Opinion
Civil Action Nos. 10,814 and 10,840.
Date Submitted: May 30, 1989.
June 1, 1989.
Lewis H. Lazarus, Esquire, Morris, James, Hitchens Williams, Wilmington, Delaware.
Samuel A. Nolen, Esquire, Richards, Layton Finger, Wilmington, Delaware.
Dear Gentlemen:
This is the decision after trial in two identical actions brought pursuant to 8 Del. C. § 220 to obtain a stocklist and related materials. It is undisputed that plaintiff, Lawrence I. Weisman ("Weisman"), is a record stockholder of defendant, Plains Resources, Inc. ("Plains"), and that his letter to the company dated April 24, 1989 (the "Demand Letter") satisfies the formal requirements of 8 Del. C. § 220. Plains also concedes that the purpose stated in the Demand Letter — to conduct a proxy solicitation with respect to the election of directors — is a proper purpose. Thus, the only issues are, (1) whether the first of Weisman's two actions was prematurely filed; and (2) whether Weisman's stated purpose is his actual purpose. I am satisfied that the first issue is moot since Plains concedes that Civil Action No. 10,840 was filed more than five business days after the company received the Demand Letter. On the question of Weisman's purpose, Plains has not satisfied its burden of proof. Accordingly, Weisman will be provided copies of Plains' stocklist and related information as set forth in the enclosed order.
By statute, a stockholder is entitled to apply to this Court for an order compelling the inspection of a stocklist if the corporation refuses or fails to respond to a demand within five business days after the demand was made. 8 Del. C. § 220(c). The five business day requirement has been interpreted to be a jurisdictional prerequisite, Levy v. Recognition Equipment Co., Inc., Del. Ch., Civil Action No. 6705, Marvel, C. (February 26, 1982), and I am satisfied from the evidence that Weisman's first complaint was filed prematurely. Although the Demand Letter is dated April 24, 1989, the undisputed evidence indicates that it was not received by Plains until May 1, 1989. The first complaint (Civil Action No. 10,814) was filed on May 5, 1989 and, thus, is subject to dismissal. However, it is equally clear that Weisman's second complaint (Civil Action No. 10,840), filed on May 18, 1989, satisfies the five business day requirement of § 220. As a result, I find it unnecessary to rule upon the validity of Weisman's first complaint.
Before I granted Weisman's motion to consolidate the two actions, Plains argued that the five day requirement of § 220(c) would be eviscerated if this Court allowed stockholders to file stocklist actions prematurely, obtain expedited scheduling and then simply refile after the statutory time period lapses. While I find some merit to Plains' concerns, there is nothing in this record to suggest that Weisman was attempting to circumvent the statutory time requirement. The complaint was filed nine business days after the date of the Demand Letter and the trial was not held until almost three weeks after suit was filed. In short, Weisman obtained no advantage by filing prematurely. Thus, the Court need not address the policy issue raised by Plains in this case.
On the question of Weisman's purpose, Plains bears the burden of proving that Weisman is seeking the stocklist for an improper purpose. 8 Del. C. § 220(c). In an effort to meet that burden, Plains relies primarily on several Schedule 13D's signed by Weisman within a few days of the date of his Demand Letter. The SEC filings disclose that Weisman asked for the Plains' stocklist "in order to determine whether to wage a proxy fight in 1989 for the election of new directors. . . ." Defendant's Exhibit 8, p. 5. This statement of purpose is somewhat different from that contained in the Demand Letter, where Weisman states that the purpose of his demand for a stocklist is "to enable me to solicit proxies in connection with the election of members of Plains' board of directors." Complaint, Exhibit A. Weisman explained the discrepancy as follows:
A. Well, counsel told me that under Delaware law I had to fish or cut bait in terms of deciding to proceed with the solicitation of proxies. And on April 24, I fished and made the decision to go forward. . . .
Trial Transcript, p. 72. Weisman's testimony, if believed, resolves any question about his purpose. Plains argues that the Court should not accept Weisman's testimony, pointing out several factual inconsistencies in Weisman's other correspondence relating to Plains. Although Plains' evidence does place in question Weisman's credibility, it is not enough to satisfy the company's burden of proof. I accept Weisman's testimony as to his purpose and conclude, as a result, that he is entitled to the stocklist and related materials.