IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JON HENRY,

Plaintiff,

v. PHIXIOS HOLDINGS, INC., a Delaware corporation,

Defendant. ) ) ) ) ) ) ) ) ) ) C.A. No. 1 2504

- VCMR

OPINION Date Submitted: April 10 , 201 7 Date Decided: July 10, 201 7 Michael W. McDermott , BERGER HARRIS LLP , Wilmington, Delaware; Attorney for Plaintiff

. Carl D. Neff and E. Chaney Hall , FOX ROTHSCHILD LLP , Wilmington, Delaware; Attorneys for Defendant

. MONTGOMERY
- REEVES, Vice Chancellor.2

In this action, an alleged stockholder seeks books and records for the purpose of investigating mismanagement of the company , communicating with other stockholders, and valuing his shares

. He points to the chief operating officer’s own
in

- court admissions of using corporate funds for personal expenses and the company’s precarious financial situation as a credible basis to infer mismanagement sufficient to establish a proper purpose under 8 Del. C. § 220. The com pany has rebuffed all examination efforts because it alleges that the plaintiff is no longer a stockholder. According to the company, its initial three directors adopted bylaws that contain stock transfer restrictions , and all company stock certificates w ere issued after that time and are subject to those restrictions

. Under the restrictions, stock may be revoked by a majority of all voting stockholders if a stockholder is found to be engaging in acts that are damaging to the company

. The company admits that the stock transfer restrictions are not noted on the stock certificate. Instead, t he company asserts that the stockholder plaintiff knew about these restrictions and consented to be bound before he obtained stock in the company. T he chief operating officer (who is partially th e subject of the investigation) purportedly explained the restrictions multiple times and provided the bylaws to the stockholder before he accepted stock in the company. Thereafter, she

sent t he bylaws again , and the stockholder acknowledged receipt. Thus, according to the com pany, the stockholder was bound by the restrictions. The company3

contends that after the stock was issued, the stockholder engaged in efforts to compete with the company, and , in respon se , the company validly rescinded his stock under the bylaws. As such, the company claims he has no right to the documents except to value his shares. The plaintiff stockholder responds that he did not have actual knowledge of the stock transfer restrictions before he acquired the stock and never assented to the restrictions after he acquired the stock , which is required under 8 Del. C. § 202

. Through this action, the plaintiff stockholder requests that the Court : (1) declare that his stock is no t subject to the restrictions and that he is still a stockholder of the
company ; (2) order the company to grant him access to all documents sought in his demand letter; and (3) award the plaintiff attorneys’ fees. I hold that under Section 202 , in order for a stockholder to be bound by stock transfer restriction s that are not “noted conspicuously on the certificate or certificates representing the security , ” he must have actual knowledge of the restriction s before he acquires the stock. If the stockholder does not have actual knowledge of the stock transfer restriction s at the time he acquires the stock, he can become bound by the stock transfer restriction s after the acquisition of the stock only i f he affirmatively

assent s to the restri ction s , either by voting to approve the restriction s or by agreeing to the restrictions

.4

After a full trial, I find that the plaintiff stockholder did not have actual knowledge of the restriction s prior to acquiring his stock. Although the plaintiff

sto ckholder may have received knowledge after he was granted stock, he did not assent to be bound by the restriction s . Th erefore , the company could not rescind his stock under the bylaws , and he remains a stockholder of the company. As a valid stock holder, h e is entitled to inspect the books and records of the company for any
proper purpose . The stockholder has stated a proper purpose for inspection, and the company has failed to prove any of its defenses. Thus, the company must produce the requested docume nts as they are necessary to effectuate the stockholder’s stated
purpose. The plaintiff, however, is not entitled to attorneys’ fees.
I. BACKGROUND These are my findings of fact based on the parties’ stipulations, documentary evidence, and the testimony of two witnesses during a half

- day trial. I accord the evidence the weight and credibility I find it deserves. 1

1 Citations to testimony presented at trial are in the form “Tr. # (X)” with “X” representing the surname of the speaker, if not clear from the text. After being identified initially, individuals are referenced herein by their surnames without regard to form al titles such as “Dr.” This opinion refers to certain individuals by first name for clarity only

. No disrespect is intended . Exhibits are cited as “JX #.” Unless otherwise indi cated, citations to the parties’ briefs are to post

- trial briefs.5

A. Parties and Relevant Non
- Parties Pl aintiff Jon Henry became a stockholder of Phixios Holdings, Inc. i n March
2015

. Non

- party Rhonda S. Henry is Jon Henry’s wife. Non

- party RSH Business Consulting Services (“RSH”) is a consulting company owned by Rhonda

. Defendant Phixios Holdings, Inc. (“Phixios” or the “Company”) is a Delaware corporation formed in July 2013 as a holding company to build product lines, make them successful , and sell them

. Non

- parties James Walker (“Walker”) , Delbert Walker, and Michael Jacobson were the initial directo rs of Phixios

. Walker is the Chief Executive Officer of Phixios. Non

- party Jacobson was the Chief Information Officer during all relevant times. Non

- party Penni Blake is the Chief Operating Officer of Phixios

. Non

- party Condor Monitoring , Inc. (“Condor”) is a subsidiary of Phixios.
B. Facts 1. The d irectors adopt bylaws that contain stock transfer restrictions On July 18, 2013, the board of directors of Ph ixios, Walker , Delbert, and Jacobson, approved and executed the Phixios Holdings, Inc. Stockholder Agreement (the “Stockholder Agreement”)

. 2 The purpose of the Stockholder Agreement was to

2 JX 2. W alker, Delbert, and Jacobson also were stockholders. Blake testified that she, David Byars, Derek Walker, and Daniel Diaz were also stockholders at the time6

“protect the company and everyb ody in it from somebody who would potentially do something that could be harmful” to the Company. 3 The Stockholder Agreement provides, in relevant part:

Stock maybe [sic] surrendered only by the registered owner except in the following circumstances:
 A stockholder is found to be engaging in acts, or has previously engaged in acts, that are damaging to Phixios. Examples include but are not limited to: o Working for a competitor

. o Willfully disclosing proprietary information. o Other willful acts that are harmful to Phixios as determined by a majority vote of the board of directors and all voting stockholders

. In these circumstances, by a majority vote of all voting stockholders, the ownership of the stock will be revoked and returned to Phixios Treasury and may be redistributed. . . . Phixios will pay par value of the stock at the time of revocation to the re gistered stock holder. 4 The Company did not retain legal counsel but rather Googled how to draft a stockholder agreement. 5 Blake was advised by a “justanswer.com” lawyer “that the majority of the directors had to sign it and that this would be what every share holder was bound by” so long as Phixios explained the agreement to each potential

the Stockholder Agreement was approved. No stock certificates were issued until 2014. Tr. 127, 1 30.

