actual and evolving record-keeping and communication practices-is not novel. Rather, it follows from one earlier recognized at common law, before email became a dominant mode of written communication, when stockholders were granted the right to inspect a variety of corporate "papers," often including letters and memoranda among officers and directors.[75] Today, emails and other electronic communications do much of the work of the paper correspondence of yore.[76]

         In its briefing below, KT4 argued that emails were necessary to accomplish its purpose because Palantir appeared to have chosen to conduct its corporate business informally over email and other electronic media instead of more traditional means, and because much of the potential wrongdoing appeared to have occurred over email.[77] As particular examples, KT4 pointed to a LinkedIn message in which Palantir's broker reached out to the private equity fund that KT4's principal, Abramowitz, was trying to get to buy KT4's stock in Palantir (allegedly as part of an effort by Palantir to scuttle that deal);[78] "an email from Palantir in which it misleadingly denies" its brokers role in the deal;[79] and an email from Palantir in which it led "KT4 to believe that it was considering KT4's information request" under the Investors' Rights Agreement, with this latter email being a focus of the Court of Chancery in its discussion of potential wrongdoing related to the September 2016 Amendments.[80]

         The crux of Palantir's argument in response was that KT4 had simply "not met its burden of proving that email communications are essential."[81] In making that argument, Palantir did not buttress its claims with any evidence that other materials would be sufficient to accomplish KT4's purpose. Instead, it argued that the production of emails in response to a § 220 demand "is the 'exception rather than the rule'-granted only where there is compelling evidence that emails are necessary to a proper purpose."[82]

         In our view, KT4 made as strong of a showing that emails were necessary as can be reasonably expected of a petitioner in a summary § 220 proceeding. Books and records actions are not supposed to be sprawling, oxymoronic lawsuits with extensive discovery.[83] Rather, as the statutory text of § 220 itself reflects, the Court of Chancery is entitled to "summarily order" an inspection.[84] A petitioner like KT4 is therefore in no position to get discovery to determine how a company like Palantir conducts business and whether the books and records that address its needs come in the form of hardcopy documents, electronic PDFs, emails, or some other medium.[85]After all, the point of a summary § 220 action is to give the stockholder access to a discrete set of books and records that are necessary for its purpose-a set that is much less extensive than would likely be produced in discovery under the standards of Rule 26 in a plenary suit.[86] Contrary to Palantir's urging, § 220 does not require the petitioner to meet an unrealistic "compelling evidence" standard just to obtain that discrete set of documents. Instead, a petitioner meets her burden to prove necessity by identifying the categories of books and records she needs and presenting some evidence that those documents are indeed necessary.[87]

          In this case, KT4 met that burden. In its post-trial opinion, the Court of Chancery held that KT4 sought books and records for the proper purpose of investigating "fraud, mismanagement, abuse, and breach of fiduciary duty," that there was a credible basis to suspect wrongdoing related to the September 2016 Amendments to the Investors' Rights Agreement, and that KT4 was therefore entitled to inspect "all books and records" related to those amendments.[88] To investigate that potential wrongdoing, KT4 needed to inspect books and records in two general categories: first, documents used by Palantir's board (or top management, as the case may be) in determining whether to adopt the amendments and evidencing the company's authorization of the amendments; and second, documents related to Palantir's solicitation of investor consents, including investors' responses to those solicitations. We say "as the case may be" for a reason: it is not clear that Palantir's board played the role one might expect it to play in developing, approving, and obtaining consents for the amendments. Instead, it may be that management was solely responsible for those actions. At any rate, in many companies, those documents might come in the form of board minutes, PowerPoint presentations or memoranda addressed to the board, board resolutions, official hardcopy letters from the company to investors, and other non-email documents. But here, the Court of Chancery found that Palantir has a history of not complying with required corporate formalities, such as the requirement that it hold annual stockholders' meetings.[89] KT4 also submitted evidence that Palantir had conducted other corporate business informally, including over email in connection with the September 2016 Amendments. Fairly read, KT4 argued that (1) it needed books and records related to how the September 2016 Amendments were authorized, who authorized them, and why they did so; and (2) if the books and records in those categories involved email, as seemed likely, then Palantir had to produce those documents. That was sufficient under the circumstances of this case.

         Requiring anything more of KT4 would subvert the statutory scheme governing books and records inspections by forcing the petitioner to conduct extensive discovery over which books and records are available and which would be sufficient for its purposes. In effect, Palantir is asking KT4 to do the impossible: demonstrate that the corporation in fact acted only through electronic communications, even though the purpose of a ...


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