Chancery Court Holds That Squeezed Out Stockholders Lack Standing to Compel Inspection under DGCL § 220

by Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP

On February 27, 2017, the Delaware Court of Chancery addressed an important matter of first impression under Delaware law: "Must a plaintiff seeking corporate records under Section 220 of the Delaware General Corporation Law be a stockholder at the time she files her complaint, in order to have standing to pursue the action?"  See Weingarten v. Monster Worldwide, Inc., C.A. No. 12931-VCG (Del. Ch. Feb. 27, 2017).  Vice Chancellor Glasscock answered that question in the affirmative, concluding that "a former stockholder squeezed out in a merger thereafter lacks standing to bring an action under the Statute."  This ruling gives directors a powerful tool to combat efforts by squeezed out stockholders to pursue post-closing breach of fiduciary duty claims.


On August 8, 2016, Randstad North America entered into a merger agreement with Monster Worldwide, which owns and operates the well-known job search website,  Pursuant to the agreement, Randstad agreed to acquire Monster via short form merger at a tender price of $3.40 per share.  On October 19, 2016, one of Monster's stockholders, Joe Weingarten, made a DGCL § 220 books and records demand on Monster's board to investigate alleged wrongdoing by Monster's board members in connection with the merger.  The board rejected Weingarten's demand in its initial form, but expressed willingness to consider a more narrowly tailored production, after which Weingarten requested that the company confirm it would not assert a standing defense to his demand if the parties had not reached agreement on the scope of inspection by the time the merger closed.  Monster did not respond to Weingarten's request for such confirmation by the deadline he imposed.  The merger then closed on November 1, 2016, and, as a result, all of Monster's outstanding stock, including Weingarten's, was canceled and converted into the right to receive cash.  Shortly thereafter, Monster's board advised Weingarten that, because the acquisition had closed, his stated purpose for his § 220 demand had been rendered moot and therefore he lacked standing to continue to pursue his demand.  Weingarten then initiated a lawsuit in the Chancery Court to compel Monster to comply with his § 220 demand. 

The Court's Ruling

Vice Chancellor Glasscock dismissed Weingarten's suit for lack of standing because he was no longer a stockholder of Monster at the time he initiated the lawsuit.  In so holding, the Vice Chancellor pointed to the plain language of DGCL § 220(c), which permits a stockholder whose § 220 demand has been rejected or ignored to file suit in the Court of Chancery to compel inspection, but only if the stockholder has first established, among other things, that "(1) Such stockholder is a stockholder; [and] (2) Such stockholder has complied with this section respecting the form and manner of making demand for inspection of such documents."  According to Vice Chancellor Glasscock, "[b]y requiring that a plaintiff under Section 220, to seek relief from this Court, demonstrate both that it 'has'—past tense—complied with the demand requirement, and that it 'is'—present tense—a stockholder, the legislature has made clear that only those who are stockholders at the time of filing have standing to invoke this Court's assistance under Section 220."


  • As a general matter, former stockholders who have been squeezed out in a merger lack standing to compel inspection of the company's books and records under DGCL § 220(c), even where they had made a § 220 demand on the board prior to the merger's closing (when they were still stockholders).
  • However, a board may be estopped from asserting such a standing defense if it induced the stockholder into delaying filing an action to compel under § 220(c) until after the merger closed, with the intention of thereby asserting the standing defense.  Vice Chancellor Glasscock explained that, had Weingarten properly invoked equitable estoppel, the court may have been precluded from considering Monster's standing defense.  However, that doctrine requires the misled party to demonstrate that it lacked knowledge or the means of obtaining the truth; it reasonably relied on the conduct of the party against whom estoppel is sought; and it detrimentally changed its position based on that reliance.  Weingarten failed to satisfy these requirements because "there was no 'conduct' by Monster to rely on."  While Weingarten threatened to file suit if Monster did not confirm, by his self-imposed deadline, that it would honor his request not to assert standing as a defense to his demand after the merger closed, Monster did not reply by that deadline and Weingarten chose not to file suit before the closing.  "Under these circumstances," the court explained, "there was no conduct by [Monster] on which [Weingarten] purports to rely, and to the extent [he] relied on Monster's silence, that reliance is not reasonable." 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick, Herrington & Sutcliffe LLP | Attorney Advertising

Written by:

Orrick, Herrington & Sutcliffe LLP

Orrick, Herrington & Sutcliffe LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.