3 Tr. 129 (Blake).

4 JX 2, at 2.

5 Tr. 127 (Blake).7

stockholder before stock in the Company was issued to that stockholder

. 6 Blake testified that Phixios had corporate controls in place to ensure every stockholder recei ved an expla nation. T he Company would e

- mail the agreement to every potential stockholder , and Blake would explain each provision to each potential stockholder prior to the issuance of any stock certificate

. 7 T he Company , however, did not require any wri tten evidence of the potential stockholder’s knowledge of or assent to the Stockholder Agreement because the Company “operated on trust

. ” 8

2. The Company hires Henry and issues stock to him In February 2015, Jacobson c ontacted Henry to see if he would consider becoming involved with Phixios. 9 On February 27, 2015, Blake e

- mailed Henry an employment offer. 10 The offer stated, in relevant part:

. . . understanding our limited funds right now, I’d like to propose the following: 1) We will give you 50,000 shares of Phixios Holdings, Inc. stock immediately. 2) Salary of $130,000 per year beginning day you start.

6 Blake Dep. 99

- 100; Tr. 197

- 98 (Blake).

7 Tr. 130

- 32, 196

- 98 (Blake).

8 Id. at 196

- 98.

9 Tr. 8 (Henry).

10 JX 5; Tr. 9 (Henry).8 3) 30% yearly bonus (based on personal performance, company performance, and customer sat) 4) We can only pay you $1,000 per month right now until revenue is high enough to cover your full salary. 5) 100% of back pay will be paid as soon as we get to the revenue point to pay your full salary. We understand we are asking for a fulltime commitment with a deferred salary. Hence, the 50,00 0 shares of stock. 11
Hen ry accepted the offer and was “officially onboard” as of March 5, 2015. 12 On March 25, 2015, Walker signed and issued Henry’s stock certificate for 50,000 shares of Phixios. 13 The certificate does not contain or note a ny stock transfer restriction , and there is nothing in writing to show the restriction s w ere provided to Henry by March 25th

. In a March 25, 2015 e - mail exchange titled “Stock
Certificates ,” Blake provide d Henry with a tracking number, and Henry respond ed ,

“

. . . thanks for the discus sion today, it made me feel much more comfortable with everything.” 14 That e

- mail does not attach or reference the Stockholder Agreement

. In an affidavit submitted on September 6, 2016 in support of Phixios’s opposition to

11 JX 5.

12 JX 6.

13 JX 9.

14 JX 10.9

Henry’s motion for summary judgm ent , Blake state d that th e “discussion”
reference d in Henry’s e

- mail was a telephone conversation in which she explained “each and every section of the S tockholder Agreement to Henry

. ” 15 Blake testified at trial that she e

- mailed Henry the Stockholder Agre ement on the same day she sent the stock certificate. 16 Blake did not provide any credible explanat ion for why one

e - mail exchange from March 25 , 2015 could be produced but another exchange from the same day that purportedly attached the Stockholder Agreement could not be produced . She merely stated that the “e

- mail has gone missing ,” presumably
because she “switched computers.” 17 No explanation was provided as to why “switch[ing] computers” would affect the av ailability of certain e

- mails and not others

. Additionally, Blake’s testimony regarding when and how many conversations
occurred regarding the Stockholder Agreement changed throughout trial

. Initially , there were two conversations between Blake and Henry before February 27 , 2 015

. 18 One conversation was at a “high

- level,” and the other went through “every single

15 JX 91.

16 Tr. 140

- 41.

17 Blake Aff. Ex. A; Tr. 199

- 200.

18 Tr. 137.10

paragraph

. ” 19 Blake testified that she specifically discussed the terms of the Stockholder Agreement, including the stock transfer restrictions, and that Henry said “he was fine, he was happy” and that “it sound[ed] good. He understood.” 20 T hen Blake testified that there was a conversation on February 2 7, 2015 and another on March 25, 2015

. 21 Later Blake said she had at least three phone calls with Henry

. 22 Finally, Blak e explain ed that she didn’t “have the dates right in [her] mind , ” but there were “a bunch” of telephone conversations

. 23 Henry testified that he and Blake did not discuss the Stockholder Agreement before his employment offer. 24 The purpose of their conve rsation was to address Henry’s concern that Phixios had delayed the issuance of shares. On August 10, 2015, Blake sent an e - mail titled “Stockholder Agreement” to multiple Phixios stock holders attaching the Stockholder Agreement

. 25 Blake w rote , “I think everyone already has this, but just sending again as I’m trying to get

19 Id. at 136

- 38.

20 Id. at 139

- 40.

21 Id. at 187.

22 Id. at 190.

23 Id. at 192

- 93, 199.

24 Id. at 20

- 21.

25 JX 13.11

everything in order with documentation and such to get ready for growth.” 26 Henry responded, “Thank you for ge tting a copy out for my records” and forwarded the e

mail to his wife, Rhonda

. 27 Henry testified at trial that he did not look at the Stockholder Agreement when he received it but rather sent it to his wife to print a copy and put it with their “important paperwork.” 28 He thought this document was a “set of instructions ” that would tell him what day Phixios stockholders had the ability to tender their stock if they wanted to and how to go about tendering if the occasion ever came up. 29

3. Business begins to suffer and the Company explores further opportunities B y the end of 2015, things at the Company were “slowing down significantly , ” and there “weren’t nearly as many prospects.” 30 To deal with these

concerns, Walker and Jacobson discussed alternatives to increase the business’s lagging revenue. 31 Henry testified that Walker asked Jacobson to explore the Federal

26 Id.

27 Id. ; JX 14; Tr. 48.

28 Tr. 22.

29 Id. at 22

- 23.

30 Id. at 26.

31 Id.12

Business Opportunities (“FBO”) process and to use Henry’s services for the “documentation of those processes.” 32 Th at testimony is corroborated by a January
2016 e

- mail exchange between He nry, Jacobson, and Walker, in which Henry state d to Jacobson: “Based upon the brief text message you sent me last weekend you’ve
asked me to look into and define to [sic] new processes that would allow us to take advantage of Contract Proposals (RFP’s) iss ued by the Federal Government.” 33 The

e - mail further stated : “After some research and direct communications, I’ve put together a process.” 34 Jacobson respond ed by stating, in part:

Jon & James FBO website needs to be utilized until I can figure when/if p aying for the actual gov contract web site is a more viable option. Concur? James That said why is [sic] Phixios representatives unable to login to FBO and is this going to be rectified? 35

32 Id. at 27.

33 JX 24.

34 Id.

35 Id.13

On March 10, 2016, Rhonda registered an account for RSH with the FBO Vend o r System , and Henry e - mailed Jacobson the information

. 36 Henry testified that this registration was necessary in order to obtain an FBO access ID. 37 Henry never attempted to register Phixios through the FBO, and to his knowledge, neither did Jacobson. 38 After completing the FBO registration process, throughout March and Ap ril , RSH began to receive numerous requests for proposals and requests for quotations for various contracts. 39 Henry and Jacobson communicated through their Phixios e

mail a ccounts , considered many of these solicitations, and worked to document the processes that would be required to pursue these opportunities. 40 Phixios points to several exchanges in particular that it believes evidence RSH’s, and thus Henry’s , competition w ith the Company. For example, on March 31, 2016, Jacobson e mailed Henry about a potential FBO opportunity and told Henry : “So I figure it is something you should check out or we should look into together . . . You know turn

36 JX 43; JX 44.

37 Tr. 68

- 71.

