Court Opinion

ID: 9370461
Source: CourtListenerOpinion
Date Created: 2023-02-13 19:03:09.539677+00
Date Added: 2024-06-11T17:16:21.714916
License: Public Domain

COURT OF CHANCERY
                                  OF THE
                            STATE OF DELAWARE
 BONNIE W. DAVID                                             COURT OF CHANCERY COURTHOUSE
MASTER IN CHANCERY                                                    34 THE CIRCLE
                                                                  GEORGETOWN, DE 19947

                         Date Submitted: February 9, 2023
                         Final Report: February 13, 2023

  C. Barr Flinn, Esquire                   Michael A. Barlow, Esquire
  Elisabeth S. Bradley, Esquire            Daniel J. McBride, Esquire
  Hana Brajuskovic, Esquire                Eliezer Y. Feinstein, Esquire
  Young Conaway Stargatt &                 Abrams & Bayliss LLP
  Taylor LLP                               20 Montchanin Road, Suite 200
  1000 North King Street                   Wilmington, DE 19807
  Wilmington, DE 19801

       RE:   Handler v. Centerview Partners Holdings L.P.,
             C.A. No. 2022-0672-SG

 Dear Counsel:

       This letter addresses plaintiff David Handler’s Motion to Compel Production

 of Documents and Information from Defendant Centerview Partners Holdings L.P.

 (the “Motion”). For the reasons explained below, I recommend that the Motion be

 granted in part and denied in part. This is a final report pursuant to Court of

 Chancery Rule 144.

 I.    BACKGROUND

       On August 1, 2022, plaintiff David Handler (“Plaintiff,” or “Handler”), in his

 alleged capacity as a partner of Centerview Partners Holdings L.P. (“Defendant,” or
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 2 of 16

“Centerview Topco”), initiated this action seeking to compel the inspection of books

and records of Centerview Topco pursuant to 6 Del. C. § 17-305.

       According to his books and records complaint, Plaintiff joined Centerview in

2008 when he founded Centerview’s Tech Team and became a partner of

Centerview Topco’s wholly owned broker subsidiary, Centerview Partners LLC,

and Centerview’s advisory business, Centerview Partners Advisory Holdings LLC.

Verified Compl. to Compel Inspection of Books and Records ¶ 3, Dkt. No. 1

[hereinafter the “Handler Compl.”]. In 2012, Centerview founders Robert Pruzan

and Blair Effron “offered Handler a partnership with broader longer-term equity and

economics in the overall business to be held through” Centerview Topco, and the

parties thereafter operated under an oral partnership agreement. Handler Compl.

¶¶ 4-5. When, in 2021, Pruzan and Effron sought to renegotiate that arrangement,

Handler served his demand, seeking to inspect eighteen categories of books and

records of Centerview Topco.1 Id. ¶¶ 7, 29.

1
  According to his demand, Plaintiff seeks books and records in order to “determine the
amount of and value of his equity and partnership interests in the Companies;” “determine
whether he has been properly compensated and whether he has received proper
disbursements based on his interests in these entities;” “determine the rights associated
with his equity and partnership interests in the Companies;” “evaluate how the revenues,
profits, and excess profits or Investment Capital of Centerview have been calculated and
distributed and whether he has been receiving his rightful share of each;” “gain clarity on
the function of, funding of, and value of his Priority Capital Accounts;” and “ascertain all
this information to, in part, meaningfully respond to the other partners’ request for a
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 3 of 16

      On August 29, 2022, Centerview Topco filed its own complaint against

Handler in a related action, Centerview Partners Holdings L.P. v. Handler, C.A. No.

2022-0767-SG (the “Substantive Action”), seeking, among other things, a

declaratory judgment that Handler “is not and never has been a partner (limited or

otherwise) of” Centerview Topco. Centerview Partners Holdings L.P. v. Handler,

C.A. No. 2022-0767-SG, Verified Complaint, Dkt. No. 1, “Prayer for Relief”

[hereinafter the “Centerview Compl.”]. The complaint in that action alleges that

between 2012 and 2013, the parties negotiated a draft partnership agreement, but

Handler refused to sign it. Id. ¶ 2. A partnership agreement for Centerview Topco

