Alexandria Venture Investments, LLC v. Verseau Therapeutics, Inc. ( 2020 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
)
ALEXANDRIA VENTURE )
INVESTMENTS, LLC and )
ALEXANDRIA EQUITIES NO. 7, )
LLC, )
)
Plaintiffs, )
)
v. ) C.A. No. 2020-0593-PAF
)
VERSEAU THERAPEUTICS, INC., )
)
Defendant. )
)
MEMORANDUM OPINION
Date Submitted: October 1, 2020
Date Decided: December 18, 2020
Raymond J. DiCamillo, Megan E. O’Connor, RICHARDS, LAYTON & FINGER,
P.A., Wilmington, Delaware; Luke Cadigan, COOLEY LLP, Boston,
Massachusetts; Patrick Gunn, COOLEY LLP, San Francisco, California; Attorneys
for Plaintiffs Alexandria Venture Investments, LLC and Alexandria Equities No. 7,
LLC.
David J. Teklits, Thomas P. Will, MORRIS, NICHOLS, ARSHT, & TUNNELL
LLP, Wilmington, Delaware; Attorneys for Defendant Verseau Therapeutics, Inc.
FIORAVANTI, Vice Chancellor
Plaintiffs Alexandria Venture Investments, LLC (“Alexandria Venture”) and
Alexandria Equities No. 7, LLC (“Alexandria Equities” and together with
Alexandria Venture, “Alexandria”) seek an order to compel inspection of books and
records of Verseau Therapeutics, Inc. (“Verseau” or the “Company”) pursuant to
Section 220 of the Delaware General Corporation Law (“DGCL”). Alexandria aims
to investigate, among other things, whether Verseau’s directors violated their
fiduciary duties when they rejected a financing proposal from Alexandria. In this
post-trial Opinion, I conclude that Alexandria is entitled to inspect some, but not all,
of the categories of books and records sought in the demand.
I. BACKGROUND
The facts recited in this Opinion are the Court’s findings based on the
testimony and documentary evidence presented at a half-day trial on October 1,
2020. The record includes stipulations of fact contained in the parties’ Pretrial
Stipulation and Order (“PTO”), the 62 trial exhibits, and deposition testimony from
one witness, Aaron Jacobson.1 The following facts were either uncontested or have
been proven by a preponderance of the evidence.
1
Citations in the form “Tr.” refer to the trial transcript. Citations in the form “JX” refer to
trial exhibits with pinpoint citations to the last three digits of the relevant Bates number.
Citations in the form “Dep.” refer to the Jacobson deposition transcript.
2
A. The Parties
Verseau is a privately held Delaware corporation founded in 2017 to develop
immunotherapies to treat cancer. During relevant events and at least until June 30,
2020, Verseau’s board of directors (the “Board”) consisted of seven individuals:
Christine Bunt, George Golumbeski, Zhenping Zhu, Jong Chang, Wen Chen, Bob
Langer, and Daniel Anderson. 2 Bunt was Verseau’s Chief Executive Officer during
that same time period.3 Golumbeski is the chairman of the Board, having previously
served as Executive Vice President of Business Development at Celgene
Corporation (“Celgene”), a biotechnology company.4 Golumbeski initially joined
Verseau as an advisor in 2018, and he continued to provide consulting services to
Verseau after joining the Board in 2019.5 Golumbeski owns approximately 1% of
Verseau’s stock on a fully diluted basis.6 Zhu is affiliated with 3SBio Inc.
(“3SBio”), a biotechnology company based in China, where he serves as President
of Research & Development and Chief Scientific Officer.7 3SBio owns 11.8% of
the Company’s stock.8 Chang is the founder and chairman of InHarv Partners Ltd.
2
Pretrial Stipulation and Order (“PTO”) ¶ 7.
3
Id. ¶ 8.
4
JX 14.
5
Id.
6
Tr. 72:12–17.
7
JX 4 at ‘095–96.
8
JX 62.
3
(“InHarv”), a venture capital firm, 9 which owns 24.4% of the Company’s stock.10
Langer and Anderson are co-founders of Verseau.11
Plaintiffs are venture capital firms and preferred stockholders of Verseau.12
Together, Plaintiffs own 5.1% of the Company’s stock.13 Joel Marcus is the
Executive Chairman of Alexandria Real Estate Equities, Inc., which is the managing
member of Alexandria Venture and ultimate managing member of Alexandria
Equities. 14 Aaron Jacobson is Senior Vice President and Venture Counsel of
Alexandria Real Estate Equities, Inc. 15
Marcus frequently attended Board meetings as one of Alexandria’s Board
observers. 16 At its March 13, 2020 meeting, the Board “expressed support for adding
Marcus to the Board subject to receipt of the requisite stockholder consents.” 17 The
Company subsequently informed its preferred stockholders of the Board’s decision
9
Id. at ‘095.
10
JX 62. The stock ownership reported for Golumbeski, S3Bio, InHarv, and Alexandria
is on a fully diluted basis. Id.
11
PTO ¶ 7.
12
PTO ¶¶ 4–5. One or more representatives of Alexandria typically attend Board meetings.
See JX 51 at ‘952, ‘958; JX 40 at ‘901, ‘909.
13
JX 62.
14
PTO ¶ 9.
15
PTO ¶ 11.
16
JX 51 at ‘952, ‘958; JX 40 at ‘901, ‘909.
17
JX 40 at ‘903.
4
to add Marcus as a director.18 The Company told stockholders that Marcus would
become a director after the stockholders agreed to expand the Board, a voting
agreement was amended, and the Board formally elected Marcus.19 There is no
evidence in the record that any of those events occurred, and I find that they did not.
B. Recent Hires at Verseau
After Golumbeski joined the Board, Verseau hired three former Celgene
employees into senior positions. In November 2019, Verseau hired Tim Smith,
Celgene’s former Executive Director of Business Development, as Verseau’s new
Chief Business Officer. 20 In February 2020, Verseau hired Alise Reicin, Celgene’s
former President of Global Clinical Development, as Veseau’s new Chief Medical
Officer.21 Verseau hired another former Celgene employee as a senior advisor that
same month. 22 Smith’s time at Celgene overlapped with Golumbeski’s, 23 but there
is no evidence in the record indicating that Golumbeski had directly worked with
Smith.24 Reicin did not overlap with Golumbeski while at Celgene. 25
18
JX 1 at ‘093.
19
Id. at ‘093–94.
20
JX 59.
21
JX 53.
22
JX 52.
23
See JX 58, 59.