38 Tr. 83

- 84.

39 JX 46; JX 47; JX 53; JX 60; JX 62; JX 65; JX 68; JX 69; JX 73; JX 74.

40 JX 46; JX 47; JX 53; JX 60; JX 62; JX 65; JX 68; JX 69; JX 73; JX 74.14

the other check [.] [sic] ” 41 Ad ditionally , i n response to a discussion regarding a government on

- boarding call, Henry told Jacobson :

We need to keep in mind that the business is registered as a Sole Proprietorship owned by a women. [sic] If you and I attempt to make the call without my wife being on the line, it could quickly go against us. We might need to do the on boarding call with her present in the event they expect to speak to the owner? 42 In an e

- mail chain title d “NASA Mentor Pro tégé Program,” Jacobson tells Henry to call him about this NASA opportunity. A n attachment highlights the requirement that a protégé “ must meet one of the eligibility requirements , ” and the attachment highlights the “Woman

- Owned Small Businesses (WOSBs)” category

. 43 Henry testified that Phixios did not qualify as a woman

- owned small business or any of the additional categories mentioned in the atta chment . T his meant Phixios would not have been able to receive “preferential points to a ward ment of a contrac t potentially

. ” 44 Henry testified at trial that he was using RSH to explore potential revenue sources and opportunities for P h ixios and reporting his findings back to

41 JX 46.

42 JX 69.

43 JX 73; JX 74.

44 Tr. 95

- 96.15

Jacobson. Ultimately, because the Company was so overwhelmed in other areas, Phixios did not pursue any of these potential contracts.

4. Conflicts with Blake surface On January 28, 2016, Walker sent an e

- mail to Jacobson attaching 60 days of Wells Fargo Bank statements stating , “As you can see I need to have a talk with Penni.” 45 The attached statements include d various seemingly personal purchases, such as iTunes and Target transactions. Blake reviewed these communications at trial and confirmed that they related to her. She testified at trial that she was “a signer on the acc ount , ” and she “got to decide how money was spent and when it was spent

. ” 46 She explained that becau se finances were tight, she did not take her full salary and used the debit card when she “had to buy something or pay something.” 47 She paid herself “$6,00 0 less that year” and “1099’d” herself for everything she spent. 48 She testified that during a discussion about t his behavior Walker said, “Your heart was in the right place, but that was really dumb, so don’t

45 JX 26.

46 Tr. 160.

47 Id. at 160

- 61.

48 Id. at 161.16

do it again.” 49 Walker also told her that if s he did it again, he would have to fire her

. 50 Blake further testified that Walker made her “do a full accounting of all the money that was spent against all the bank accounts and show hi m” in the March

April 2016 time frame. 51

5. Henry is f

ired and the l itiga tion b egins On May 6, 2016, Walker sent Henry an e

- mail stating, in part: Jon, I tried to reach you this morning to discuss a layoff. Effective immediately. As a company we can no longer financially support outside contractors. If the company sells or starts making money you will receive what is owed to you. 52 Henry replied that he had “stopped billing [Phixios] as of April 1 st since things had slowed down due to the cut back s in available revenue. This blocked our ability to purchase any parts needed to test, build or deliver anythin g to sales or the customer base. ” 53 H e also stated t hat he understood the situation and thanked Walker for the opportunity to work with him for the past year. 54 Henry testified that he went back

49 Id.

50 Id.

51 Id. at 162

- 63.

52 JX 75.

53 Id.

54 Id.17

to being retired after he le ft Phixios. 55 On October 14, 2016, Blake submitted an

a ffidavit in support of Phixios ’ s opposition to Henry’s motion to quash and stated her understanding that “Henry, through RSH, is continuing to compete with Phixios

now. ” 56 At trial, s he admitted that h er belief was based solely on a conversation with Chuck Nash, a person with whom Phixios suspected Henry and Jacobson were continuing to do business. 57 Blake has no first

- hand basis for believing that Henry continues to compete with the Company and no proo f to support the statement in her affidavit

. 58 In June 2016, Henry , Rhonda, and Jacobson received a cease

- and

- desist letter from counsel representing Phixios. 59 The letter addressed to Henry alleged that he was “conspiring with Mr. Jacobson to defraud the Company and misappropriate Company assets for [his] own personal gain.” 60 On June 8, 2016, Jacobson delivered a Section 220(d) demand to the Company requesting inspection of certain books and

55 Tr. 31

- 32.

56 JX 93; Tr. 218

- 22.

57 Tr. 218

- 20.

58 Id.

59 JX 76; JX 77.

60 JX 76.18

records. 61 On June 19, 2016, the Company sent no tice to stockholders of a special meeting to be held June 30, 2016. 62 On June 21, 2016, Henry sent a request under Section 219 to examine the list of the Company’s stockholders entitled to vote at the special meeting

. 63 On June 23, 2016, Henry and Jacobso n delivered a written demand (the “Demand Letter”) to the Company requesting that the Company allow Jacobson and Henry “to examine a list of the Company stockholders in connection with a special meeting the [C]ompany has purportedly noticed to take place o n June 30, 2016” pursuant to Section 219. 64 The Demand Letter also seeks the i nspection of books and records “(i) to communicate with other stockholders concerning the June 30 special meeting; (ii) to value their stock; and (iii) to investiga te mismanagement and wrongdoing ” pursuant to Section 220(b). 65 The Demand Letter asks for the following specific documents:

 A ll executed stockholder agreements, any amendments thereto, and any current capitalization table, and the stockholder list described above ;

61 Joint Pre

- Trial Stipulation 24.