(the “L.P. Agreement”) was later finalized and executed in November 2013 by

Pruzan and Effron, but not Handler. Id. ¶¶ 42, 44-45. According to Centerview

Topco’s complaint, between 2012 and 2021, “Handler never claimed to be (or acted

as if he was) a Topco limited partner,” nor did he receive a Schedule K-1 federal tax

form reporting income, losses and dividends for Centerview Topco,2 as Centerview

Topco’s other partners received in that period. Id. ¶ 6; Def.’s Opp’n to Pl.’s Mot. to

Compel ¶ 4, Dkt. No. 66 [hereinafter “Opp’n”].

proposal to resolve certain disputes and issues in the partnership.” See Handler Compl.
¶ 26.
2
 Instead, Handler received Schedule K-1 forms for Centerview Partners Advisory
Holdings LLC. Centerview Compl. ¶ 6.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 4 of 16

      In the present books and records action, Defendant repeats its arguments that

Plaintiff is not a partner of Centerview Topco, and therefore lacks standing to obtain

the partnership’s books and records. Opp’n ¶ 7.

      On November 3, 2022, Vice Chancellor Glasscock held a scheduling

conference, at which he determined that the most efficient way to stage the related

proceedings was to stay the Substantive Action and bifurcate this summary

proceeding in order to first resolve the predicate issue of Plaintiff’s partner status in

Centerview Topco. Nov. 3, 2022 Scheduling Conference Transcript 8:6-9:18, Dkt.

No. 43 [hereinafter “Tr.”]. A hearing to resolve Plaintiff’s partner status and

argument on Defendant’s Motion for Judgment on the Pleadings is scheduled for

April 5, 2023.

      On January 9, 2023, Plaintiff moved to compel the production of various

categories of documents responsive to Plaintiff’s Request for Production Nos. 1, 2,

3 and 7, as well as responses to Plaintiff’s Interrogatory Nos. 1, 2, 3 and 4. Pl.’s

Mot. to Compel Production of Documents and Information from Def. 1, Dkt. No. 61

[hereinafter “Mot.”].
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 5 of 16

II.   ANALYSIS

      Court of Chancery Rule 26(b)(1) provides that “[p]arties may obtain

discovery regarding any non-privileged matter that is relevant to any party’s claim

or defense and proportional to the needs of the case ….” Ct. Ch. R. 26(b)(1). While

the scope of discovery under Rule 26 is broad, the Court also “has broad discretion

in determining the scope of discovery.” Wei v. Zoox, Inc., 268 A.3d 1207, 1212

(Del. Ch. 2022); see also Ct. Ch. R. 26(b).

      Compared to plenary proceedings before this Court, the scope of discovery

permitted in books and records actions under 6 Del. C. § 17-305 and its corporate

analog, 8 Del. C. § 220, is more limited. “Because the issues in a books and records

case are narrow, discovery is necessarily narrow as well.”        Maitland v. Int’l

Registries, LLC, 2008 WL 2440521, at *2 (Del. Ch. June 6, 2008). Parties may not

use discovery to “expand a books-and-records action into a plenary proceeding ….”

Lebanon Cnty. Employees’ Ret. Fund v. Amerisourcebergen Corp., 2020 WL

132752, at *26 (Del. Ch. Jan. 13, 2020), aff’d, 243 A.3d 417 (Del. 2020).

      Although the issues presented in a books and records action typically are

narrow, discovery needs nevertheless “may vary with the nature of the defenses that

the company interposes.” Chammas v. NavLink, Inc., 2015 WL 5121095, at *1 (Del.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 6 of 16

Ch. Aug. 27, 2015). Here, a predicate issue to determining Plaintiff’s entitlement to

books and records is whether he is, in fact, a partner of Centerview Topco. While

the Court “generally relies on the corporation’s existing stock ledger” to summarily

resolve stockholder status in a Section 220 proceeding, Knott Partners L.P. v.

Telepathy Labs, Inc., 2021 WL 5493092, at *4 (Del. Ch. Nov. 23, 2021), Centerview

Topco does not maintain a similar “ledger” of partnership interests.3 As a result,

some factual inquiry into Plaintiff’s alleged status as a partner of Centerview Topco

is needed; hence Vice Chancellor Glasscock’s decision to bifurcate the action and

resolve that threshold issue through “some discovery and perhaps an evidentiary

hearing.” Tr. at 9:9. However, resolution of Plaintiff’s broad discovery requests

must also take into account the nature of this summary books and records action, for

which a hearing is scheduled in less than two months.