24
Dep. 22:5–23:18.
25
Id.
5
C. Negotiation of the Term Sheet
In March 2020, Verseau needed cash, particularly to weather the global
pandemic. Verseau and Alexandria, an existing Verseau stockholder, then began
discussing bridge financing. On April 25, Alexandria sent to Verseau a non-binding
term sheet that generally provided for Alexandria to lead a financing round of $30
million in convertible notes.26 Among other terms, the proposal provided investors
a 2.0x return on investment in the event of a change in control. It also gave
Alexandria the right to designate a director to serve on the Board and specified
Marcus as Alexandria’s initial director designee. Bunt sent Verseau’s response a
week later, stating that the proposal was generally “a fair balance for the
company.”27 Verseau pushed back, however, on a few provisions, two of which are
pertinent to this Opinion. 28
First, the Company resisted terms giving Alexandria significant power over
Verseau’s relationship with 3SBio, where Zhu was an officer. Verseau had
partnered with 3SBio on one recent project and anticipated partnering with 3SBio
on a second project within the next year. 29 Alexandria’s initial proposal required
approval by Alexandria’s designated Board member for any related-party
26
JX 5.
27
See JX 6.
28
Id.
29
Id.
6
transaction with a value of $50,000 or more.30 Verseau was concerned that this
provision would jeopardize the Company’s plans to partner with 3SBio, and it
countered with terms expressly permitting the Company to allocate funds for the
anticipated second partnership with 3SBio. 31 Alexandria balked, warning that “the
company should be mindful of the amount of Chinese investment and control of
technology.” 32 After further negotiation, the final version of the term sheet required
approval from holders of 67% of the notes, including one holder of at least $5
million, before Verseau could enter into related-party transactions. 33 Alexandria
admitted that this term would essentially give Alexandria veto power over any
transactions between Verseau and 3SBio.34
The second and most controversial provision prohibited the Company from
compensating non-founder directors with cash. 35 Verseau generally agreed to this
term, but it sought an exception that would have allowed the Company to continue
compensating Golumbeski in cash for his consulting services. 36 Bunt stressed to
30
JX 5 at ‘036 (requiring approval of a majority of the Board, including Alexandria’s
designated director, to enter into “any transaction with any director, officer or employee of
the Company of any ‘associate’ . . . of any such person”).
31
JX 6 at ‘077.
32
JX 8.
33
JX 29.
34
Tr. at 33–34.
35
JX 5 at ‘035.
36
JX 6 at ‘076.
7
Jacobson that Verseau pays Golumbeski $75,000 per year plus expenses, which she
considered to be modest in relation to the value he added to the Company.37 In an
email to Marcus, Bunt warned that “we would [lose] most likely our Chairman at
Verseau in acceptance of such a provision,” which would be detrimental to the
Company because Golumbeski “added tremendous value” and his involvement on
the Board was “a very good situation.”38 According to Bunt, Alexandria’s proposed
restriction on Golumbeski’s cash compensation was “a board issue” to which at least
two other directors—Verseau co-founders Langer and Anderson—objected.39
Alexandria refused to budge. Marcus told Bunt that “[w]e are firm on this
and [will not] change.” 40 Internally, Marcus directed Jacobson to offer Golumbeski
equity compensation instead of cash, and if Golumbeski would not agree, then “we
[will not] lead the note[,] period.” 41 According to Jacobson, when the Company
presented this offer to Golumbeski, “he gave them a flat no.” 42 The Company then
offered to defer Golumbeski’s cash payments and let them accrue until the next
financing round, but Alexandria promptly rejected that counteroffer. 43 The parties
37
JX 14 at ‘997.
38
JX 26 at ‘962.
39
Id.
40
JX 10 at ‘733–34; JX 19.
41
JX 19 at ‘540.
42
Id. at ‘541.
43
Id.
8
reached an impasse, with Alexandria describing this provision as “the last sticking
point.”44
On May 18, 2020, Alexandria delivered the final version of the term sheet (the
“Term Sheet”) to Verseau, demanding “a yes or no on the entire Term Sheet by 5pm
pdt on Friday [May 22].”45 The Term Sheet prohibited cash compensation to non-
founder directors and further required Verseau to terminate any existing cash
payments. 46
On May 22, 2020, prior to the deadline, Bunt signed the Term Sheet on behalf
of Verseau.47 Although it was executed, the Term Sheet expressly permitted either
party to propose different terms or unilaterally terminate all negotiations “without
any liability whatsoever to the other party.” 48 Verseau and Alexandria both
understood that the Term Sheet required Board approval.49
D. The Board Rejects the Term Sheet
At a June 4, 2020 meeting (the “June 4 Meeting”), the Board discussed the
Term Sheet and other potential financing alternatives. The Board package from the
44
Id.
45
JX 27 at ‘063.
46
JX 32.
47
Id.
48
Id.
49
See JX 41 at ‘648; JX 39 at ‘642.
9
meeting contained a copy of the Term Sheet but no other documents regarding the
proposed financing. 50 The Board discussed the Term Sheet in a closed session that
excluded Bunt and Marcus.51 According to the unsigned minutes of the June 4
Meeting, the Board concluded that
the Alexandria term sheet in its current form was not in the best interest
of the Company based on several factors, including the economic return
to investors in the event of a change of control transaction, approval
rights of the investors in regards to certain types of strategic
transactions and Board-level decisions, and other terms which the
Board determined were not within typical market parameters.52
The minutes also reflect that “Mr. Chang from [InHarv] stated that his firm was
working on a bridge financing proposal that he believed would be more attractive to
Verseau than the Alexandria proposal.” 53 After further discussion, “and with Mr.
Golumbeski refraining from expressing his view,” the other directors unanimously
agreed not to continue discussions with Alexandria and to await a proposal from
InHarv. 54
Verseau did not immediately inform Alexandria that the Board had rejected
the Term Sheet. On June 11, 2020, Alexandria sent an email to Bunt, requesting
50
JX 40.
51
JX 56 at ‘027.
52
Id.
53
Id.
54
Id.
10
details about the Board’s consideration of the Term Sheet.55 Bunt responded by
referring Alexandria to Verseau’s outside counsel. 56 On June 16, 2020, Verseau’s
outside counsel informed Alexandria by email that the Board had rejected the Term
Sheet at the June 4 Meeting and decided to pursue alternative financing options.57
The next day, Alexandria’s outside counsel requested more information about the
Board’s executive-session rejection of the Term Sheet. Alexandria’s letter raised
“concern[s] that Board members did not discharge their duty of care or act in the
best interests of Verseau and its stockholders” in rejecting the Term Sheet.58
Alexandria urged the Board to reconsider its decision or continue discussions with
Alexandria.