62 Id.

63 Id.

64 JX 79, at 1.

65 Joint Pre

- Trial Stipulation 24 ; JX 79, at 3.19  A nnual, quarterly a nd monthly financial statements, including both audited and internally

- prepared income statements, balance sheets, cash flows and stockholders’ equity statements , from the Company’s 2013 inception through the present ;
 F ederal, s tate and local income tax returns and reports together with supporting documentation;
 G eneral ledger, check registry and related journal entries for the years 2013 to the present;
 S chedule of current Company debt;
 S chedule of compensation paid to the of ficers, managers and board of directors;
 P ayroll records from July 2013 to present;
 B ank statements from July 2013 t hrough the present for all Company bank accounts;
 D ocuments constituting budgets, projections, or business plans; and
 D ocuments re lating to any actual, potential or contemplated tra nsaction resulting in a merger or other business combination, or the sale of the Company’s assets. 66 On June 30, 2016, the Company held a special meeting of the stockholders and vote d to remove Jacobson as a director. 67 On Ju ly 12, 2016, the Company held another spec ial meeting of the stockholders and purported to revoke all of the common stock held by Henry and Jacobson under Section 11 of the Stockholder

66 JX 79, at 2

- 3. In connection with post

- trial briefing, Henry narrowed his request to documents from March 2015 through the prese nt. Pl.’s Reply Br. 12

- 14.

67 Joint Pre

- Trial Stipulation 25, 28.20

Agreement. 68 Henry testified that he never received notice of th e July 12, 2016 meeting. 69 In a letter dated July 19, 2016, Phixios notified Henry and Jacobson that their common stock had been revoked on July 12 , 2016

. 70 On July 22, 2016, Henry was added as a p laintiff to this action. 71
II. A NALYSIS OF THE STOCK TRANSFER RESTRICTIONS In this case, the Company alleges that the Stockh older Agreement was adopted as part of the bylaw s of the Company long before Henry was issued stock in th e Company. The Company further maintains that althoug h the restrictions were not noted conspicuously on the stock certificate representing Henry’s stock , Henry had actual knowledge both before and after the shares were issued, either of which is adequate under 8 Del. C. § 202(a). Henry concedes that the Stockholder Agreement was in place before Henry’s stock was issued. But he contends that the provisions contained in the Stockholder Agreement are not bylaws of the Company. Even accepting as true that the provisions in the S tockholder Agreement are bylaw s , Henry argues that he is not bound under Section 202 because he did not have actual

68 Id.

69 Tr. 37.

70 Joint Pre

- Trial Stipulation 25.

71 Id.21

knowledge of the restrictions before the stock was issued, and he did not consent to be bound after the stock was issued

. I need not decide whether t he provisions in the Stockholder Agreement constituted bylaw s because whether the restriction s w ere adopted through bylaw s , through an agreement , or otherwise does not change the analysis. Instead , I must determine whether Henry had actual knowledge by the time the stock was issued. If the answer is no, I must also determine whether under Section 202 Henry may be bound by restrictions that wer e in place before the securities were issued to him if he gained actual knowledge of the restrictions after the securities were issued to him

. If the answer to that question is no, I must determine whether Henry otherwise consented to be bound by a subsequent agreement or vote in favor of the restriction s . In order to obtain a declaratory judgment, the plaintiff bears the burden of
p rov ing each element of his claim by a preponderance of the evidence. 72 “Proof by a preponderance of the evidence means proof that something is more likely than not. It means that certain evidence, when compared to the evidence opposed to it, has the

72 Prizm Gp., Inc. v. Anderson , 2010 WL 1850792, at *4 (Del. Ch. May 10, 2010).22

more convincing force and makes you believe that something is more likely true than not. ” 73
A. Principles of Statutory Interpretation Under Delaware law, “a statute or an ordinance is to be interpreted according to its plain and ordinary mea ning.” 74 “Where a statute contains unambiguous language that clearly reflects the intent of the legislature, then the language of the statute controls.” 75 Delaware courts “construe statutes ‘to give a sensible and practical meaning to a statute as a whole in order that it may be applied in future cases without difficulty.’” 76 The courts also “read each relevant section of the statute in light of all the others to produce a harmonious whole. ” 77 “Words in a statute
should not be construed as surplusage if there is a reasonable construction which

73 Agilent Techs., Inc. v. Kirkland , 2010 WL 610725, at *13 (Del. Ch. Feb. 18, 2010) (quoting Del. Express Shuttle, Inc. v. Older , 2002 WL 31458243, at *17 (Del. Ch. Oct. 23, 2002)) (internal quotation marks omitted).

74 New Cingular Wireless PCS v. Sussex County Bd. of Adjustment , 65 A.3d 607, 611 (Del. 2013).

75 State Farm Mut. Auto. Ins. Co. v. Kelty , 126 A.3d 631, 635 (Del. 2015) (quoting Hoover v. State , 958 A.2d 816, 820 (Del. 2008)) (internal quotation marks omitted).

76 Rapposelli v. State Farm Mut. Auto. Ins. Co. , 988 A.2d 425, 427 (Del. 2010) (quoting Nationwide Mut. Ins. Co. v. Krongold , 318 A.2d 606, 609 (Del. 1974)).

77 Kelty , 126 A.3d at 635 (quoting Progressive N. Ins. Co. v. Mohr , 47 A.3d 492, 496 (Del. 2012)).23

will give them meaning, and the courts must ascribe a purpose to the use of statutory language, if reasonably possible.” 78
B. Knowledge and Consent Requirements Under Section 202 Section 202(a) of the Delaware General Corporation Law provides: A written restriction or restrictions on the transfer or registration of transfer of a security of a corporation . . . if permitted by this section and noted conspicuously on the certificate or cert ificates representing the security or securities so restricted . . . may be enforced against the holder of the restricted security or securities or any successor or transferee of the holder. Unless noted conspicuously on the certificate or certificates re presenting the security or securities so restricted . . . a restriction, even though permitted b y this section, is ineffective except against a person with actual knowledge of the restriction. 79 Thus, a written restriction on the transfer of a security may be enforceable against a particular stockholder if : (1) it is noted conspicuously on the certificate representing the security in the case of certificated shares ; or (2) the person against whom enforcement is sought had actual knowledge of the restriction

. Section 202(b) states: A restriction on the transfer or registration of transfer of securities of a corporation . . . may be imposed by the certificate of incorporation or by the bylaws or by an

78 Cingular , 65 A.3d at 611 (quoting Oceanport Indus., Inc. v. Wilm. Stevedores, Inc. , 636 A.2d 892, 900 (Del. 1994)) (internal quotation marks omitted).

