Trials involving books-and-records requests have become more common since the Delaware Supreme Court encouraged stockholder plaintiffs to use the “tools at hand” to discover information necessary to establish demand futility prior to pursuing derivative litigation. Less common are decisions post-trial regarding inspection rights for members of a Delaware limited liability company. The recent decision in Riker v. Teucrium Trading, C.A. No. 2019-0314-AGB (Del. Ch. May 12, 2020), reflects the care by which the Delaware Court of Chancery applies the applicable standard to determine whether a member has met his burden to show entitlement to documents and, if so, the scope of necessary production. The case also demonstrates that a company’s hard-fought litigation tactics opposing document requests, which the court ultimately validates, does not by itself provide grounds to shift attorney fees, particularly where plaintiff did not substantially prevail.
This case arose out of a control dispute between two members, plaintiff Riker and Sal Gilbertie, who each owned approximately 46% of voting Class A units of Teucrium Trading LLC (the company), a Delaware limited liability company whose principal assets were five agriculture-focused exchange-traded funds available on the New York Stock Exchange. The parties’ LLC agreement gave certain veto rights to Gilbertie, including over the selection and removal of the company’s officers. In 2018, the plaintiff sought to eliminate Gilbertie’s veto rights and install himself and his wife as the managers. Gilbertie opposed this effort and, acting with the third LLC member who owned approximately 8% of the voting power, removed Riker and installed himself and non-Riker family members as the management group.
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