IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JON HENRY,

 Plaintiff,

 v.

PHIXIOS HOLDINGS, INC.,

a Delaware corporation,

 Defendant.

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C.A. No. 12504-VCMR

OPINION

Date Submitted: April 10, 2017

Date Decided: July 10, 2017

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 company 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 were 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, the company asserts that the stockholder plaintiff knew about 

these restrictions and consented to be bound before he obtained stock in the 

company. The chief operating officer (who is partially the 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 the bylaws again, and the stockholder acknowledged receipt. Thus, according 

to the company, the stockholder was bound by the restrictions. The company 
3

contends that after the stock was issued, the stockholder engaged in efforts to 

compete with the company, and, in response, the company validly rescinded his 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 not 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 restrictionsthat are not “noted conspicuously on the certificate or certificates 

representing the security,” he must have actual knowledge of the restrictions before 

he acquires the stock. If the stockholder does not have actual knowledge of the stock 

transfer restrictions at the time he acquires the stock, he can become bound by the 

stock transfer restrictions after the acquisition of the stock only if he affirmatively 

assents to the restrictions, either by voting to approve the restrictions or by agreeing 

to the restrictions. 
4

After a full trial, I find that the plaintiff stockholder did not have actual 

knowledge of the restrictions prior to acquiring his stock. Although the plaintiff 

stockholder may have received knowledge after he was granted stock, he did not 

assent to be bound by the restrictions. Therefore, the company could not rescind his 

stock under the bylaws, and he remains a stockholder of the company. As a valid 

stockholder, he 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 documents 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 formal 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 indicated, citations to the parties’ briefs are to post-trial briefs.
5

A. Parties and Relevant Non-Parties

Plaintiff Jon Henry became a stockholder of Phixios Holdings, Inc. in 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 directors 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 directors adopt bylaws that contain stock transfer 

restrictions

On July 18, 2013, the board of directors of Phixios, 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. Walker, Delbert, and Jacobson also were stockholders. Blake testified that 

she, David Byars, Derek Walker, and Daniel Diaz were also stockholders at the time 
6

“protect the company and everybody 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 registered 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 shareholder 

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, 130. 

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 

received an explanation. The 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

 The Company, however,

did not require any written 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 contacted 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 50,000 shares of 

stock.11

Henry 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 any stock transfer 

restriction, and there is nothing in writing to show the restrictions were provided to 

Henry by March 25th. In a March 25, 2015 e-mail exchange titled “Stock 

Certificates,” Blake provided Henry with a tracking number, and Henry responded, 

“. . . thanks for the discussion 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 judgment, Blake stated that the “discussion” 

referenced in Henry’s e-mail was a telephone conversation in which she explained 

“each and every section of the Stockholder Agreement to Henry.”

15

 Blake testified 

at trial that she e-mailed Henry the Stockholder Agreement on the same day she sent 

the stock certificate.16 Blake did not provide any credible explanation 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 availability 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, 2015.

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 Then 

Blake testified that there was a conversation on February 27, 2015 and another on 

March 25, 2015.

21 Later Blake said she had at least three phone calls with Henry.22

Finally, Blake explained 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 conversation 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 stockholders attaching the Stockholder Agreement.

25

 Blake wrote,

“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 getting a copy out for my records” and forwarded the email 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

By 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 That testimony is corroborated by a January 

2016 e-mail exchange between Henry, Jacobson, and Walker, in which Henry stated

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) issued by the Federal Government.”33 The 

e-mail further stated: “After some research and direct communications, I’ve put 

together a process.”34 Jacobson responded by stating, in part: 

Jon & James 

FBO website needs to be utilized until I can figure 

when/if paying 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

Vendor 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 April, 

RSH began to receive numerous requests for proposals and requests for quotations

for various contracts.39 Henry and Jacobson communicated through their Phixios email accounts, 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 with the Company. For example, on March 31, 2016, Jacobson emailed 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 Additionally, in 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 titled “NASA Mentor Protégé Program,” Jacobson tells Henry to 

call him about this NASA opportunity. An 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 attachment. This meant Phixios would not 

have been able to receive “preferential points to awardment of a contract 

potentially.”