79 8 Del. C. § 202(a).24 agreement among any number of security holders or among such holders and the corporation. No restrictions so imposed shall be binding with respect to securities issued prior to the adoption of the restriction unless the holders of the securities are parties to an agreement or voted in favor of the restriction. 80 Th erefore , a stock transfer restriction may be binding on existing securities through one of three ways: (1 ) by inclusion in the certificate of incorporation ; (2) by inclusion in the bylaws of the corporation ; or (3) by agreement among stockholders or am ong stockholders and the c or poration. A n existing stockholder must affirmatively a ssent to the restriction in order to be bound either by becoming a party to an agreement or by voting in favor of the restriction

. 81 A restriction cannot be retroactively im posed

on a current stockholder without his express consent

. “The purpose of § 202 is to protect a shareholder’s investment from diminishment through post

- purchase restrictions placed on the shareholder’s shares by the corporation or its other shareholders. ” 82 “ Otherwise, others might

80 Id. § 202(b).

81 Id. ; see Joseph E. Seagram & Sons, Inc. v. Conoco, Inc. , 519 F. Supp. 506, 513

- 14 & nn.4

- 5 (D. Del. 1 981); E DWARD P. W ELCH ET AL ., F OLK ON THE D ELAWARE G ENERAL C ORPORATION L AW § 202.06, at 6

- 20 ( 6 th e d. 2016) ; R

. F RANKLIN B ALOTTI & J ESSE A. F INKELSTEIN , D ELAWARE L AW OF C ORPORATIONS & B USINESS O RGANIZATIONS § 6.6, at 6

- 10 (3 rd ed. 2013); F OLK , T HE D ELAWARE G ENERAL C ORPORATION L AW : A C OMMENTARY AND A NALYSIS 197

- 98 (1972).

82 Di Loreto v. Tiber Hldg. Corp. , 1999 WL 1261450, at *6 (Del. Ch. Jun. 29, 1999).25

circumscribe the stockholder’s ability to transfer his or her shares, reducing the
in vestment’s liquidity and value. ” 83 The phrasing in Section 202 was modeled after Section 8

- 204 of the Uniform Commercial Code , 84 to wh ich the o fficial comments
state, “A purchaser who takes delivery of a certificated security is entitled to rely on the terms stated on the certificate.” 85 Section 202(a) thus is intended to provide notice such that encumbered securities are easily identified. 86 A s tockholder who bargains for a security is entitled to use the certificate’s terms as evidence of his economic rights and as proof of the value he bargained for. Reading t he statute holistically to give it its intended purpose , the statute must be read to mean that a n existing restriction on the transfer of a security is binding on subsequent purchasers of the securities if: (1) i t is noted conspicuously on the certificate representing the security ; (2) the stockholder has actual knowledge of the restriction at the time he acquire s the stock ; or (3) the stockholder consents to be bound by the restriction either through a vote or through a subsequent agreement

83 Id.

84 W ELCH ET AL
. , supra note 81 , § 202.06, at 6

- 19 ; F OLK , supra note 81

. 85 UCC § 8

- 204.

86 B ALOTTI & F INKELSTEIN , supra note 81 § 6.6, at 6

- 9 to 6

- 10.26

with the stockholders or with the company

. 87 To allow otherwise would “produce the incongruous result of allowing the Board of Directors [or other stockholders] unilaterally to impose stock transfer restrictions, which might be of significant economic consequence, on existing shares without the [ knowledge before purchase or] consent [after purchase] of the corporation’s stockholders.” 88 Taken to its logical conclusion, the Company’s position would allow it to entice an investor into purchasing secur ities with the expectation that transfer is

unre stricted because no restrictions are noted o n the certificate representing the securit ies , while withholding the existence of potentially value

- reducing restrictions

.

“ [T] he Legislature could not have intended to produce such onerous results

. ” 89 This absurd result would complete ly undercut the purpose of Section 202 to protect the stockholder’s bargain ed

- for rights

.

1. Henry did not have actual knowledge of the restriction s when he received Company stock Phixios argues that Henry had actual knowledge of the restriction s before stock was issued to him because Blake discussed the Stockholder Agreement with

87 8 Del. C. § 202(a); see also Agranoff v. Miller , 1999 WL 219650, at *12 (Del. Ch. Apr. 12, 1999); Joseph E. Seagram & Sons, Inc. v. Conoco, Inc. , 519 F. Supp. 506, 5 13

- 14 (D. Del. 1981); B ALOTTI & F INKELSTEIN , supra note 81 , § 6.6, at 6

- 10.

88 Seagram , 519 F. Supp. at 513.

89 Id. at 514.27

Henry before issuing his stock and sent him the Stockholder Agreement on March 25, 2015 ( the day she issued the stock )

. Blake’s testimony that she explained each provision to Henry and sent him the Stockholder Agreement prior to the issuance of stock is dubious at best. 90 S he claims in her September 7, 2016 affidavit that she discussed the Stockholder Agreement with Henry and sent him the agreement on March 25, 2015. 91 The affidavit does not mention any conversation occurring before March 25, 2015. At trial, however, she contradicted her own sworn affidavit

. 92 She stated she had multiple conversations with Henry regar ding the Stockholder Agreement. S he testified that she could not remember the exact dates of these conversations, but she also testified that she had a phone call about the Stockholder Agreement prior to February 27, 2015, on February 27, 2015, and on March 25 , 2015

. 93 Her only explanation for why t hese additional conversations were not included in her affidavit is that she “didn’t author this document,” but merely “approved” it. 94 Finally, although Blake testified at trial that she e

- mailed Henry the

90 See supra Section I.B.2.

91 JX 91.

92 Tr. 136

- 38.

93 Id. at 190

- 92.

94 Id. at 192.28

Stockholder Agree ment on the same day she sent the stock certificate, 95 she did not provide any credible explanation for why the purported e

- mail containing the

a greement could not be produced when other e - mails from the same day were produced. A nd she did not produce any documentation showing that she sent the Stockholder Agreement to Henry prior to March 2015

. 96 Thus, Phixios offers nothing to rebut Henry’s credible testimony that he did not have actual knowledge
of the restrictions when he became a stockholder in March 2 015.

2. Henry did not assent to the stock transfer restriction s Both sides acknowledge that t he Stockhold er Agreement was sent to Henry

on August 10, 2015

. 97 Even assuming, arguendo , that after this date Henry had actual knowledge of the Stockholder Agreement, a s discussed above, t o impose transfer restrictions on a stockholder who did not have actual knowledge of those restrictions when he became a stock holder and who did not affirmatively assent to the restrictio ns after he became a stockholder would run afoul of the legislative

95 Id. at 140

- 41.

96 Id. at 199

- 200.