The Board reconsidered the Term Sheet at a special meeting on June 29, 2020
(the “June 29 Meeting”). According to the unsigned minutes of that meeting,
Golumbeski and Chang were excluded from the Board’s discussion of the Term
Sheet.59 The remaining directors unanimously rejected the Term Sheet, resolving
that it was not in the best interest of the Company’s stockholders. The minutes also
reflect the resignations of two significant participants in Verseau’s negotiations with
55
JX 45 at ‘032.
56
Id.
57
JX 45 at ‘031.
58
JX 46 at ‘045.
59
JX 56 at ‘017–18.
11
Alexandria over the Term Sheet: Bunt as CEO and as a director, and Bob Crane as
Verseau’s Chief Financial Officer. The record does not indicate the circumstances
of or motivations for those resignations. As before, Verseau did not initially tell
Alexandria about the June 29 Meeting.
E. Alexandria’s Inspection Demands
On July 1, 2020, still unaware of the June 29 Meeting, Alexandria sent to
Verseau a written demand to inspect books and records pursuant to Section 220 of
the DGCL (the “Demand”).60 The Demand stated that Alexandria sought to
investigate whether Board members failed to discharge their duty of care or to act in
the best interests of stockholders in the directors’ consideration of the Term Sheet
and “Alternative Financing Options.”61 The Demand listed seven categories of
books and records related to its purpose.
Verseau rejected the Demand. 62 In its July 2, 2020 rejection letter, Verseau
revealed to Alexandria that the Board met again on June 29 to reconsider the Term
Sheet. The response stated that Golumbuski and one other director (later determined
to be Chang) recused themselves and that following “a deliberate and lengthy
60
JX 47.
61
The Demand defined “Alternative Financing Options” as “any existing alternative
financing options available to the Company as of May 22, 2020 or thereafter.” Id.
62
JX 48.
12
discussion” the Board unanimously rejected Alexandria’s proposal.63 The rejection
letter further accused Alexandria of using its status as a stockholder to obtain “inside
information as to how [the] board assessed its offer and what alternatives the board
may be considering or preferring to its offer.” 64 Verseau asserted that Alexandria’s
“primary interest [was] as a ‘bidder,’” not a stockholder.65 Despite rejecting the
Demand, Verseau invited Alexandria to make an improved offer.
On July 9, 2020, Alexandria delivered a supplemental inspection demand (the
“Supplemental Demand” and together with the Demand, the “Demands”). 66 The
Supplemental Demand articulated additional areas of concern to bolster
Alexandria’s suspicions of wrongdoing, including potential conflicts attributable to
Golumbeski and Zhu, foreign investment in the Company, and the Company’s
treatment of Marcus, who had been excluded from the June 29 Meeting even though
he thought he was a Board member. The Supplemental Demand added seven more
categories of books and records to the scope of the inspection demanded. Verseau
did not reply to the Supplemental Demand, and Alexandria filed the Verified
Complaint to compel inspection of books and records on July 17, 2020.
63
Id. at 4.
64
Id. at 3.
65
Id.
66
JX 49.
13
On July 21, 2020, the Company provided three documents to Alexandria: (1)
unsigned minutes from the June 4 Meeting; (2) unsigned minutes from the June 29
Meeting; and (3) a term sheet between the Company and InHarv, which was signed
by the Company but not InHarv (the “InHarv Proposal”).67
The InHarv Proposal is dated July 16, 2020 and reflects that the Company
signed it on July 20, 2020.68 The InHarv Proposal contained many of the same terms
as the previously rejected Term Sheet, but differs in several material respects. First,
it provides for a 1.5x return on investment in the event of a change-of-control
transaction, as opposed to the Term Sheet, which provided for a 2.0x return. Second,
the InHarv Proposal did not provide for board representation. Third, there were no
restrictions on related-party transactions. Fourth, there were no limits on cash
compensation to directors. Like the Term Sheet, the InHarv Proposal was non-
binding, allowed the parties to propose different terms, and could be unilaterally
terminated by either side without liability to the other party. As of the date of trial,
there was no indication that the InHarv Proposal or any other alternative financing
transaction had been consummated.
67
JX 56.
68
The InHarv Proposal is signed by Smith, who is identified as the Company’s President
and Chief Business Officer. Id. at ‘012–15.
14
Alexandria remained unsatisfied with Verseau’s limited production, and
Alexandria pursued inspection of each category of books and records identified in
its Demands. Verseau did not produce any additional books and records, and the
case proceeded to a half-day trial on a paper record on October 1, 2020.
II. LEGAL ANALYSIS
To obtain an order compelling inspection of books and records under Section
220, a plaintiff must establish by a preponderance of the evidence that it: (1) is a
stockholder of the corporation, (2) has complied with the statute’s technical
requirements, and (3) has a proper purpose for conducting inspection. 69 If the
plaintiff meets these requirements, then it must prove, again by a preponderance of
the evidence, that each category of books and records requested is necessary to
accomplish that proper purpose.70 Verseau does not dispute Alexandria’s status as
a stockholder or the Demands’ technical statutory compliance. Instead, Verseau
contends that Alexandria has not established a proper purpose and that the books and
records requested are not necessary to satisfy Alexandria’s stated purposes.
69
Lebanon Cty. Empls.' Ret. Fund v. AmerisourceBergen Corp., 2020 WL 132752, at *6
(Del. Ch. Jan. 13, 2020), aff'd, 2020 WL 7266362 (Del. Dec. 10, 2020).
70
Id.15
A. Proper Purpose
A stockholder of a Delaware corporation may inspect the corporation’s books
and records for “any proper purpose.”71 A proper purpose “mean[s] a purpose
reasonably related to such person’s interest as a stockholder.”72 A purpose is not
proper if it is made solely to harass the corporation or where it is adverse to the best
interests of the corporation. 73 Once the court has found that the stockholder’s
primary purpose is proper, any secondary or ulterior purposes is irrelevant.74 The
court may, however, take into account an ulterior purpose when considering the
permitted scope of inspection.75
A common proper purpose is “to investigate allegedly improper transactions
and mismanagement.” 76 A stockholder seeking to inspect books and for
mismanagement “must show, by a preponderance of the evidence, a credible basis
from which the court can infer there is ‘possible mismanagement as would warrant
71
8 Del. C. § 220(b).
72
Id.
