COURT OF CHANCERY

OF THE 

STATE OF DELAWARE

 JOHN W. NOBLE 417 SOUTH STATE STREET

VICE CHANCELLOR DOVER, DELAWARE 19901

TELEPHONE: (302) 739-4397

 FACSIMILE: (302) 739-6179

September 24, 2014

Timothy R. Dudderar, Esquire Scott G. Wilcox, Esquire

Samuel L. Closic, Esquire Whiteford Taylor Preston LLC

Potter Anderson & Corroon LLP The Renaissance Centre, Suite 500 

1313 North Market Street 405 North King Street

Wilmington, DE 19801 Wilmington, DE 19801

Re: Jefferson v. Dominion Holdings, Inc.

C.A. No. 8663-VCN

Date Submitted: May 28, 2014

Dear Counsel:

This is yet another dispute between a shareholder and the corporation about 

the scope of inspection in a proceeding under 8 Del. C. § 220. The Court 

concluded after trial that the stockholder had demonstrated a proper purpose for his 

request. The matter involves a corporation with a limited number of shareholders 

and no public reporting duties. Thus, another question is the confidentiality to be 

accorded documents that would not ordinarily find their way into the public light. 

EFiled: Sep 24 2014 03:37PM EDT 

Transaction ID 56082893

Case No. 8663-VCN
Jefferson v. Dominion Holdings, Inc.

C.A. No. 8663-VCN

September 24, 2014

Page 2

The Court addresses the debate in two phases: first, determining the scope of the 

production and second, balancing the confidentiality concerns. 

Plaintiff Rodney Jefferson (“Jefferson”) demonstrated that valuing his 

holdings in Defendant Dominion Holdings, Inc. (“Source4”) is a primary and 

proper purpose for the inspections which he proposed. 

Tax returns and financial reports are requested.1 Yet, Jefferson seeks 

“supporting documents relating thereto.” The scope of such a request is not 

entirely clear; more importantly, why supporting documentation is necessary is not 

readily apparent. The numbers on the tax returns and financial reports should 

suffice. 

Executive compensation is another proper topic. Jefferson reasonably seeks 

compensation information tied to individuals in their given positions. Jefferson, 

however, seeks social security numbers and other personal information (or, at least, 

his requests can be read as encompassing such information). No legitimate reason 

to release personal information beyond individual names has been offered.

 

1

The request for financial statements has not been waived.
Jefferson v. Dominion Holdings, Inc.

C.A. No. 8663-VCN

September 24, 2014

Page 3

Source4 proposes to provide “audited consolidated annual financial 

statements” for the period of 2010 through 2013. For purposes of valuing 

Jefferson’s stake in the corporation, that should be adequate. Why the unaudited 

financial statements (as opposed to just the audited final statements) are needed has 

not been explained.

Source4’s audited financials are done on a consolidated basis. That is, 

various subsidiaries are not independently audited. Jefferson has not shown why 

subsidiary-by-subsidiary (as opposed to consolidated) reports are needed to fulfill 

the purposes of his inspection. Production is limited to those audited financials 

that already exist. It is not an objective of a Section 220 proceeding to require the 

corporation to compile various financial data in a particular format when it has not 

done so and when the stockholder has offered no reason why the corporation’s 

standard practices should not be respected.2 

 

2

The parties had debated the production of various general ledgers (or information 

to be extracted from them) maintained by Source4 and its subsidiaries. That 

debate apparently has been resolved. See Pl.’s Opp’n to Def.’s Mot. for Entry of 

Def.’s Orders ¶ 4.
Jefferson v. Dominion Holdings, Inc.

C.A. No. 8663-VCN

September 24, 2014

Page 4

If the requested books and records are maintained in an electronic format 

that may be readily used by Jefferson, there is no reason why production should 

not be in that form. To the extent the information is maintained on paper, and not 

readily available in electronic form, production in paper format is a reasonable 

means of responding to the inquiry.3Payment by the stockholder of the reasonable 

costs of copying company paper records is part of the Section 220 process.4 

Confidentiality agreements provide a rational, reasonable, and enforceable 

methodology for dealing with corporate books and records that otherwise would 

not be subject to public review. A closely held corporation does not need to make 

all of its records available to the public simply because it has a stockholder with a 

legitimate basis for inspecting corporate records. Allowing a shareholder the right 

to inspect corporate books and records should not automatically result in the 

release of its private—even if not necessarily confidential—information. A 

balancing of the needs of the stockholder and the reasonable expectations of the 

corporation is required. That balancing is best achieved through a confidentiality 

 

3

Thirty calendar days is a reasonable timeframe for production of all categories of 

Source4’s books and records.

4 To the extent that there was a dispute over court costs, the parties have resolved 

that issue.
Jefferson v. Dominion Holdings, Inc.

C.A. No. 8663-VCN

September 24, 2014

Page 5

agreement that both (a) reasonably protects the confidentiality of the books and 

records and (b) allows the stockholder to review the documents, not only with his 

advisors, but also with other shareholders who share similar views. Thus, a 

stockholder should be allowed to share the information, but only with those who 

(a) have some reasonable basis for review and (b) agree to preserve 

confidentiality.5 

A reasonable confidentiality agreement protects the Court from being called 

upon to inquire into the motives that may have animated a stockholder’s desire to 

inspect the corporation’s books and records. Undoubtedly, there will be times 

when the inspection is motivated by hostility toward incumbent management, 

inspection not motivated strictly by the best interests of the corporation. In this 

instance, Jefferson’s desire to value his shares provides a genuine and proper 

purpose. Whether there might be some secondary, ulterior motive lurking in the 

background that would incentivize the release of the corporation’s documents is a 

question that the Court need not resolve. Source4’s confidentiality concerns are 

adequately protected by a confidentiality order.

 

5

The form of a confidentiality order is not prescribed. Any person acquiring 

access to the books and records should execute a confidentiality undertaking.
Jefferson v. Dominion Holdings, Inc.

C.A. No. 8663-VCN

September 24, 2014

Page 6

Finally, there appears to be some dispute about what confidentiality 

provisions apply to documents that have been (or will be) released. To clarify, the 

Court is not addressing documents disclosed in litigation up to this point. The 

treatment of those documents is governed by Rule 5.1 and the confidentiality order 

under which they were provided.

Accordingly, the scope of the production has been defined, and the method

for preserving confidentiality has been explained. Counsel are required to prepare 

and to submit an implementing form of order.

Very truly yours,

/s/ John W. Noble

JWN/cap

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