Court Opinion

ID: 4299289
Source: CourtListenerOpinion
Date Created: 2018-07-30 20:06:07.194921+00
Date Added: 2024-06-11T14:42:06.098399
License: Public Domain

THE COURT OF CHANCERY OF THE STATE OF DELAWARE

MUDRICK CAPITAL MANAGEMENT, L.P., )
                                  )
        Plaintiff,                )
                                  )
    v.                            )                  C.A. No. 2018-0351-TMR
                                  )
GLOBALSTAR, INC.,                 )
                                  )
        Defendant.                )

                         MEMORANDUM OPINION

                         Date Submitted: July 16, 2018
                          Date Decided: July 30, 2018

A. Thompson Bayliss, Michael A. Barlow, and Adam K. Schulman, ABRAMS &
BAYLISS LLP, Wilmington, Delaware; Jordan Goldstein, David Elsberg, Joshua
Margolin, and Ron Krock, SELENDY & GAY PLLC, New York, New York;
Attorneys for Plaintiff.
Robert S. Saunders, Joseph O. Larkin, Arthur R. Bookout, Matthew P. Majarian, and
Stephen J. Della Penna, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
Wilmington, Delaware; Albert L. Hogan III, SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP, Chicago, Illinois; Attorneys for Defendant.

MONTGOMERY-REEVES, Vice Chancellor.
      This case involves a stockholder demand to inspect the books and records of

Globalstar, Inc. (“Globalstar” or the “Company”). On April 25, 2018, Globalstar

announced its merger with Thermo Acquisitions, Inc. (“Thermo”).              In this

transaction, Globalstar will acquire assets controlled or owned by the CEO and

controlling stockholder of the Company, James Monroe.           As a result of the

transaction, the controlling stockholder’s interest in the surviving entity would

increase from 53% to over 80%, while all minority stockholders would be severely

diluted.

      Concerned with both the merger process and stock dilution, Mudrick Capital

Management, L.P. (“Mudrick Capital”), the Company’s largest minority

stockholder, sent a demand to inspect the books and records of the Company on May

4, 2018. The demand included seven purposes and fourteen categories of requested

documents. Globalstar rejected the demand and produced no documents. This

litigation ensued.

      In an effort to resolve this litigation, the parties significantly narrowed the

issues. First, Globalstar stipulates that Mudrick Capital’s demand letter complies

with the form and manner requirements of 8 Del. C. § 220 and that Mudrick Capital

has standing to pursue this action. Globalstar also stipulates that six of the seven

purposes listed in the demand state a proper purpose to obtain books and records

                                         1
under 8 Del. C. § 220. 1 Second, Mudrick Capital narrowed its document requests.

Third, Globalstar produced 188 documents pre-trial and an additional 1,100

documents post-trial in response to the demand.

      Unfortunately, the parties’ efforts to resolve the litigation were unsuccessful,

and Mudrick Capital continues to seek (1) emails and other communications related

to Mudrick Capital’s narrowed document requests from four custodians;

(2) documents and communications related to the valuation of one of the merger

assets, FiberLight, LLC, and the 2016 failed sale of FiberLight; and (3) draft

materials, including (a) drafts of board and special committee minutes and

(b) internal drafts of the merger agreement, term sheets, and the letter of intent.

Globalstar responds that these documents are not necessary because the documents

produced provide Mudrick Capital with sufficient information to address Mudrick

Capital’s purposes.

      For the reasons stated in this memorandum opinion, I conclude that Mudrick

Capital has shown that some, but not all, of the books and records it requests are

necessary to address its purposes. I hold that (1) Plaintiff may inspect (a) certain

emails and other communications and (b) documents and communications related to

1
      One purpose remains disputed. The parties agree that I need not address whether
      the seventh purpose is proper because none of the demanded documents are
      exclusive to that purpose.

                                          2
the valuation of FiberLight and the 2016 failed sale of FiberLight; (2) Plaintiff may

not inspect Draft Materials; 2 and (3) Defendant must produce a privilege log that

reflects documents withheld or redacted for any privilege for all productions,

including past productions.