44

 Henry testified at trial that he was using RSH to explore potential 

revenue sources and opportunities for Phixios 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 included 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 account,” and she “got to decide how money was spent and when it 

was spent.”

46 She explained that because 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 “$6,000 less that year” and “1099’d” herself for 

everything she spent.48 She testified that during a discussion about this 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 she 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 him” in the MarchApril 2016 timeframe.51

 

5. Henry is fired and the litigation begins

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 1st since things had 

slowed down due to the cut backs in available revenue. This blocked our ability to 

purchase any parts needed to test, build or deliver anything to sales or the customer 

base.”

53 He also stated that 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 left Phixios.55 On October 14, 2016, Blake submitted an 

affidavit 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, she admitted that her 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 proof 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 notice 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 Jacobson 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 on June 30, 2016” 

pursuant to Section 219.64 The Demand Letter also seeks the inspection of books 

and records “(i) to communicate with other stockholders concerning the June 30 

special meeting; (ii) to value their stock; and (iii) to investigate mismanagement and 

wrongdoing” pursuant to Section 220(b).65 The Demand Letter asks for the 

following specific documents: 

 All 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

 Annual, quarterly and 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;

 Federal, state and local income tax returns and 

reports together with supporting documentation; 

 General ledger, check registry and related journal 

entries for the years 2013 to the present; 

 Schedule of current Company debt; 

 Schedule of compensation paid to the officers, 

managers and board of directors; 

 Payroll records from July 2013 to present; 

 Bank statements from July 2013 through the present 

for all Company bank accounts; 

 Documents constituting budgets, projections, or 

business plans; and 

 Documents relating to any actual, potential or 

contemplated transaction 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 voted to remove Jacobson as a director.67 On July 12, 2016, the Company held 

another special 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 present. Pl.’s Reply Br. 12-14. 

67 Joint Pre-Trial Stipulation 25, 28.
20

Agreement.68 Henry testified that he never received notice of the 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 plaintiff to this action.71 

II. ANALYSIS OF THE STOCK TRANSFER RESTRICTIONS

In this case, the Company alleges that the Stockholder Agreement was 

adopted as part of the bylaws of the Company long before Henry was issued stock 

in the Company. The Company further maintains that although 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 Stockholder Agreement are bylaws, 

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 the provisions in the Stockholder Agreement 

constituted bylaws because whether the restrictions were adopted through bylaws,

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 were 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 restrictions. 

In order to obtain a declaratory judgment, the plaintiff bears the burden of

proving 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 meaning.”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 certificates 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 

representing the security or securities so restricted . . . a 

restriction, even though permitted by 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

Therefore, 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 among 

stockholders and the corporation. An existing stockholder must affirmatively assent 

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 imposed 

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. 1981); EDWARD P. WELCH ET AL., FOLK ON THE DELAWARE 

GENERAL CORPORATION LAW § 202.06, at 6-20 (6th ed. 2016); R. FRANKLIN 

BALOTTI & JESSE A. FINKELSTEIN, DELAWARE LAW OF CORPORATIONS &

BUSINESS ORGANIZATIONS § 6.6, at 6-10 (3rd ed. 2013); FOLK, THE DELAWARE 

GENERAL CORPORATION LAW: A COMMENTARY AND ANALYSIS 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 

investment’s liquidity and value.”

83

 The phrasing in Section 202 was modeled after 

Section 8-204 of the Uniform Commercial Code,

84 to which the official 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 stockholder 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 the statute holistically to give it its intended purpose, the statute must 

be read to mean that an existing restriction on the transfer of a security is binding on 

subsequent purchasers of the securities if: (1) it is noted conspicuously on the

certificate representing the security; (2) the stockholder has actual knowledge of the 

restriction at the time he acquires 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 WELCH ET AL., supra note 81, § 202.06, at 6-19; FOLK, supra note 81.