73
CM & M Grp., Inc. v. Carroll, 453 A.2d 788, 792 (Del. 1982).
74
AmerisourceBergen Corp. v. Lebanon Cty. Emps.' Ret. Fund, __ A.3d ___, 2020 WL
7266362, at *4 (Del. Dec. 10, 2020).
75
Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d 160, 167 (Del. Ch.
1987) (“Plaintiff's ulterior purpose will, however, be taken into account in determining the
scope of the relief to which [Plaintiff] would be entitled.”); see also Henshaw v. Am.
Cement Corp., 252 A.2d 125 (Del. Ch. 1969).
76
Woods Tr. of Avery L. Woods Tr. v. Sahara Enterprises, Inc., 238 A.3d 879, 889 (Del.
Ch. 2020).
16
further investigation.’” 77 This standard is “the lowest possible burden of proof,” and
it is far below the burden of proof necessary to show that any actionable wrongdoing
actually occurred.78
In the Demand, Alexandria’s stated purpose is to evaluate whether any
breaches of fiduciary duty occurred, including whether “Board members did not
discharge their duty of care or act in the best interests of Verseau and its
stockholders” when they rejected the Term Sheet. The Supplemental Demand
identifies additional “concerns” about Golumbeski’s influence over personnel
decisions, 3SBio’s relationship with the Company, and the Company’s “conflicting
messages” regarding Marcus’s status as a Board member.79
Alexandria’s pretrial brief slices its sole stated purpose—to investigate
possible breaches of fiduciary duty—into five separate purposes, which include the
“concerns” from the Supplemental Demand. 80 This Opinion addresses the issues
concerning the Term Sheet collectively, followed by the remaining areas of
requested inspection.
77
AmerisourceBergen, 2020 WL 7266362, at *5 (quoting Sec. First Corp. v. U.S. Die
Casting & Dev. Co., 687 A.2d 563, 568 (Del. 1997)).
78
Id. See also Seinfeld v. Verizon Commc'ns, Inc., 909 A.2d 117, 118 (Del. 2006).
79
JX 49 at 3. Alexandria did not identify its concern about Marcus’s Board membership
in the Pretrial Stipulation and Order as one of its purposes. PTO ¶ 28.
80
Plaintiffs’ Pretrial Brief (“Pls.’ Br.”) 29.
17
1. Rejection of the Term Sheet
Alexandria seeks to evaluate “whether Board members discharged their duty
of care and acted in the best interests of Verseau and its stockholders” when the
Board considered and rejected the Term Sheet. 81 A plaintiff seeking books and
records to investigate whether a corporate board breached its duty of care must
establish a credible basis to suspect that the board acted with gross negligence. 82
“Mere disagreement with a business decision is not enough” to establish that credible
basis. 83 Furthermore, “a poorly formulated or executed negotiation strategy, without
more, does not a gross negligence claim make.”84
Alexandria alleges that the Board might have breached its duty of care in
rejecting the Term Sheet, because Verseau needed financing and the Board did not
have any other then-existing financing proposals.85 Indeed, the Board believed that
the Company’s current cash position would only carry it to early 2021.86 Alexandria
further notes that, as of trial, the Company still had not indicated whether it had
obtained needed financing.
81
PTO ¶ 28(a).
82
Hoeller v. Tempur Sealy Int'l, Inc., 2019 WL 551318, at *10 (Del. Ch. Feb. 12, 2019).
83
High River Ltd. P'ship v. Occidental Petroleum Corp., 2019 WL 6040285, at *5 (Del.
Ch. Nov. 14, 2019).
84
Hoeller, 2019 WL 551318, at *10.
85
See Pls.’ Br. 32–33.
86
JX 42 at ‘098–99.
18
Verseau insists that Alexandria is merely suggesting a disagreement with the
Board’s business decision.87 But, regardless of whether the rejection of the Term
Sheet was “within the ambit of reasonable Board determinations,” there may still be
a credible basis to suspect wrongdoing if Alexandria “sufficiently portrays [the
Board’s determination] as infected and spurred by self-interest and conflicts among
decision-makers and their advisors.”88 Alexandria attempts to make that portrayal
here by focusing on three directors in particular.
Alexandria first points to Golumbeski. Alexandria maintains that the Board
may have rejected the Term Sheet because the provision prohibiting cash
compensation to non-founder directors would have adversely affected Golumbeski.
Golumbeski participated in the June 4 Meeting, where the Term Sheet was first
discussed, although the draft minutes state that he refrained from expressing his view
and did not vote on whether to accept the Term Sheet.89 Even prior to that meeting,
other members of the Board, including directors who had worked closely with
Golumbeski and had cultivated “a lot of respect” for him, were purportedly
concerned that he might walk away from the Company if it accepted Alexandria’s
87
See AmerisourceBergen, 2020 WL 7266362, at *4 (“[M]ere disagreement with a
business decision will fail to establish a proper purpose.”).
88
Inter-Local Pension Fund GCC/IBT v. Calgon Carbon Corp., 2019 WL 479082, at *11
(Del. Ch. Jan. 25, 2019), aff'd, 237 A.3d 818 (Del. 2020).
89
JX 56 at ‘027.
19
restrictive proposal. 90 Alexandria contends that it is conceivable that Golumbeski
influenced other directors to reject the Term Sheet out of a self-interested motivation
to preserve his cash compensation rather than in the interests of the Company’s
stockholders.
Alexandria next argues that Zhu was conflicted because of the Term Sheet’s
limitation on related-party transactions, which essentially would have given
Alexandria a veto right over Verseau’s ability to partner with 3SBio. Zhu, a 3SBio
executive, attended both the June 4 and June 29 Meetings and voted with the Board
in rejecting the Term Sheet. 91
Alexandria contends that Chang was also conflicted because he proposed a
potential alternative financing proposal from his investment firm, InHarv, at the June
4 Meeting.92 Although Chang recused himself from the June 29 Meeting, he
participated in the consideration of the Term Sheet at the June 4 Meeting and voted
to reject the Term Sheet.93
Alexandria also points to the resignations of Bunt and Crane—two senior
officers involved in the Term Sheet negotiations on behalf of the Company—which
are noted in the minutes from the June 29 Meeting, as additional evidence supporting
90
JX 26 at ‘962.
91
JX 56 at ‘018, ‘027.
92
Pls.’ Br. 35.
93
JX 56 at ‘027.