I.    BACKGROUND
      The facts in this opinion reflect my findings based on admitted allegations in

the pleadings, stipulated facts, trial testimony, and 182 documentary exhibits. I grant

the evidence the weight and credibility that I find it deserves.3

      A.     The Proposed Merger

             1.     Events before the merger announcement
      Defendant Globalstar is a Delaware corporation with its principal executive

offices in Louisiana. 4     Globalstar provides “mobile satellite voice and data

services,”5 and the Company has rights to use wireless spectrum bandwidth.6

2
      “Draft Materials,” as used in this Memorandum Opinion, means only those draft
      materials that remain in dispute. For all other draft materials, the existing
      agreements of the parties remain in effect. See, e.g., infra p. 17.
3
      Citations to the trial transcript are in the form “Tr. #.” Joint Trial Exhibits are cited
      as “JX #.” Facts drawn from the Joint Pre-Trial Stipulation and Order are cited as
      “PTO ¶ #.” Citations to the parties’ briefs are to their post-trial briefs.
4
      PTO ¶ 30.
5
      Id. ¶ 31.
6
      Tr. 10:23-11:1.

                                              3
Wireless spectrum is the bandwidth where wi-fi signal is transmitted.7 As more

technology uses wi-fi, this unique wireless spectrum will become scarcer and, thus,

more valuable. 8

      Globalstar is controlled by non-party and majority stockholder James (Jay)

Monroe III. 9 He currently owns approximately 53% of Globalstar’s shares through

entities he controls. 10 He also serves as the Executive Chairperson of the Board and

Chief Executive Officer of Globalstar.11

      Plaintiff Mudrick Capital is an SEC-registered investment advisor

specializing in distressed companies that it believes are undervalued by the stock

market.12 Mudrick Capital has been a stockholder of Globalstar since 2014 and is

currently the largest minority stockholder, beneficially owning approximately 5.6%

of Globalstar’s outstanding voting capital stock.13

7
      Tr. 63:23-64:12.
8
      Tr. 10:23-11:4, 156:3-7.
9
      See PTO ¶ 33.
10
      Id.
11
      Id.
12
      Id. at ¶ 26; Tr. 7:12-8:12.
13
      PTO ¶¶ 27-29; Tr. 8:24-9:18.

                                           4
      Mudrick Capital’s evaluation of Globalstar as an investment is largely based

on the potential increase in value of wireless spectrum rights over time. 14 Using the

estimated value of Globalstar’s assets, including its wireless spectrum rights,

Mudrick Capital valued the stock at more than $6.60 per share as of January 2017.15

And Monroe16 agreed with this value during the January 2017 investor call. 17

      Despite the possibly enormous potential of Globalstar’s wireless spectrum

rights, the Company has had liquidity issues due to a loan that requires large

payments every year. 18 To resolve the cash flow problems created by the loan,

Globalstar has raised capital through equity offerings in the past.19 But the 2017

offering was not sufficient to resolve the continuing problem. Globalstar projected

14
      Tr. 11:1-4.
15
      JX 3, at 13-14.
16
      My usual practice is to identify individuals by their last names without honorifics.
      In this case, the risk of confusion between Mr. Mudrick, the biological person, and
      Plaintiff Mudrick Capital Management, L.P., warrants an exception. The same risk
      does not exist for others, who are identified without honorifics. No disrespect is
      intended.
17
      JX 3, at 13 (Mudrick: The Company has “an equity value of $8.7 billion, which is
      $6.60 per share. Does all that math sound right?” Monroe: “Yes, I understand the
      math and I don’t disagree with any of it.”).
18
      Tr. 18:2-5.
19
      See, e.g., JX 16, at 6.

                                           5
that it would have insufficient funds to meet its loan obligations through the end of

2018. 20

       Aware of these liquidity issues, Mudrick Capital sent a proposal to the

Globalstar Board of Directors (the “Board”).21 Mudrick Capital offered to lend

Globalstar $150 million in a nonconvertible financing instrument to (1) enable

Globalstar to access liquidity to pay amounts due on the loan through at least the end

of 2019 and (2) prevent Globalstar from diluting the ownership of minority

stockholders through future equity offerings.22 In addition to sending the offer to

the Board members, Mudrick Capital publicly filed it with the SEC in an effort to

prevent Globalstar stock value from continuing to decline, as it had done for the last

three calendar quarters.23 Globalstar did not substantively respond to Mudrick

Capital’s offer. 24

20
       Tr. 143:7-19.
21
       JX 31, at 1.
22
       Id. at 2-3; Tr. 17:10-18:10.
23
       JX 30, at 16, 23-24; Tr. 188:13-190:2.
24
       Tr. 20:9-21.