85 UCC § 8-204. 

86 BALOTTI & FINKELSTEIN, 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 securities with the expectation that transfer is 

unrestricted because no restrictions are noted on the certificate representing the 

securities, 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 completely undercut the purpose of Section 202 to protect the 

stockholder’s bargained-for rights. 

1. Henry did not have actual knowledge of the restrictions

when he received Company stock

Phixios argues that Henry had actual knowledge of the restrictions 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, 

513-14 (D. Del. 1981); BALOTTI & FINKELSTEIN, 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 She 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 regarding the Stockholder 

Agreement. She 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 these 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 Agreement 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 

agreement could not be produced when other e-mails from the same day were 

produced. And 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 2015. 

2. Henry did not assent to the stock transfer restrictions

Both sides acknowledge that the Stockholder 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, as discussed above, to impose 

transfer restrictions on a stockholder who did not have actual knowledge of those 

restrictions when he became a stockholder and who did not affirmatively assent to

the restrictions 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

 Thus, the question becomes whether Henry affirmatively 

assented or became a party to a subsequent agreement containing these restrictions.99 

“The use of the internet as the 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, Inc. 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 the shareholder agrees to such a 

restriction or has actual knowledge of the restriction when the securities are issued 

to him.”); UCC § 8-204; WELCH 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. In 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 agreement 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. Storm105 case 

provides an example of the type of language that gives adequate notice of the 

modification of legal rights. There, the Court held that a clickwrap agreement 

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

 She also had 

 

101 Id. (quoting Vernon v. Qwest 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 outlined in 

the document” and that her “grant acceptance will be final once [she] click[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 the August 10, 2015 email. 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 restrictions contained 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 Agreement 

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 WL 
32

III. ANALYSIS OF THE BOOKS AND RECORDS CLAIM

A stockholder of a Delaware corporation may inspect the corporation’s books 

and records under Section 220 for any proper purpose. “A proper purpose shall 

mean a purpose reasonably related to such person’s interest as a stockholder,”

110 and 

“a stockholder 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 Chancery 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 plaintiff 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 conduct, 

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 

question, 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) communicate 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 argues that: (1) Henry’s true purpose is not to value his shares 

but to retaliate against the Company and to further his competitive scheme against 

the Company; (2) the inspection demand as it relates to the valuation of shares should 

be appropriately tailored; (3) Henry has failed 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

investigating 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 Has Alleged a Proper Purpose

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 making 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 points to e-mail exchanges regarding the FBO 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 was 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 Phixios would not be able 

to take advantage. The most damning e-mails refer to certain requests for proposals 

that require the company to be a woman-owned business.119 These e-mails prove 

improper competition, according to Phixios, because Phixios did not fit into this 

category, and it would not be able to take advantage of an opportunity limited to 

woman-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 

identifying potential sources of revenue for Phixios. 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 stopped before May 6, 2016 (Henry’s termination 

date), which comports 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 October 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 Phixios concedes, as it must, that communicating with other 

stockholders, valuing shares, and investigating mismanagement each states a proper 

purpose for inspection.

B. Henry Has Stated a Credible Basis to Infer Wrongdoing

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 possible 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, logic, 

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 with 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 conduct, 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 Is Entitled to the Documents 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 Bizzari 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 the purpose of valuing 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 valuing 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 Bizzari had ulterior motives,

including competing directly with the company, which are not present here, and 

Bizzari 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 the 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 ledger of a

corporation shall prepare and make, at least 10 days before 

every meeting of 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 germane 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 the meeting or voiding the 

results of the meeting.141

Phixios did not provide the stockholder lists because of its belief that Henry 

was attempting to harass and compete with the Company. I find these reasons 

insufficient to justify 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 request 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 respond to Phixios’s argument in his 

post-trial 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-trial brief.

142

 

Additionally, “[a]lthough . . . fee-shifting awards may be merited in exceptional 

cases in order to deter abusive litigation, avoid harassment, and protect the integrity 

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 out 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 the 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 void the 

results of the June 30, 2016 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 is not entitled to fee shifting. The parties shall submit 

an order consistent with this opinion within ten (10) days. 

IT IS SO ORDERED.