20
Alexandria’s suspicions of potential fiduciary duty breaches in connection with
rejection of the Term Sheet. 94
Verseau maintains that Alexandria has not established a credible basis to infer
wrongdoing because “Plaintiffs do not, and cannot, contest . . . that each of the
decisions at issue was made by a Verseau Board consisting of a majority of
independent and disinterested directors.”95 Verseau’s argument cannot carry the
day. As this Court observed in Khanna v. Covad Communications Group, Inc., 2004
WL 187274 (Del. Ch. Jan. 23, 2004),
[the company] argues that various transactions were approved by a
majority of directors whose independence and disinterestedness are not
fairly questioned by [Plaintiff]. Instead of contesting whether [Plaintiff]
has a credible basis for believing that corporate wrongdoing occurred,
[the company] attempts to debate whether [Plaintiff] will ultimately
prevail. A Section 220 action is not the proper forum for litigating a
breach of fiduciary duty case.
Id. at *6. In AmerisourceBergen Corp. v. Lebanon County Employees’ Retirement
Fund, the Delaware Supreme Court recently reaffirmed that, except in one
circumstance not pertinent here, the Court of Chancery should “defer the
consideration of defenses that do not directly bear on the stockholder’s inspection
rights, but only on the likelihood that the stockholder might prevail in another
94
Pls.’ Br. 37.
95
Defendant’s Pretrial Brief (“Def’s. Br.”) 27.
21
action.”96 A stockholder can obtain books and records if it establishes a credible
basis from which the Court can infer possible mismanagement or wrongdoing, such
as a conflicted transaction, and “[t]he stockholder need not demonstrate that the
alleged mismanagement or wrongdoing is actionable.” 97
In challenging Alexandria’s purposes, Verseau relies upon cases that found
no credible basis to infer wrongdoing. In each of those cases, there was no evidence
of a conflict of interest. For example, in High River Ltd. Partnership v. Occidental
Petroleum Corp., 2019 WL 6040285 (Del. Ch. Nov. 14, 2019), the court found no
credible basis of suspected wrongdoing after the board made what the plaintiffs
thought were bad deals, because nothing in the record suggested that there was any
conflict of interest. According to the Court, “[the plaintiffs] have not alleged, much
less proven, that the [board] was conflicted, disloyal or in some way interested in the
transactions at issue.” Id. at *5; see also Hoeller v. Tempur Sealy Int'l, Inc., 2019
WL 551318, at *9 (Del. Ch. Feb. 12, 2019) (“Plaintiff also failed to present any
evidence even remotely suggesting that [the company’s] fiduciaries were motivated
by self-interest.”). In City of Westland Police & Fire Retirement System. v. Axcelis
96
AmerisourceBergen Corp. v. Lebanon Cty. Empls.’ Ret. Fund, __ A.3d ___, 2020 WL
7266362, at *14 (Del. Dec. 10, 2020); see also id. at *13 (“[A] Section 220 proceeding ‘is
not the time for a merits assessment of Plaintiffs’ potential claims against [the
corporation’s] fiduciaries.’” (citing In re Facebook, Inc. Section 220 Litig., 2019 WL
2320842, at *2 (Del. Ch. May 30, 2019)).
97
AmerisourceBergen, 2020 WL 7266362, at *13.
22
Technologies, Inc., 1 A.3d 281 (Del. 2010), the alleged conflicts related to
motivations of entrenchment rather than third-party allegiances. The Supreme Court
affirmed this Court’s finding that there was “no support in the record of any
entrenchment motive,” concluding that “the record provides no credible basis to
infer that the Board’s rejections of the [acquisition] proposals . . . were other than
good faith business decisions.” Id. at 288.
Verseau next argues that Alexandria cannot infer wrongdoing from the
Board’s decision to reject, rather than accept, a proposed offer. 98 In response,
Alexandria relies heavily upon Paraflon Investments, Ltd. v. Linkable Networks,
Inc., 2020 WL 1655947, (Del. Ch. Apr. 3, 2020). There, the plaintiff sought to
investigate, among other issues, the board’s failure to enforce a term sheet that would
have provided financing when the company was within months of insolvency. The
company said that it rejected the financing because the terms were too onerous. The
plaintiff argued, however, that the rejection of the term sheet was really a concession
to the financing counterparty, which had a representative on the board. In granting
inspection, the Court found a credible basis to infer that the counterparty’s presence
on the board may have improperly influenced the directors to “elevate[] [the
counterparty’s] interests over the Company’s.”99 As in Paraflon, the Verseau Board
98
Tr. 74–75.
99
Paraflon, 2020 WL 1655947, at *5.
23
rejected proposed financing when it was facing a short cash runway, and Alexandria
argues that the rejection could have resulted from prioritization of InHarv’s,
3SBio’s, or Golumbeski’s interests (or a combination thereof) rather than Verseau’s
interests. In Paraflon, the alleged interestedness of just one director was sufficient
to establish a credible basis to suspect potential wrongdoing. 100
There are two noteworthy distinctions between this case and Paraflon. First,
the conduct at issue in Paraflon had reached a conclusion. The company did not
receive a financial infusion, it ran out of cash six months later, and its assets were
sold for “pennies on the dollar.”101 The stockholder sought to investigate whether
the board’s refusal to enforce the term sheet caused the company’s demise. Thus,
there was no longer the prospect of a new lender coming forward to keep the
company afloat. Second, and somewhat related, the plaintiff stockholder in Paraflon
was not the counterparty to the proposed investment term sheet.
Unlike in Paraflon, the situation here is, or at least at the time of trial was,
more fluid. Verseau may still obtain a funding source. There is also a seeming risk
that Alexandria could be using its inspection rights to advance its interest as a
counterparty to a transaction—either by using the information to obtain an unfair
100
See also Everett v. Hollywood Park, Inc., 1996 WL 32171, at *5 (Del. Ch. Jan. 19,
1996).
101
Paraflon, 2020 WL 1655947, at *1.