                                            6
                2.    The merger announcement and structure of the proposed
                      merger
      The Globalstar Board created a special committee of four purportedly

independent directors (the “Special Committee”) to investigate, negotiate, and

approve (or disapprove) a merger transaction with Thermo, an entity controlled by

Monroe. 25 The Special Committee and the Board unanimously approved the terms

of the Agreement and Plan of Merger dated April 24, 2018 (the “Merger

Agreement”).26 On April 25, 2018, Globalstar issued a press release announcing its

merger with Thermo (the “Merger”), valued at approximately $1.645 billion.27 As

part of the Merger, Thermo will merge with a wholly owned subsidiary of

Globalstar.28 Globalstar will receive the following assets:

            • Nearly 100% of the outstanding membership interests of FiberLight; 29

            • $100 million in cash; 30

            • 15.5 million shares of common stock in CenturyLink, Inc.;31

25
      JX 14, at 1.
26
      PTO ¶ 51.
27
      JX 38, at 78.
28
      Id. at 12.
29
      See id.
30
      Id.
31
      Id.; Tr. 22:17-22, 54:23-24.

                                          7
            • Certain property in Covington, Louisiana, together with development
              and construction contracts relating to improvements of the property and
              sufficient cash to complete improvements on the property; 32 and

            • Minority interests in both Pivotal Commware, Inc., and Orion Labs,
              Inc.33

According to the press release announcing the Merger Agreement, the summed

values of the cash ($100 million), the CenturyLink stock ($275 million), and the

Louisiana property and the minority interests in Pivotal Commware, Inc., and Orion

Labs, Inc. (combined value of $25 million) is $400 million.34 Simple arithmetic and

logic indicate that the value assigned to FiberLight is $1.245 billion.

      Thermo stockholders will receive “Globalstar common stock valued at”

$1.645 billion. 35 The number of shares to be issued in the Merger is determined

using the volume-weighted average market price of Globalstar common stock for

the twenty trading days immediately before the closing.36 The price of the stock is

limited by a collar; the price cannot be less than 80% or more than 120% of the

volume-weighted average market price of Globalstar common stock for the twenty

32
      JX 38, at 12.
33
      PTO ¶ 48; see JX 38, at 12.
34
      JX 38, at 78.
35
      Id.
36
      PTO ¶ 49.

                                           8
trading days immediately before the signing date of the Merger Agreement, or April

24, 2018.37 Therefore, if there is a notable increase (or decrease) in the value of

Globalstar stock during the twenty days before closing, this increase (or decrease) is

effectively capped (or floored).

      Jason Mudrick, the President and Chief Investment Officer of Mudrick

Capital, testified that the price is limited to a range of $0.52-0.825.38 Using this

range, Globalstar must issue a minimum of approximately 2 billion shares and up to

a maximum of approximately 3.2 billion shares. 39 As of February 16, 2018,

approximately 1.3 billion shares of Globalstar voting common stock are

outstanding. 40 The Merger will more than double—and possibly triple—the number

of outstanding shares of Globalstar common stock.

      Under the terms of the Merger Agreement, as the majority stockholder of

Thermo, Monroe will receive the majority of the newly issued Globalstar stock.41

37
      Id.
38
      Tr. 60:8-15, 66:9-19. Using data from JX 58 (GSAT Historical Price/Volume Data),
      this Court calculates the range to be $0.55-0.83. The difference between this
      calculation and Mr. Mudrick’s testimony has no impact on the parties’ arguments
      or this Court’s findings.
39
      These estimates are calculated by dividing 1.645 billion by 0.52 and 0.825,
      respectively.
40
      JX 27, at 33.
41
      See JX 38, at 78, 80.