97 JX 13; Pl.’s Opening Br. 11; Def.’s Answering Br. 9.29

purpose of Section 202

. 98 T hus , the question becomes whether Henry affirmatively

a ssented or became a party to a subsequent agreement containing these restrictions. 99 “The use of the internet as t he vehicle for contract formation ‘has not fundamentally changed the principles of contract.’” 100 “The ‘threshold issue is the same: did the party who assented online have reasonable notice, either actual or constructive, of the terms of the putative agreement and did that party manifest

98 See Di Loreto v. Tiber Hldg. Corp. , 1999 WL 1261450, at *6 (Del. Ch. Jun. 29, 1999); Joseph E. Seagram & Sons, I nc. v. Conoco, Inc. , 519 F. Supp. 506, 513

- 14 (D. Del. 1981); Harlamert v. World Finer Foods, Inc. , 494 F. Supp. 2d 681, 687 (S.D. Ohio 2006) (“As can be seen, a restriction on the transferability of shares of stock is permissible under Delaware law, if th e shareholder agrees to such a restriction or has actual knowledge of the restriction when the securities are issued to him.”); UCC § 8

- 204; W ELCH ET AL
. , supra note 81 , § 202.06, at 6

- 19

. 99 Phixios points to Agranoff v. Miller where the Court held that a restriction on stock was valid, even where not noted on the stock certificate, because the stockholder had actual knowledge of the restriction. 1999 WL 219650, at *12

- 13 (Del. Ch. Apr. 12, 1999); Def.’s Answering Br. 20

- 22. I n Agranoff , then

- Vice Chancellor Strine found that the stockholder had actual knowledge of the restriction years before he acquired the stock. 1999 WL 219650, at *12. There, the stockholder “purposely refrained from obtaining a copy” of the pertinent agr eement until after he purchased some of the stock. But, his agents had a copy of the pertinent agreement prior to his purchase of any shares, and he received a copy of the agreement prior to his further purchase of a majority stake in the company. Id. at *12 & n.14. No such facts exist here. Henry did not receive or have knowledge of the agreement prior to his purchase. There are no credible allegations that he was purposely avoiding knowledge of the restrictions. And there are no allegations that he purchased more shares after he knew of the restrictions.

100 Newell Rubbermaid v. Storm , 2014 WL 1266827, at *6 (Del. Ch. Mar. 27, 2014) (quoting Van Tassell v. United Mktg. Gp., LLC , 795 F. Supp. 2d. 770, 790 (N.D. Ill. 2011)).30

assent to those terms.’” 101 “A party may assent to an agreement on the internet [or through email] without reading its terms and still be bound by it if she is on notice that she is modifying her legal rights, just as she may with a physical written contract.” 102
On August 10, 2015 , Blake sent an e - mail titled “Stockholder Agreement,”
and wrote “I think everyone already has this, but just sending again as I’m trying to get everything in order with documentation

. ” 103 Henry responded, “Thank you for getting a copy out for my records.” 104 The Newell Rubbermaid Inc. v. Storm 105 case provides an example of the type of language that giv e s adequate notice of the modification of legal rights. There, the Court held that a clickwrap agree ment modifying an employee’s post

- employment rights was enforceable because the defendant had to affirmatively click a box next to a bolded , conspicuous sentence stating that she “read and agree[d] to the terms of the” agreement

. 106 S he also had

101 Id. (quoting Vernon v. Qw est Commc’ns Int’l, Inc. , 857 F. Supp. 2d. 1135, 1149 (D. Colo. 2012) )

. 102 Id. at *7.

103 JX 13.

104 Id.

105 Newell Rubbermaid , 2014 WL 1266827, at *6

- 7.

106 Id.31

to affirmatively assent on an additional screen with an “Accept ” button that stated in order to complete the agreement, she must “read and accept the terms outli ned in the document” and that her “ grant acceptance will be final once [she] cl ick [ed] Accept.” 107 Although the precise language in Newell Rubbermaid is not mandatory to manifest assent, there is no evidence that Henry was on notice that he was modifying his legal rights when he acknowledged receipt of th e August 10, 2015 e mail. To the contrary, Henry credibly testified at trial that he did not open the attachment because he thought it was a set of instructions describing how Phixios stockholders could tender their stock. 108 Phixios does not provide any credible evidence to the contrary. Therefore, Henry did not assent to be bound by the stock transfer restriction s contain ed in the Stockholder Agreement; his stock was revoked invalidly ; and Henry remains a stockholder of Phixios. 109

107 Id

. 108 Tr. 22

- 23.

109 Phixios argues that Henry acquiesced to the terms of the Stockholder Agreement or, in the alternative, is equitably estopped from denying the restrictions contained therein. Def.’s Answering Br. 24

- 29. In support of its arguments, Phixios cites Henry’s reply to the August 10 , 2015 e - mail attaching the Stockholder Agreemen t saying “Thank you for getting a copy out for my records.” JX 13. Acquiescence requires that a plaintiff “has full knowledge of his rights and the material facts and (1) remains inactive for a considerable time; or (2) freely does what amounts to recognition of the complained act; or (3) acts in a manner inconsistent with the subsequent repudiation, which leads the other party to believe the act has been approved.” Klaassen v. Allegro Dev. Corp. , 2013 WL 5739680, at *20 (Del. Ch. Oct. 11, 2013) (quoting NTC Gp., Inc. v. West

- Point Pepperell, Inc. , 1990 WL32

III. ANALYSIS OF THE BOOKS AND RECORD S CLAIM A stockholder of a Delaware corporation may inspect the corporation’s books and r ecords under Section 220 for any proper purpose. “A proper purpose shall mean a purpose reasonably related to such per son’s interest as a stockholder, ” 110 and “a stockh older has the burden of proof to demonstrate a proper purpose by a preponderance of the evidence.” 111 A stockholder who seeks inspection of books or records in order to investigate wrongdoing also must state “a credible basis from
which the Court of Chancer y can infer there is possible mismanagement that would warrant further investigation

— a showing that ‘may ultimately fall well short of demonstrating that anything wrong occurred.’ ” 112 A p laintiff seeking inspection

143842, at *5 (Del. Ch. Sept. 26, 1990)). Estoppel requires that a “party by his conduct intentionally or unintentionally leads another, in reliance upon that cond uct, to change position to his detriment.” Wilson v. Am. Ins. Co. , 209 A.2d 902, 903

- 04 (Del. 1965). “To establish an estoppel, it must appear that the party claiming the estoppel lacked knowledge and the means of knowledge of the truth of the facts in q uestion, that he relied on the conduct of the party against whom the estoppel is claimed, and that he suffered a prejudicial change of position in consequence thereof.” Id. at 904. But Phixios fails to prove that it was misled or changed its position in any way in reliance on Henry’s acknowledgement of receipt of the attachment. And Phixios has put forth no other evidence to prove acquiescence or estoppel.

110 8 Del. C. § 220.