3
  When asked at the November 3, 2022 scheduling conference whether Centerview Topco
maintained a list of its partners, Defendant’s counsel represented to Vice Chancellor
Glasscock that “[t]here is a written partnership agreement, and Mr. Handler is not on that.”
Tr. at 14:9-10. Defendant now argues that “Topco’s primary method for tracking its
equityholders is by issuing each individual who holds Topco equity an annual K-1 showing
that terminal value equity interest and corresponding tax basis,” and suggests that discovery
should be limited to production of those documents. Opp’n ¶ 17. At this stage of the
proceedings, it appears that Centerview Topco does not maintain one centralized “ledger”
of partnership interests and, as Vice Chancellor Glasscock already ruled, discovery into
Plaintiff’s status as a partner is needed.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 7 of 16

      A.       Request for Production No. 3.
      The Motion focuses primarily on Plaintiff’s Request for Production No. 3,

which seeks:

               All documents and communications concerning the status of
               Robert Pruzan, Blair Effron (or any entity in which Pruzan and/or
               Effron hold a beneficial interest), David Handler, David St. Jean,
               Mark Robinson, and/or Alan Hartman as an employee, partner,
               equity holder, or a member of any Centerview entity from 2008
               to 2022, including without limitation all accounting records,
               ledgers, and tax records and filings identifying equity and capital
               holders and contributors.

Exhibits 1-6 to Pl.’s Mot. to Compel at 22-23 (pages numbered sequentially based

on PDF), Dkt. No. 61 [hereinafter “Mot. Exhibits”]. Specifically, the Motion seeks

(1) communications about Plaintiff’s status as a partner of Centerview Topco; (2)

the L.P. Agreement, including all schedules, attachments and amendments; (3) any

documents listing the partners of Centerview Topco; and (4) accounting and tax

records for Centerview Topco partners, and related communications.

               1. Communications About Plaintiff’s Partner Status.

      The Motion seeks to compel the production of communications about

Plaintiff’s status at Centerview, including communications reflecting the parties’

course of conduct demonstrating whether Plaintiff was treated as a partner of

Centerview Topco. Mot. ¶¶ 1, 16, 23.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 8 of 16

      Defendant has not refused to produce communications about Plaintiff’s

partner status, which is the central issue to be addressed at the April 5 hearing.

However, in responding to Plaintiff’s request, Defendant unilaterally limited its

document review and production to data from four custodians, restricted by

undisclosed search terms and a date range of January 2012 (when Plaintiff and

Centerview Topco first exchanged a draft partnership agreement) through May 2014

(when Plaintiff purportedly refused to sign it).4 Opp’n ¶ 13. Plaintiff contends that

“[a]ll communications in Defendant’s possession concerning Plaintiff’s status as

partner during the time in which he alleges he was a partner” – from 2008 through

the present – “are relevant and should be produced.” Mot. ¶ 20 (emphasis added).

      Defendant argues that communications addressing Plaintiff’s partner status

are most likely to fall within the time periods during which the parties negotiated the

partnership agreement. That is not unreasonable, but Plaintiff is also correct that

documents showing whether Plaintiff was treated as a Centerview Topco partner

after those negotiations also may be probative of his partner status. Because the

parties have not exchanged search terms, it is difficult to assess the burden associated

4
 After the Motion was filed, Defendant also “agree[d] to expand the date range of its email
review from 2012 through 2022 for one of the categories of documents Handler seeks –
namely, documents concerning Handler’s annual compensation negotiations.” Opp’n ¶ 27.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 9 of 16

with either position. Often, parties resolve similar disagreements by negotiating

multiple sets of search terms to be applied across different date ranges, using more

targeted terms for longer time periods. I believe that approach is appropriate here.

Accordingly, within 24 hours, Defendant should disclose to Plaintiff the search

terms and date range(s) it has already applied to govern its review, and provide a

corresponding hit report. Plaintiff should then inform Defendant whether the search

terms and date range(s) applied are acceptable, or propose additions if appropriate.

Defendant should then provide a hit report for Plaintiff’s proposal. If the parties still

cannot agree, they should submit the hit reports for the Court’s consideration.

             2. The L.P. Agreement, Schedules, Attachments and Amendments.

      Plaintiff also seeks a “complete copy” of the L.P. Agreement, including all

schedules, attachments and amendments. Mot. ¶ 2.

      When asked at the November 3, 2022 scheduling conference whether

Centerview Topco maintained a list of its partners, Defendant’s counsel pointed to

the L.P. Agreement, claiming “Mr. Handler is not on that.”              Tr. at 14:4-10.