                                          9
He currently owns, through entities he controls, approximately 53% of Globalstar

stock. 42 After the Merger, he will own 83-87% of Globalstar stock. 43 In contrast,

the minority stockholders’ percentages of ownership will be diluted. For example,

Mudrick Capital currently owns approximately 5.6% of Globalstar stock;44 after the

Merger, its ownership will be reduced to approximately 2%. 45 After the Merger

closes, Globalstar “expects to initiate” a rights offering of up to $100 million for

minority stockholders. 46

             3.       Mudrick Capital’s response to the proposed merger
      Mr. Mudrick learned of the Merger on April 24, 2018, in a meeting with

Monroe, Kyle Pickens (Vice President of Strategy & Communications), Tim Taylor

(Vice President of Finance, Business Operations & Strategy), and Jim Lynch (CEO

of FiberLight).47 Mr. Mudrick immediately had concerns about the interested nature

42
      Id. at 80; PTO ¶ 33.
43
      JX 38, at 80.
44
      PTO ¶ 27.
45
      Tr. 66:24-67:4.
46
      JX 38, at 80.
47
      Tr. 21:2-23:2.

                                        10
of the Merger for Monroe and also about Globalstar using stock to pay for the

transaction at a time when Mr. Mudrick believed the stock was undervalued.48

      Mr. Mudrick contacted Moelis & Company (“Moelis”), the investment bank

that issued the fairness opinion.49 He spoke with Lawrence Chu from Moelis,

someone whom Mr. Mudrick knows both personally and professionally. 50 Chu

indicated that he did not interact directly with Monroe, but instead with the Special

Committee. 51 Chu suggested that the members of the Special Committee were not

truly independent because Monroe, as the controlling stockholder, handpicks the

board members. 52 Chu also informed Mr. Mudrick that he (Chu) had asked the

Special Committee to reach out to Mudrick Capital regarding its financing offer and

that he was surprised to hear that the Special Committee had not done so.53

48
      Tr. 23:10-15; JX 31, at 2.
49
      Tr. 24:17-25:3.
50
      Tr. 26:5-8.
51
      Tr. 26:14-16.
52
      Tr. 26:19-27:10.
53
      Tr. 27:13-22.

                                         11
      A few days later, on April 28, 2018, Mr. Mudrick met with Globalstar

representatives, including Monroe.54 During this meeting, Mr. Mudrick learned that

Globalstar had been planning this Merger for “a little over a year.” 55

      Later that same day, Mr. Mudrick met alone with Taylor.56 He asked Taylor

why the Special Committee had not asked for a majority-of-the-minority vote to

protect the minority stockholders.57 Taylor responded that the deal was more certain

to get approval without such a provision.58

             4.       Other responses to the proposed merger
      On April 25, 2018, the day of the Merger announcement, the price of

Globalstar stock dropped from $0.70 to $0.65.59 On the date of the trial, the stock

price was $0.47. 60 Currently, Globalstar shares are trading in the range of $0.40 to

$0.46 per share. But it is not clear whether the stock price decrease is a response to

54
      Tr. 29:16-31:15.
55
      Tr. 31:6-8.
56
      Tr. 32:15-18.
57
      Tr. 32:20-21.
58
      Tr. 32:22-33:16.
59
      JX 58, at 22.
60
      Tr. 28:7.

                                          12
the Merger or to something else entirely, as the stock price has been declining over

the past twelve months.

      On April 26, 2018, the day after the Merger announcement, Cowen, an

independent investment research firm, 61 issued a report titled “An Expensive

Solution to Globalstar’s Liquidity Woe’s.” 62 Cowen’s top-line summary states:

               Yesterday morning, Globalstar announced plans to buy
               assets controlled by its Chairman and CEO, worth about
               $1 billion on our estimates, for a nominal $1.65 billion
               worth of shares many believe were already undervalued.
               The best that can be said is that it’s an incredibly expensive
               fix to the company’s liquidity woes; we expect
               considerable push back from Globalstar’s non-affiliated
               shareholders.63