111 Seinfeld v. Verizon Commc’ns, Inc. , 909 A.2d 117, 121 (Del. 2006).

112 Id

. at 123 (quoting Khanna v. Covad Commc’ns Gp., Inc. , 2004 WL 187274, at *6 n.25 (Del. Ch. Jan. 23, 2004)).33

must also prove that “each category of the books and records requested is essential and sufficient to the party’s stated purpose .” 113 “The plaintiff can obtain books and records that ‘address the crux of the shareholder’s purpose and if that information is unavailable from another source.’” 114 And, this 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. ” 115 Henry’s Demand Letter states that his purposes are to (1) c ommunicate with other stockholders regarding the June 30 meeting ; (2) value his shares ; and (3) investigate mismanagement. 116 All three are proper purposes under Section 220 , and Phixios does not argue otherwise

. Instead, Phixios argue s that : (1) Henry’s true purpose is not to value his shares but to retaliate against the Company and to further his competitive scheme agains t the Company; (2) the inspection demand as it relates to the valuation of shares should be appropriately tailored; (3) Henry has faile d to provide a credible basis for

113 Thomas & Betts Corp. v. Leviton Mfg. Co. , 681 A.2d 1026, 1035 (Del. 1996).

114 Amalgamated Bank v. Yahoo! Inc. , 132 A.3d 752, 788 (Del. Ch. 2016) (quoting Wal

- Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr. Fund IBEW , 95 A.3d 1264, 1271 (Del. 2014)).

115 Id. at 796 (quoting 8 Del. C. § 220(c)).

116 JX 79.34

investigati ng mismanagement and wrongdoing; and (4) the purpose for the stockholder list has been mooted because the June 30 , 2016 meeting has come and
gone. A. Henry H as A lleged a P roper P urpose Phixios contends that Henry’s primary purpose is to compete with the Company through RSH and to aid and abet Jacobson in his breaches of fiduciary duties. As evidence of this, Phixios argues that Henry never requested access to financial records of the Company before maki ng the demand, and he seeks to know the value of his shares for estate planning purposes, not to sell or buy more shares. 117 But Henry never stated in the Demand Letter or in this litigation that he did not want to value his stock to decide whether to sell. 118 And, more importantly , Phixios has not provided any reason why Henry’s valuation of his shares for estate planning purposes would be improper

. Phixios also has not shown that Henry is competing or plans to compete with Phixios

. Phixios point s to e

- mail exchanges regarding the F BO account registered
to RSH as evidence of Henry’s competition with the Company. Phixios argues that Henry created the account for RSH’s benefit and solicitation of FBO opportunities

.

117 Def.’s Answering Br. 31

- 32.

118 Id. at 53

- 54.35

Phixios contends that if Henry wa s working on behalf of Phixios he would have created a new FBO account for Phixios or fixed Phixios’s existing account, which
he did not do

. Also, Phixios points to Henry’s and Jacobson’s e - mail correspondence considering FBO opportunities of which Phixio s would not be able to take advantage. The most damning e

- mails refer to certain requests for proposal s that require the company to be a woman

- owned business. 119 These e

- mails prove improper competition, according to Phixios, because Phixios did not f it in to this category, and it would not be able to take advantage of an opportunity limited to

wom a n - owned businesses, while RSH could. Although I recognize the reality that Phixios could not take advantage of certain of the opportunities explored by Henry and Jacobson , Henry credibly testified that Walker set the mandate and knew about the plan to explore the FBO process. 120 Walker also knew about the problems with Phixios’s FBO account. Henry credibly testified that he and Jacobson were identifyi ng pote ntial sources of revenue for Ph ixios. And Walker was aware that Henry was reporting to Jacobson, the Chief Information Officer of the Company, regarding the documentation of these processes for the future

. Phixios did not bring Walker to trial to refute any of Henry’s statements.

119 JX 69; JX 73; JX 74.

120 Tr. 26

- 27.36

Further, these exchanges stop ped before M ay 6 , 2016 ( Henry’s termination
date ) , which comport s with Henry’s testimony that the exploration of the FBO
process was all done for the benefit of Phixios. This also confirms Henry’s testimony that after leaving the Company, he retired and is currently not working

. And the record contains no reliable evidence of any current plans to compete , much less actual competition . Although Blake stated in her Octob er 14, 2016 affidavit that Henry is continuing to compete with Phixios , at trial she testified that she in fact had no knowledge of RSH’s dealings after Henry and Jacobson left in May 2016

. 121 Therefore, any argument that Henry seeks to compete with Phixios is unsubstantiated , as Phixios has not proven any scheme, conspiracy, or competitive conduct by Henry. And Phi xios concedes, as it must, that communicating with other stockholders, valuing shares, and investigating mismanagement each states a proper
purp ose for inspection.
B. Henry Has Stated a Credible B asis to Infer W rongdoing Phixios argues that Henry has not shown a credible basis to infer mismanagement or wrongdoing because (1) a lack of liquidity does not form a credible basis for mismanagement , and (2) Blake’s use of the company credit card for personal expenses did not harm the Company and the issue was resolved

. The

121 Id. at 217; JX 93.37

“credible basis” standard “sets the lowest possible burden of proof.” 122 To state a credible basis to support investigation of possibl e mismanagement, the stockholder must show “some evidence” from which the “Court of Chancery can infer there is possible mismanagement that would warrant further investigation.” 123 This “threshold may be satisfied by a credible showing, through documents, lo gic, testimony, or otherwise, that there are legitimate issues of wrongdoing.” 124 Henry testified that Phixios had insufficient funds to purchase “inexpensive components needed to do some of the development and prototyping work that Mr. Jacboson was doing, ” and his requests for such items were never satisfied. 125 Furthermore, he testified that he “had seen text messages, e

- mails, and an assortment of other documentation specifically showing that there were expenditures taking place that had nothing to do wit h business, and they were far outside the realm of anything that should have had anything to do with the business.” 126 At trial, Blake admitted that, because Phixios’s finances were tight, she would “take some

122 Seinfeld v. Verizon Commc’ns, Inc. , 909 A.2d 117, 123 (Del. 2006).

123 Id.

124 Id. (quoting Sec. First Corp. v. U.S. Die Casting & Dev. Co. , 687 A.2d 563, 568 (Del. 1997)) (internal quotation marks omitted).

125 Tr. 38

- 39.

126 Id. at 39.38

variation” of her full pay by using “the debit card out of the bank account when I had to buy something or pay something.” 127 These purchases included iTunes purchases, Target purchases, home furnishing purchases, and various restaurant transactions, to name a few. 128 She and Walker discussed this conduc t, and by her own admission, Walker told her “that was really dumb, so don’t do it again.” 129
Walker also warned that if she engaged in this type of behavior again, “he would have to let [her] go because he was telling [her] not to do it.” 130 Blake claims she “1099’d herself” for everything she spent. 131 These allegations are sufficient to establish a credible basis from which the Court of Chancery can infer there is possible mismanagement that would warrant further investigation. C. Henry I s Ent itled to the Docum ents He Seeks Phixios argues that Henry’s inspection demand should be appropriately
tailored and not used to give access to overly broad categories of documents. I agree. “A stockholder who states a proper purpose for inspection is entitled to inspect only

