On Jan. 31, Chancellor Kathaleen McCormick of Delaware’s Court of Chancery issued her opinion in the matter of Wei v. Zoox, C.A. No. 2020-1036-KSJM, where the court addressed the intersection of legal principles at play in the realms of 8 Del. C. Section 220 (permitting a stockholder of a Delaware corporation to inspect certain books and records of the entity) (Sec. 220); certain timing and informational realities in play in private company M&A transactions that might limit a stockholder’s use of Sec. 220; and the scope of discovery in a statutory appraisal proceeding prosecuted by a former stockholder of a Delaware corporation pursuant to 8 Del C. Section 262 (Sec. 262). As framed by the court: “No Delaware court has yet confronted the precise issue presented by respondent’s motion—whether an appraisal petitioner may obtain full discovery in an appraisal proceeding where the proceeding was commenced for the purpose of pre-suit investigation.” Put another way, the particular question before the court was whether a former stockholder, who could not use Sec. 220 as a tool to investigate potential wrongdoing by fiduciaries in a merger transaction, may nevertheless file a statutory appraisal action and use the rather broad discovery rules of Rule 26 of the Court of Chancery Rules solely—or perhaps primarily—for the purpose of such an investigation to aid a potential direct, class action against fiduciaries for alleged misconduct in the merger.

On the facts of this case, the chancellor answered in the negative. The court did, however, grant the stockholder access to discovery in the appraisal litigation that would essentially mirror the more limited inspection rights attendant to Sec. 220.