24
advantage in submitting a new bid or using the information to commence litigation
to enforce the Term Sheet as a counterparty. While these are legitimate concerns,
they are not sufficient to defeat Alexandria’s stated purpose as a stockholder in this
case.102 To be sure, Verseau’s letter rejecting the Demand asserted that Alexandria’s
primary interest in seeking inspection was as a bidder, not a stockholder.103 But
Verseau did not press that theory at trial and did not assert an improper ulterior
purpose defense in this action, which would have required Verseau to make a
difficult, fact-intensive showing. 104
To some extent, Alexandria’s evidentiary support for the alleged director
conflicts has a bit of a rabbit-in-the-hat quality to it. Two of the three asserted
director conflicts arising from rejection of the Term Sheet were Alexandria’s own
creations. Golumbeski’s alleged conflict arose from Alexandria’s insistence that no
cash compensation could be paid to non-founder directors. Zhu’s alleged conflict
102
Jacobson testified that Alexandria has no further interest in negotiating a new financing
deal with the Company. Dep. 103:20–105:13. Even if it did, the Court can fashion an
order to protect the Company’s interests. See 8 Del. C. § 220(c) (“The Court may, in its
discretion, prescribe any limitations or conditions with reference to the inspection, or award
such other or further relief as the Court may deem just and proper.”). See also Radwick
Pty., Ltd v. Med., Inc, 1984 WL 8264, at *3 (Del. Ch. Nov. 7, 1984) (“[I]nspection rights
may be limited where production of certain documents would be adverse to the interests of
the corporation.”).
103
JX 48 at 3.
104
A corporate defendant may resist a books and records demand if it can demonstrate that
the stockholder’s stated purpose is not its actual purpose for inspection. Pershing Square,
L.P. v. Ceridian Corp., 923 A.2d 810, 817 (Del. Ch. 2007). To do so, the corporation
essentially must show that “the plaintiff pursued its claim under false pretenses.” Id.25
was created by Alexandria’s demand for an effective veto right over related-party
transactions.
Despite these concerns, however, there is other evidence to support
Alexandria’s purpose. First, the Company was in need of a financial infusion, and
it appeared at the time of the Board’s initial consideration of the Term Sheet that no
other source was available. Second, after much negotiation, the Company’s CEO
signed and agreed to present to the Board a term sheet, albeit non-binding, which
included the provisions that gave rise to the potential director conflicts. Third,
Chang’s representation of InHarv’s sudden interest in making a financing proposal
arose at the time of the Board’s June 4 rejection of the Term Sheet. Fourth, the
Board’s second rejection of the Term Sheet at the June 29 Meeting appears to
coincide with the resignations of the Company’s CEO and CFO, both of whom were
directly involved in negotiating the Term Sheet. Viewed in context and in its totality,
the evidence, both direct and circumstantial, satisfies the very low threshold
necessary to establish a credible basis to suspect that the directors may have favored
the interests of certain directors or their affiliates over the Company’s interests in
rejecting the Term Sheet.
2. Golumbeski’s Alleged Self-Interested Conduct
Beyond the Term Sheet and the Board’s consideration of financing
alternatives, Alexandria seeks to investigate whether Golumbeski acted out of self
26
interest by making or influencing decisions regarding Company personnel and
commercial arrangements. Alexandria requests books and records concerning hiring
decisions that have occurred since Golumbeski joined the Board. Golumbeski was
the Executive Vice President of Business Development at Celgene for several years
prior to joining Verseau’s Board in 2019.105 Since then, Verseau has hired three
former Celgene employees into senior positions.106 Alexandria argues that
Golumbeski has been trying to increase his influence and control over Verseau107
and points to the resignations of the CEO and CFO at the end of June 2020 and the
elevation of Smith (a former Celgene employee) to President and Chief Business
Officer of Verseau.108
In cases where this Court has found a credible basis to infer wrongdoing from
a fiduciary’s hiring decisions, the decisions involved potential malfeasance, such as
an officer’s concealing material information from a board’s hiring committee 109 or
the board’s approving an excessive compensation package.110 Mere disagreement
105
JX 14.
106
Supra section I.B.
107
Pls.’ Br. 37.
108
JX 56 at 12.
109
See Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 780 (Del. Ch. 2016).
110
See In re Walt Disney Co. Derivative Litig., 825 A.2d 275, 279 (Del. Ch. 2003).
27
with who Verseau hires, however, does not create a credible basis to suspect
potential wrongdoing. 111
Alexandria has not presented evidence that Golumbeski has received or would
receive improper benefits from the hiring of former Celgene employees. Nor is there
evidence to reasonably infer that the hiring decisions were not aligned with the
interests of Verseau or its stockholders. For these reasons, Alexandria has not stated
a proper purpose to inspect records concerning Golumbeski’s role in hiring decisions
or recommendations.
3. Zhu’s Alleged Self-Interested Conduct
Alexandria seeks to evaluate whether Zhu may have been motivated by self-
interest in his consideration of “other Verseau business.” Alexandria does not
explain what “other Verseau business” entails, and it does not even hint of Zhu’s
having engaged in any wrongdoing. Presumably, Alexandria’s targeting of Zhu is
grounded in its general statement of concern during Term Sheet negotiations over
Verseau doing business in China. 112 This request falls squarely into the category of
“[m]ere curiosity or desire for a fishing expedition [which] will not suffice” to permit
inspection.113
111
AmerisourceBergen, 2020 WL 7266362, at *4 (“[M]ere disagreement with a business
decision will fail to establish a proper purpose.”).
112
JX 8.
113
Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 568 (Del. 1997).
28
4. Marcus’s Membership on the Board
Alexandria’s final purpose is to evaluate the Board’s process for nominating
and appointing Marcus to the Board. Alexandria has not presented evidence
establishing a credible basis from which I can infer wrongdoing regarding Marcus’s
purported membership on the Board. 114 The Board’s forward-looking statements
that Marcus would become a director if additional approvals were secured, even
coupled with Marcus’s belief that he was a director, do not create an inference that
Board members acted out of self-interest, in bad faith, or in breach of fiduciary duty.
If Alexandria or Marcus believes that Marcus was duly appointed to the Board, the
appropriate avenue for relief is through an action under DGCL Section 225, which
is a separate summary proceeding.115
Nevertheless, the Term Sheet expressly provided that Marcus would be
Alexandria’s initial Board designee if the Term Sheet was approved. Thus, to the
extent that Marcus’s service as a prospective director was considered or discussed
114
Verseau makes a credible argument that Alexandria waived this purported purpose by
not expressly including it in the Pretrial Order and Stipulation. Tr. 88–89; see PTO ¶ 28
(omitting any reference to Marcus’s purported director status as among the purposes of
inspection). Because I find that this is not a proper purpose, I need not address the waiver
argument.
115
8 Del. C. § 225(a) (allowing the Court of Chancery, upon application of any stockholder
or director whose title to office is contested, to determine the validity of any appointment
or removal of any director or officer of a corporation). There is also no evidence that
Marcus sought to inspect books and records in his capacity as a director under DGCL
§220(d), which further undermines Alexandria’s assertion that Marcus considered himself
to be a director of Verseau.