The report specifically notes that minority stockholders “would see their percentage

ownership reduced to little more than a third of today’s ownership.” 64 The report

also assigns a net equity value of $336 million to FiberLight,65 a stark difference

from the $1.245 billion indicated by the press release.66

61
      Tr. 49:6.
62
      JX 44.
63
      Id. at 1.
64
      Id.
65
      Id.
66
      See supra p. 8.

                                            13
      B.       Mudrick Capital’s Demand for Books and Records, Globalstar’s
               Response to the Demand, and This Litigation
      On May 4, 2018, Mudrick Capital sent its demand for books and records to

Globalstar’s Corporate Secretary and its Registered Agent. 67 The demand listed

seven purposes for requesting books and records and sought fourteen categories of

documents, not including subcategories.68

      On May 11, 2018, Globalstar responded to Mudrick Capital’s demand, stating

that it “fail[ed] to state a proper purpose for inspecting the Company’s books and

records because it d[id] not demonstrate that Mudrick [Capital] ha[d] a credible basis

for suspecting wrongdoing by the directors or officers of Globalstar.” 69 It also stated

that “the requests in the Demand [were] not ‘circumscribed with rifled precision’

nor ‘essential and sufficient’ to the stated purpose of the Demand.” 70 But Globalstar

offered to meet and confer to discuss the Company’s “willingness” to provide

Mudrick Capital with documents.71

67
      JX 57.
68
      Id. at 1-2, 6-8.
69
      JX 60, at 1.
70
      Id. at 3.
71
      Id. at 4.

                                          14
      On May 17, 2018, Mudrick Capital filed its Verified Complaint for Inspection

of Books and Records. 72

      On June 25, 2018, eight days before trial, Globalstar produced 188 documents

to Mudrick Capital in response to the Section 220 Demand. 73

      On June 28, 2018, the parties filed their Joint Pre-Trial Stipulation and Order

(“Pre-Trial Order”).74 In this document, Globalstar stipulates that six of the seven

purposes in Mudrick Capital’s demand are proper.75 The undisputed purposes relate

to investigating possible breaches of fiduciary duty by the Board and Special

Committee concerning the Merger, the Merger Agreement, and the related voting

agreement; evaluating the fairness of the Merger and the independence of the

members of the Special Committee; valuing Mudrick Capital’s stock; and

communicating with other minority stockholders regarding litigation and other

potential corrective measures. 76 Only one purpose remains disputed, but the parties

72
      JX 73.
73
      Pl.’s Opening Br. 1.
74
      JX 122.
75
      PTO ¶ 63.
76
      Id. ¶ 3.

                                        15
agree that I need not resolve this dispute because none of the demanded documents

are exclusive to this purpose.77

      In the Pre-Trial Order, Plaintiff narrows its original fourteen requests for

books and records by (1) removing its request for FiberLight valuation materials

related to past litigation; (2) limiting its request regarding the valuation of Globalstar

to materials in three data rooms and documents exchanged with only two specific

entities; (3) removing two requests; and (4) amending the definition of “Selected

Books and Records” to exclude Globalstar executive officers. 78

      This Court held a one-day trial on July 3, 2018. Only one witness gave

testimony: Mr. Mudrick.

      The parties engaged in further discussions after the trial. Globalstar agreed to

produce the following additional documents:

77
      The disputed purpose is to investigate

             possible breaches of fiduciary duty, misappropriation of
             information, mismanagement, corporate waste, and improper
             influence and conduct by the Company’s controlling
             stockholder, Chief Executive Officer and Chairman of the
             Board, James Monroe III, that had the purpose or effect of
             artificially reducing the share trading price of [Globalstar’s]
             Common Stock, which in turn had the purpose or effect of
             making the Merger highly dilutive for [minority stockholders].

      JX 57, at 1-2.
78
      Pl.’s Opening Br. 7; see PTO ¶ 67.

