Submitted: June 12, 2019
Below: Court of Chancery of the State of Delaware C.A. No.
appeal from the Court of Chancery. AFFIRMED.
A. Felice, Esquire, Bailey & Glasser, LLP, Wilmington,
Delaware for Appellant Alex Tiger.
G. Abrams, Esquire, Matthew L. Miller, Esquire, Abrams &
Bayliss LLP, Wilmington, Delaware, Brian J. Capitummino,
Esquire, Woods Oviatt Gilman LLP, Rochester, New York, for
Appellee Boast Apparel, Inc.
STRINE, Chief Justice; SEITZ and TRAYNOR, Justices.
report that was adopted by the Court of Chancery, a Master in
Chancery held that books and records produced to a
stockholder under Section 220 of the Delaware General
Corporation Law are "presumptively subject to a
order.'" And in response to the stockholder's
request for a time limitation on such a confidentiality
order, the Master responded that, because the stockholder had
not demonstrated the existence of exigent circumstances,
confidentiality should be maintained "indefinitely,
unless and until the stockholder files suit, at which point
confidentiality would be governed by the applicable court
rules." After the Court of Chancery adopted the
Master's Report, the stockholder appealed.
that, although the Court of Chancery may-and typically does-
condition Section 220 inspections on the entry of a
reasonable confidentiality order, such inspections are not
subject to a presumption of confidentiality. We further hold
that when the court, in the exercise of its discretion,
enters a confidentiality order, the order's temporal
duration is not dependent on a showing of the absence of
exigent circumstances by the stockholder. Rather, the Court
of Chancery should weigh the stockholder's legitimate
interests in free communication against the corporation's
legitimate interests in confidentiality. Nevertheless,
although we disagree with the Master's formulation of the
principles governing confidentiality in the Section 220
inspection context, the confidentiality order that the Court
of Chancery ultimately entered seems to us to be within the
range of reasonableness- and, thus, not an abuse of
discretion-given the facts and circumstances of this case. We
therefore affirm the Court of Chancery's order and final
is an apparel brand created by tennis player Bill St. John in
1973. Although Boast, which featured a Japanese maple leaf
logo,  enjoyed some success in the 70s and 80s,
St. John retired the brand in the 90s.
2010, Alex Tiger-the plaintiff in this suit-and John Dowling
decided to revive the Boast Brand. The pair started Boast
Investors, LLC, which would later be converted into the named
defendant in this case, BAI Capital Holdings, Inc.
("BAI"), as well as Branded Boast, LLC. Boast
Investors owned a majority interest in Branded Boast, which
in turn purchased the Boast intellectual property from St.
John's holding company, Boast, Inc.
the next several years, Tiger and Dowling had several
conflicts in managing Boast Investors. In particular, Dowling
increased his equity stake in Boast Investors and its
successors through a series of mechanisms that Tiger opposed.
First, Dowling loaned $4 million to Boast Investors. Then,
after an abortive attempt, Dowling succeeded on his second
try at amending Boast Investors' operating agreement and
converted his loans into additional member units in Boast
Investors. As a part of this conversion, other members were
required to contribute additional capital in a preemptive
rights offering or their stakes would be diluted. Tiger
objected to this offering and did not participate. In
November 2014, Boast Investors converted itself from a
limited liability company to the corporation that became
Tiger and Dowling attempted to resolve their disagreements
through negotiations but were not able to do so.
December 9, 2014, Tiger delivered his first Section 220
demand to BAI, requesting 22 categories of documents. The
stated purposes of Tiger's inspection demand were to,
among other things, value his shares, investigate potential
mismanagement, and investigate director independence. BAI
responded with a proposed confidentiality agreement. This
first proposed agreement would have barred Tiger from using
BAI documents in subsequent litigation. Tiger rejected this
proposal. BAI made a revised proposal that prohibited use of
the documents in litigation other than derivative actions.
Tiger then requested that BAI produce all documents that were
not confidential, but BAI demurred.
February 24, 2017, Tiger sent a second Section 220 demand to
BAI. BAI's CFO offered Tiger the opportunity to review
Tiger's demanded documents but once again asked Tiger to
sign a confidentiality agreement. As before, Tiger asked BAI
to produce all non-confidential materials, but BAI's CFO
once more asked for a confidentiality agreement. The parties
negotiated over the confidentiality agreement but were unable
to come to an agreement.
October 2017, BAI gave notice under 8 Del. C. §
228(e) to non-consenting stockholders that it had sold
substantially all of its assets to Boast Brands Group, LLC, a
company owned by a group of clothing and investment
companies. In consideration for the sale, BAI received
approximately $1 million in cash plus a 10% equity stake in
Boast Brands Group.
then filed a Section 220 action against BAI in the Court of
Chancery, demanding access to the books and records
he had specified in his 2017 demand, which Tiger had amended
on May 8, 2017. The case was assigned to a Master in
primary dispute between the parties before the Court of
Chancery was the scope of Tiger's confidentiality
obligations upon BAI's production of the relevant books
and records. Tiger suggested a one-year confidentiality
order, while BAI, citing previous cases in which the Court of
Chancery issued three-year confidentiality orders on
financial documents, pushed for a "default three-year
period of confidentiality."
considering the parties' respective positions, the Master
in Chancery submitted her report on July 23, 2018,
recommending an indefinite confidentiality period lasting up
to and until Tiger filed suit based on facts learned through
his inspection, after which confidentiality would be
controlled by the applicable court rules. Tiger took
exception to the Master's Report, but the Master-having
become Vice Chancellor-rejected Tiger's exceptions and
adopted the Master's Report, including the indefinite
appealed, arguing that the indefinite nature of the
confidentiality order constituted an abuse of discretion and
that the Court of Chancery failed to account for his status
as a market participant.
STANDARD OF REVIEW
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. This
standard of review is highly deferential. . . . 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. Questions of law, however,
are reviewed de novo."
Court may affirm on the basis of a different rationale than
that which was articulated by the trial court if the issue
was fairly presented to the trial court."