29
as part of the Board’s decision to reject the Term Sheet, it is a proper subject for
inspection.
B. Scope of Inspection
Having concluded that Alexandria has established a proper purpose to inspect
Verseau’s books and records, the Court must next determine which books and
records Alexandria is entitled to inspect. The Demands state that Alexandria seeks
“[t]o evaluate whether any fiduciary breaches have occurred.” 116 Alexandria’s
pretrial brief argues that it is entitled to “‘enough information to effectively address
the problem, [including] through derivative litigation.’”117 “[W]hen a books and
records action is brought with the goal of evaluating a possible derivative suit, the
books and records that satisfy the action are those that are required to prepare a well-
pleaded complaint.” 118 Therefore, Alexandria should be afforded the opportunity to
inspect documents that would enable it to draft a well-pleaded complaint for any
subsequent derivative litigation.
116
JX 49 at 2.
117
Pls.’ Br. 45 (alteration in original) (quoting Saito v. McKesson HBOC, Inc. 806 A.2d
113, 115 (Del. 2002).
118
Kaufman v. CA, Inc., 905 A.2d 749, 753 (Del. Ch. 2006); see also Saito, 806 A.2d at
115. “[W]here a § 220 claim is based on alleged corporate wrongdoing, and assuming the
allegation is meritorious, the stockholder should be given enough information to effectively
address the problem, either through derivative litigation or through direct contact with the
corporation's directors and/or stockholders.”).
30
On the other hand, a Section 220 demand “does not open the door to the wide
ranging discovery” like a well-pleaded complaint would. 119 “The inspection should
stop at the quantum of information that the court deems ‘sufficient’ to accomplish
the plaintiff's stated purpose.”120 The burden of proof is always on the party seeking
inspection to establish that each category of the books and records requested is
sufficient for the stockholder’s stated purpose.121
“[T]he court's duty to closely examine any Section 220 demand” 122 does not
eliminate the expectations that the stockholder will make good-faith demands “with
reasonable particularity”123 and that the company will “provide [certain] documents
voluntarily without forcing stockholders to litigate over them.” 124 If the parties have
not “meaningfully conferred concerning the scope of production necessary and
essential to meet Plaintiff's purposes,” then the Court is justified in sending the
119
Saito, 806 A.2d at 114; see also Kaufman, 905 A.2d at 754 (“Section 220 is not meant
as a replacement for discovery under Rule 34.”).
120
Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 788 (Del. Ch. 2016); see also KT4
Partners LLC v. Palantir Techs. Inc., 203 A.3d 738, 752 (Del. 2019) (“[T]he court must
give the petitioner everything that is ‘essential,’ but stop at what is ‘sufficient.’”).
121
Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1035 (Del. 1996).
122
Highland Select Equity Fund, L.P. v. Motient Corp., 906 A.2d 156, 164 (Del. Ch. 2006).
123
In re Plains All Am. Pipeline, L.P., 2017 WL 6016570, at *4 (Del. Ch. Aug. 8, 2017).
124
Pettry v. Gilead Sciences, Inc., 2020 WL 6870461, at *24 (Del. Ch. Nov. 24, 2020).
31
parties back to the negotiating table. 125 The Court, of course, retains jurisdiction to
ultimately resolve any remaining disputes.
Alexandria’s books and records demand reads like a discovery request in a
plenary action.126 For example, the first request seeks to inspect “[a]ll written or
electronic documents or other records relating to Defendant’s consideration, if any,
of the Term Sheet and any Alternative Financing Option including, without
limitation, copies of all minutes of Board meetings discussing or considering the
Term Sheet or Alternative Financing Options, notes taken of said discussions or
consideration, and any emails or texts by Defendant’s officers, directors, agents or
advisors relating to said discussion or consideration.”127 Alexandria makes similarly
expansive demands for “[a]ll written or electronic documents or other records
relating to any actions taken by Defendant, if any, and the reasons for said actions,
with respect to the Term Sheet or Alternative Financing Options” and for “[a]ll
written or electronic or other records relating to the information provided to the
Board or to individual directors about the Term Sheet or Alternative Financing
125
Kosinski v. GGP Inc., 214 A.3d 944, 957–58 (Del. Ch. 2019).
126
See, e.g., Lavin v. W. Corp., 2017 WL 6728702, at *14 (Del. Ch. Dec. 29, 2017)
(describing a demand that sought, for example, “all books and records provided to or
referred by the individuals who drafted the [Proxy]” as “land[ing] with the precision of
buckshot”).
127
PTO ¶ 29(a).
32
Options.” 128 These broad-ranging requests do not demonstrate a sufficient effort by
Alexandria to describe with reasonable particularity the documents it wishes to
inspect. At trial, Alexandria did not dispute Verseau’s assertion that Alexandria did
nothing to try to narrow the scope of its requests.129
1. Formal Board Materials
“The starting point (and often the ending point) for an adequate inspection
will be board-level documents that formally evidence the directors’ deliberations
and decisions and comprise the materials that the directors formally received and
considered (the “Formal Board Materials”). A corporation should be able to collect
and provide its Formal Board Materials promptly and with minimal burden.” 130 To
that end, the Company has produced only three traditional, non-electronic
documents: the unsigned minutes of the June 4 Meeting and June 29 Meeting, and
the InHarv Proposal signed only by the Company. That is not, however, the universe
of documents that Alexandria possesses concerning the Term Sheet. Through its
Board observers, Alexandria has received numerous Board materials, including
meeting agendas, board packages, and meeting minutes. Those materials included
the agenda and board package for the June 4 Meeting.
128
Id. ¶ 29(b)–(c).
129
Tr. 65:18–67:20.
130
Lebanon Cty. Empls.’ Ret. Fund v. AmerisourceBergen Corp., 2020 WL 132752, at *24
(Del. Ch. Jan. 13, 2020), aff'd, __ A.3d ___, 2020 WL 7266362 (Del. Dec. 10, 2020).