According to the Motion, after making that representation, Defendant selectively

produced a copy of the L.P. Agreement to Plaintiff, but withheld the referenced

schedules (including those identifying “Interests in Operating Proceeds,” “Class B
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 10 of 16

Units” and “Priority Capital Amounts”), purportedly because those schedules

existed only as drafts. Mot. ¶ 4.

      At argument, the parties clarified that at least some draft schedules have now

been produced. Defendant’s counsel explained that Defendant has produced drafts

of the L.P. Agreement and its schedules that were created “closest in time to the

critical dates,” namely November and December 2012.

      The L.P. Agreement and all schedules, attachments and amendments – draft

or final – are plainly relevant to the parties’ claims and defenses. Defendant has not

argued that it would be burdensome to produce them, nor has it asserted a claim of

privilege over them. Therefore, to the extent Defendant has not already produced

all final versions of the L.P. Agreement, schedules, attachments and any

amendments from 2012 through 2022, it must do so.5 To the extent Defendants’

review of electronic communications uncovers non-privileged drafts of any of those

documents, whether or not Plaintiff is on them, they should be produced as well.

             3. Documents Listing Centerview Topco Partners.

      Plaintiff also argues that documents concerning Plaintiff’s status as a partner

of Centerview Topco must include “[a]ny list of partners of Defendant in

5
 Latest-in-time “draft” schedules or attachments that are associated with a final L.P.
Agreement must also be produced.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 11 of 16

Defendant’s possession, whether it lists Plaintiff or not ….” Mot. ¶ 19. I agree that

any document listing Centerview Topco’s partners, whether or not Plaintiff appears

on that list, is highly relevant to whether Plaintiff was, in fact, a partner, and must

be produced.

             4. Accounting and Tax Records for Centerview Topco Partners.

      In addition to Plaintiff’s partner status, Plaintiff’s Request for Production No.

3 seeks documents, including communications, concerning the partner status of

Pruzan, Effron, St. Jean, Mark Robinson and Alan Hartman,6 “including without

limitation all accounting records, ledgers, and tax records and filings identifying

equity and capital holders and contributors.” Mot. Exhibits at 22-23.

      According to Plaintiff, in order to assess whether Plaintiff was treated

similarly to, or differently from, other Centerview Topco partners or equityholders,7

Plaintiff should be permitted to compare records for his accounts against documents

showing how those other individuals were accounted for and/or taxed. Mot. ¶¶ 21-

6
 According to the Motion, Mark Robinson and Alan Hartman became partners of
Centerview Topco in 2014. Mot. ¶ 13.
7
  As noted above, Defendant argues that the Schedule K-1 forms issued to Centerview
Topco’s “equityholders” – Pruzan, Effron, Robinson and Hartman – are the partnership
analog of a stock ledger. At argument on the Motion, however, Defendant clarified its
position that the only partners (as opposed to equityholders) of Centerview Topco are
Pruzan and Effron.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 12 of 16

22. In response, Defendant has agreed to produce Schedule K-1 tax forms issued to

each Centerview Topco partner or equityholder from 2012 through 2022, but

otherwise objects to producing documents responsive to this request, which it argues

are the same documents sought in Plaintiff’s books and records demand.8 Opp’n ¶

18.

      In view of the broad discovery permitted by Rule 26, documents

demonstrating whether Plaintiff was treated in certain respects like other Centerview

Topco partners may have some relevance to Plaintiff’s partner status. As a practical

matter, however, time constraints inherent in a summary schedule and the narrow

focus of a books and records action necessarily limit the scope of discovery. With

those considerations in mind, Defendants should produce, for each year from 2012

through 2022, (1) documents sufficient to show on which Centerview entity’s books

and records the Priority Capital Amounts or “Accounts” held by Plaintiff, Pruzan,

Effron, St. Jean, Hartman and Robinson were recorded; (2) Schedule K-1 forms sent

to Pruzan, Effron, St. Jean, Hartman or Robinson from Centerview Partners

Advisory Holdings LLC, if any exist; and (3) documents sufficient to show whether

Pruzan, Effron, St. Jean, Hartman and Robinson filed Section 83(b) elections with

