June 12, 2019
Reargument Denied August 26, 2019
Below: Court of Chancery of the State of Delaware, C.A. No.
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 reasonable confidentiality order.
" And in response to the stockholders
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 Masters 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 orders 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 stockholders legitimate interests
in free communication against the corporations legitimate
interests in confidentiality. Nevertheless, although we
disagree with the Masters 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 Chancerys order and
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.
Johns 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
BAI. Tiger and Dowling attempted to resolve
their disagreements through negotiations but were not able to
December 9, 2014, Tiger delivered his first Section 220
demand to BAI, requesting 22 categories of documents. The
stated purposes of Tigers 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. BAIs CFO offered Tiger the opportunity to review
Tigers demanded documents but once again asked Tiger to sign
a confidentiality agreement. As before, Tiger asked BAI to
produce all non-confidential materials, but BAIs 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
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 ...