127 Id. at 160.

128 JX 26.

129 Tr. 161.

130 Id.

131 Id.39

those records that are ‘essential and sufficient’ to achieve his purpose.” 132 A document is “essential” if “it addresses the crux of the shareholder’s purpose,” and
the ‘information the document contains is unavailable from another source. ’ ” 133 “[A] stockholder seeking to inspect books and records must specifically and discretely identify, with ‘rifled precision,’ the documents sought.” 134
Phixios points to the Biz za ri v. Suburban Waste Services, Inc. case , where Judge LeGrow , sitting by designation as a Vice Chancellor, ruled that financial statements, tax returns, and certain agreements encumbering the company’s assets were necessary and essential for th e purpose of valui ng his stock in two companies

. 135 But Judge LeGrow also ruled that Bizzari did not prove how the remaining requests for compensation paid to employees, monthly cash flow statements, sales and expenses, credit, security, and pledge agreements would “aid
in v aluing his interests beyond the aggregate information” contained in the financial

132 Bizzari v. Suburban Waste Servs., Inc. , 2016 WL 4540292, at *7 (Del. Ch. Aug. 30, 2016) (quoting Macklowe v. Planet Hollywood, Inc. , 1994 WL 560804, at *6 (Del. Ch. Sept. 29, 1994)).

133 Bizzari , 2016 WL 4540292, at *7 (quoting Espinoza v. Hewlett

- Packard Co. , 32 A.3d 365, 371

- 72 (Del. 2011) )

. 134 Id. (quoting Sec. First Corp. v. U.S. Die Casting and Dev. Co. , 687 A.2d 563, 570 (Del. 1997)).

135 Id.40

statements

. 136 Importantly, Judge LeGrow found that B izzari had ulterior motives , including competing directly with the company, which are not present here, and
Biz zar i did not adequately allege a proper purpose of investigating mismanagement. 137 Here, Henry may only need the financial statements and tax information to value the Company ; but , Henry has adequately alleged a credible basis for investigating mismanagement, and t he other documents are essential to this purpose. Blake is the Chief Operating Officer of the Company who testified that she was a signer on the Company accounts , and she “got to decide how money was spent and when it was spent.” 138 She also admitted that she used Company funds to pay her personal expenses. 139 Henry’s request for check ledgers , a schedule of compensation paid to officers , managers and board of directors , payroll records , and bank statements are necessary to properly investigate Blake’s mismanagement

. Henry is entitled to all the documents he seeks through this litigation.

136 Id. at *7

- 8.

137 Id. at *5

- 6.

138 Tr. 160.

139 Id.41

D. Henry is Not Entitled to Have the Court Void the Results of the June 30, 2016 Stockholder Meeting Under Section 219 (a) : The officer who has charge of the stock ledge r of a corporation shall prepare and make, at least 10 days before every meeting o f stockholders, a complete list of the stockholders entitled to vote at the meeting . . . . Such list shall be open to the examination of any stockholder for any purpose germ ane to the meeting for a period of at least 10 days prior to the meeting . . .

. 140 Section 219(b) states: If the corporation, or an officer or agent thereof, refuses to permit examination of the list by a stockholder , such stockholder may apply to the Court of Chancery for an order to compel the corporation to permit such examination. The burden of proof shall be on the corporation to establish that the examination such stockholder seeks is for a purpose not germane to the meeting. The Court may summarily order the corporation to permit examination of the list upon such conditions as the Court may deem appropriate , and may make such additional orders as may be appropriate , including, without limitation, postponing th e meeting or voiding the results of the meeting. 141 Phixios did not provide the stockhold er lists because of its belief that Henry

was attempting to harass and compete with the Company

. I find these reasons insufficient to just ify the denial of Henry’s inspection request

. Phixios also argues

140 8 Del. C. § 219(a).

141 Id. § 219(b).42

that this Court should not exercise its discretion to void the results of that meeting because Henry could have, but did not, petition this Court to obtain the list before the meeting

. Henry’s initial Section 219 r equest was sent on June 21, 2016; his Demand Letter was delivered on June 23, 2016 ; and yet he did not become a plaintiff in this action until July 22, 2016, nearly a month later and well after the June 30, 2016 meeting came and went

. Henry did not respon d to Phixios’s argument in his post

- t rial briefing or at oral argument. Therefore, I decline to exercise the discretion granted under the statute to void the results of the June 30, 2016 stockholder meeting

. IV. ANALYSIS OF THE FEES REQUEST Henry seeks the award of costs and attorneys’ fees for this litigation. As an initial matter, Henry did not brief his fees request in his opening post

- tr i a l brief

. 142 Additionally, “[a]lthough

. . . fee

- shifting awards may be merited in exceptional cases i n order to deter abusive litigation, avoid harassment, and protect the in tegrity of the judicial process, ” 143 in order to warrant the Court’s departure from the

142 In re IBP, Inc. S’holders Litig. , 789 A.2d 14, 62 (Del. Ch. 2001) (“In its opening post

- trial brief, Tyson did not argue that these issues would in themselves be sufficient to give it a reason not to close in the event that the DFG

- related issues in the Restated Financials were carved ou t by Schedule 5.11. As a result, I consider Tyson to have waived any arguments about these issues.”); Emerald P’rs v. Berlin , 726 A.2d 1215 (Del. 1999) (“Issues not briefed are deemed waived.”).

143 Fairthorne Maint. Corp. v. Ramunno , 2007 WL 2214318, at * 9 (Del. Ch. July 20, 2007)

.43

American Rule requiring each party to bear their own costs and fees regardless of the outcome of the case, the plaintiff must show that defendants “‘unnecessarily required the institution of litigation, delayed the litigation, and asserted frivolous motions,’ or, put another way, [that] defendants’ bad faith has ‘made the procession
of the case unduly complicated and expensive.’” 144 Although I have ruled against Phixios, Henry has not convinced me that Phixios engaged in bad faith litigation conduct that would justify a fee award to Henry.
V. CONCLUSION For the foregoing reasons, I find that Henry is not subject to the stock transfer restrictions contained in the Stockholder Agreement and , therefore , is a stockholder of Phixios

. Henry is entitled to inspect the books and records he seeks in this litigation

. While Henry was entitled to inspect the stock ledger of the Company before the June 30 , 2016 stockholder meeting , and t he Company withheld this list without justification, Henry has not provided any substantive response to the Company’s argument that this Court should not exercise its discretion to vo id the results of the June 30, 201 6 meeting

. Thus, I deny Henry’s request to void the results

144 Id. (quoting Johnston v. Arbitrium (Cayman Islands) Handels , 720 A.2d 542, 545

- 46 (Del. 1998) ; ATR

- Kim Eng Fin. Corp. v. Araneta , 2006 WL 3783520, at *23 (Del. Ch. 2006), aff’d 2007 WL 1704647 (Del. 2007)).44

of the meeting

. Henry also i s not entitled to fee shifting. The parties shall submit an order consistent with this opinion within ten (10) days. IT IS SO ORDERED

.