8
  Defendant also agreed to provide a verified interrogatory response identifying the
individuals who received a Schedule K-1 from Centerview Topco from 2012 through 2022.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 13 of 16

the IRS, to the extent such documents are in Defendant’s possession. Beyond that,

ordering broad searches to unearth communications concerning accounting and tax

issues involving other Centerview Topco partners or equityholders is not

proportional to the needs of the case, which must remain a narrowly focused,

summary proceeding. See Pearl City Elevator, Inc. v. Gieseke, 2020 WL 5640268,

at *2 (Del. Ch. Sept. 21, 2020) (explaining that “discovery in summary proceedings

is necessarily (and appropriately) limited,” weighing “the relevance versus the

burden of producing documents” and denying discovery requests where the

relevance of the documents sought was “minimal at best” and plaintiff would be

receiving the “documents related to the core issues in dispute”).

      In opposing Plaintiff’s requests, Defendant argues that some of these

documents may overlap with the eighteen broad categories of documents sought in

Plaintiff’s books and records demand. It is true that a plaintiff may not bypass the

merits of her demand by requesting in discovery the very documents she seeks as

final relief. See, e.g., Maitland, 2008 WL 2440521, at *2 (limiting discovery in

books and records action where it would “effectively … grant [plaintiff] final relief

in this proceeding”); Fitzgerald v. Cantor, 1998 WL 842278, at *1 (Del. Ch. Nov.

16, 1998) (denying motion to compel where “[t]he documents sought by Defendants

in these requests [we]re the same documents underlying Defendants’ books and
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 14 of 16

records claim”). However, as Vice Chancellor Glasscock has already ruled, Plaintiff

is entitled to some discovery into his partner status; the documents, as limited above,

are a small subset of those sought in Plaintiff’s far broader books and records

demand; and any specific concerns about sharing sensitive documents with Plaintiff

could be mitigated through the two-tiered confidentiality stipulation entered in this

action.

      B.     Request for Production Nos. 1 and 2.

      The Motion also seeks to compel documents responsive to Plaintiff’s

Request for Production Nos. 1 and 2, which request “any actual, contemplated, or

negotiated employment agreements, partnership agreements, LLC agreements, side

letters, separation or settlement agreements, or other agreements concerning any

Centerview members, equity holders, and/or partners;” “any such agreements

concerning any of Robert Pruzan, Blair Effron (or any entity in which Pruzan

and/or Effron hold a beneficial interest), David Handler, David St. Jean, Mark

Robinson, and/or Alan Hartman;” and all communications regarding the same.

Mot. Exhibits at 22.

      In the Motion, Plaintiff argues, without explanation, that documents

responsive to these requests are “obviously relevant.” Mot. ¶ 19. Aside from L.P.

Agreements between these individuals and Centerview Topco (which, as explained
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 15 of 16

above, Defendant must produce), these broad requests for other partners’

agreements with Centerview seem more designed to support the purposes in

Plaintiff’s demand than to discover information relevant to his partner status.

Accordingly, Plaintiff’s motion to compel documents responsive to Document

Request Nos. 1 and 2 is denied.9

      C.     Request for Production No. 7.
      Plaintiff also seeks to compel the production of documents responsive to

Request for Production No. 7, which requests “documents sufficient to identify all

partners, members, and equity holders in each Centerview entity from 2008

through 2022, including any changes in equity ownership during that period.”

Mot. Exhibits at 23 (emphasis added). To the extent this request seeks information

about other partners’ or equityholders’ interests in Centerview Topco or

Centerview Partners Advisory Holdings LLC, it is fairly covered by the other

requests addressed above. To the extent Plaintiff seeks information about other

Centerview entities, he has not explained how such information is either relevant

9
 For these same reasons, Plaintiff’s motion to compel responses to Interrogatory Nos. 1
and 2 is also denied.
Handler v. Centerview Partners Holdings L.P.,
C.A. No. 2022-0672-SG
February 13, 2023
Page 16 of 16

or proportional to the needs of the case. Accordingly, Plaintiff’s motion to compel

documents responsive to Document Request No. 7 is denied.10

III.   CONCLUSION

       For the reasons explained above, I recommend that the Motion be granted in

part and denied in part. This is a final report pursuant to Court of Chancery Rule

144.

                                               Sincerely,

                                               /s/ Bonnie W. David

                                               Bonnie W. David
                                               Master in Chancery

cc:    All counsel of record (by File & ServeXpress)

10
  For these same reasons, Plaintiff’s motion to compel responses to Interrogatory Nos. 3
and 4, which seek information about other Centerview entities, is also denied.