33
Alexandria also possesses documents evidencing the parties’ negotiations
over the Term Sheet, including the emails, phone calls, and counterproposals
exchanged between Verseau and Alexandria. The trial record also reflects that Bunt
and Crane were candid with Marcus and Jacobson throughout the negotiations in
describing the Company’s concerns about certain provisions in the Term Sheet. 131
Considering the documents already in Alexandria’s possession, Alexandria is
entitled to inspect, subject to any assertion of attorney-client privilege or attorney
work product, any agenda or materials distributed to the Board in connection with
the June 4 and June 29 Meetings, to the extent they have not been produced, and any
financing agreement entered into by the Company since May 22, 2020. In addition,
Alexandria is entitled to inspect the document or documents that contain the terms
of Golumbeski’s consulting arrangement with the Company (and any amendments
thereto) and any director questionnaires or similar Company files that reflect the
relationships among the directors, to the extent Verseau maintains such records. 132
131
See JX 6, 9, 12, 17, 19, 23, 26, 27, 57.
132
Yahoo, 132 A.3d at 785 (“[T]he Delaware Supreme Court has indicated that a plaintiff
could obtain ‘a file of the disclosure questionnaires for the board’ or similar materials that
could ‘provide more detail about the thickness of the relationship[s]’ in the boardroom.”
(citing Del. Cty. Empls. Ret. Fund v. Sanchez, 124 A.3d 1017, 1024 (Del. 2015)).
34
2. Other Books and Records
Alexandria seeks not only Formal Board Materials but also electronic
documents, including emails and text messages.133 In Palantir, the Delaware
Supreme Court addressed the circumstances under which electronic documents must
be produced in response to a books and records demand:
If a corporation has traditional, non-electronic documents sufficient to
satisfy the petitioner’s needs, the corporation should not have to
produce electronic documents. But when a petitioner . . . reasonably
identifies the documents it needs and provides a basis for the court to
infer that those documents likely exist in the form of electronic mail,
the respondent corporation cannot insist on a production order that
excludes emails even if they are in fact the only responsive corporate
documents that exist and are therefore by definition necessary. 134
Verseau resists the production of emails, arguing that the Formal Board
Materials already provided to Alexandria are sufficient to satisfy Alexandria’s stated
purposes. Alexandria disagrees and insists that it needs electronic communications
because the produced documents “are sparse and raise more questions than they
answer.” 135
Under Palantir, to obtain electronic documents, Alexandria must “provide[]
a basis for the court to infer that those [additionally demanded] documents likely
133
See, e.g., PTO ¶ 29(a).
134
Palantir, 203 A.3d at 756.
135
Pls.’ Br. 44, 46, 47, 51.
35
exist in the form of electronic mail.”136 Alexandria primarily points to the “sparse”
Board materials previously produced, which omit discussions that should have
occurred, in Alexandria’s view, between the Board and Verseau’s officers or
advisors.
The existence of formal Board minutes does not eliminate the possibility that
informal board deliberations occurred via email communications among the Board
members in advance of the formal Board meetings. But despite having Board
observers, Alexandria has not provided evidence that Verseau’s Board informally
conducts or conducted corporate business via email and text messages. This lack of
evidence was not necessarily for lack of trying. Alexandria’s interrogatories directly
asked whether Board members engaged in electronic communication regarding the
Term Sheet, but Verseau objected to the interrogatory as overbroad and answered
136
Palantir, 203 A.3d at 756; see also id. (“KT4 also submitted evidence that Palantir had
conducted other corporate business informally, including over email in connection with the
September 2016 Amendments.”); Mudrick Capital Mgmt., L.P. v. Globalstar, Inc., 2018
WL 3625680, at *9 (Del. Ch. July 30, 2018) (“Mudrick Capital has adequately shown that
(1) the produced documents do not allow it to adequately address the stated purposes, and
(2) the produced documents also suggest that other documents exist, including emails, that
address the crux of the stated purposes and are unavailable from another source.”); Bucks
Cty. Empls. Ret. Fund v. CBS Corp., 2019 WL 6311106, at *9 (Del. Ch. Nov. 25, 2019)
(“Plaintiff has demonstrated that Redstone, the Viacom board and the CBS Board
communicated by means of text messages and emails regarding company business and
there is an absence of board-level materials relating to this narrow topic.”); Yahoo, 132
A.3d at 795 (“The record provides reason to believe that there are additional books and
records beyond the Board–Level Materials that are essential to Amalgamated's inspection.
. . . That seems particularly true for events in January 2014, where the official record of
Committee involvement is decidedly sparse.”).
36
only vaguely that “communications by individuals using a Company email account
are located on the Company’s servers.” 137
As the Delaware Supreme Court recently held, the Court of Chancery may
defer judgment on the inspection of documents beyond Formal Board Materials if
the record is not sufficiently developed to determine the necessity of those
documents.138 In AmerisourceBergen, this Court ordered the production of Formal
Board Materials and deferred its decision on whether the plaintiff was entitled to
inspect additional books and records. Vice Chancellor Laster recognized that
determining the necessity of any category of documents is a fact-intensive inquiry,
but that the defendant had “created an additional obstacle to conducting the inquiry
when it refused to disclose in discovery the types and custodians of the records it
maintains.”139 The Court granted the plaintiff further discovery into the existence of
additional records and instructed the parties to confer on a final order of inspection.
If no agreement could be reached, the plaintiff was permitted to return and ask the
Court to compel production of necessary books and records. The Supreme Court
affirmed the trial court’s decision as within its discretionary power:
We understand the court to have found that the Plaintiffs were entitled
to the Formal Board Materials and to have reserved judgment, subject
137
JX 54 at 9, 11–12.
138
AmerisourceBergen Corp. v. Lebanon Cty. Empls.’ Ret. Fund, __ A.3d ___, 2020 WL
7266362, at *14 (Del. Dec. 10, 2020).
139
Id.37
to additional discovery, as to the Informal Board Materials and the
Officer-Level Documents. Seen in that light, the court’s ruling is a
discovery ruling in an ongoing proceeding and thus within the court’s
discretion. But even if the ruling were to be viewed as the court’s post-
trial remedial order, the ruling is still within the court’s discretion. 140
Similarly, I find it appropriate to defer judgment on whether Alexandria is
entitled to inspect documents beyond Formal Board Materials. In my view, the
parties have not meaningfully conferred on scope, and Verseau has resisted
providing information as to the existence of relevant electronic communications.
The parties are directed to meet and confer as to whether the Board informally
considered, via email or text message, the Term Sheet or the InHarv Proposal in
advance of the June 4 or June 29 Meetings, and to confer on the final order of
inspection. If the parties are unable to agree, then the parties are directed to submit
letters of no more than ten pages setting out their respective positions on a form of
final order.
III. CONCLUSION
For the foregoing reasons, Verseau shall produce the documents specified
herein and the parties shall confer on the final order of inspection, as directed.
IT IS SO ORDERED.
140
Id.38