                                           16
         • All draft and final notes, agendas, and written consents;

         • All drafts of the Merger Agreement and draft and final term sheets
           exchanged between Globalstar and the Thermo Companies;

         • All director and officer insurance documents concerning director
           independence (to the extent any exist);

         • All non-email material concerning Moelis’s selection;

         • All draft and final non-email materials given to the Board and to the
           Special Committee;

         • All documents in the three data rooms; and

         • All materials given to Globalstar’s advisors.79

      After the parties’ resolution of several issues, Mudrick Capital seeks the

following additional documents:

         • Emails and other communications transmitted or dated January 1, 2017,
           to May 4, 2018, and sent to, received by, or in the possession of
           Globalstar CEO and Board of Directors Chair James Monroe,
           Globalstar General Counsel L. Barbee Ponder IV, Special Committee
           Chair J. Patrick McIntyre, or Special Committee member John M.R.
           Kneuer relating to the Merger, the Merger Agreement, or the voting
           agreement; the Merger assets or liabilities, including FiberLight and
           CenturyLink; the establishment, independence, or disinterestedness of
           the Special Committee; advisors or legal counsel in connection with the
           Merger or alternatives to the Merger; or any alternatives to the Merger
           considered by the Board or the Special Committee;

         • Documents, including final and draft documents, and communications
           transmitted or dated January 1, 2016, to May 4, 2018, relating to the
           valuation of FiberLight or the 2016 failed sale of FiberLight; and

79
      Pl.’s Opening Br. 9-10.

                                       17
         • Draft Materials dated January 1, 2017, to May 4, 2018, including
           (a) drafts of Board and Special Committee minutes and (b) internal
           drafts of the Merger Agreement, term sheets, and the letter of intent. 80

II.   ANALYSIS
      Under Section 220 of Delaware General Corporation Law, stockholders of a

Delaware corporation may inspect the books and records of a company for any

proper purpose.81 A proper purpose includes “a purpose reasonably related to such

person’s interest as a stockholder.”82 “It is well established that a stockholder’s

desire to investigate wrongdoing or mismanagement is a ‘proper purpose.’” 83 The

stockholder, however, must present “some evidence that establishe[s] a credible

basis from which [this Court] could infer there [are] legitimate issues of possible

waste, mismanagement or wrongdoing that warrant[] further investigation.”84

      Mudrick Capital identifies seven purposes for its demand. 85         Globalstar

stipulates, for purposes of this litigation only and without waiver to challenge the

allegations in Mudrick Capital’s demand and complaint in any future litigation, that

80
      Id., Proposed Order & J. ¶¶ 3-4.
81
      8 Del. C. § 220.
82
      Id. § 220(b).
83
      Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 121 (Del. 2006).
84
      Id. at 118.
85
      JX 57, at 1-2.

                                         18
it does not contest six of these purposes. 86     Globalstar states that due to its

stipulations, “no finding of a credible basis to suspect wrongdoing or

mismanagement is required.”87 Thus, the only question for this Court to resolve is

the scope of any further inspection.

      The scope of inspection is limited to only those books and records that are

“necessary and essential to accomplish the stated, proper purpose.”88 “Documents

are ‘necessary and essential’ pursuant to a Section 220 demand if they address the

‘crux of the shareholder’s purpose’ and if that information ‘is unavailable from

another source.’” 89 “[T]he burden of proof is always on the party seeking inspection

to establish that each category of the books and records requested is essential and

sufficient to the stockholder’s stated purpose.” 90 “[W]here a [Section] 220 claim is

based on alleged corporate wrongdoing, and assuming the allegation is meritorious,

the stockholder should be given enough information to effectively address the

86
      PTO ¶ 63.
87
      Id. ¶ 75.
88
      Saito v. McKesson HBOC, Inc., 806 A.2d 113, 116 (Del. 2002).
89
      Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr. Fund IBEW, 95 A.3d 1264,
      1271 (Del. 2014) (quoting Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 371-72
      (Del. 2011)).
90
      Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1035 (Del. 1996).

                                         19
problem, either through derivative litigation or through direct contact with the

corporation’s directors and/or stockholders.” 91

      Mr. Mudrick gave testimony for several hours, and he testified credibly. As

an investment fund manager, his knowledge of Globalstar, a Mudrick Capital

investment, is quite extensive. Mr. Mudrick understands the business strategy of

Globalstar as it relates to wireless spectrum rights; he participates in investor

conference calls; and he meets individually with Globalstar’s Board members and

management.

      Before testifying, Mr. Mudrick reviewed the 188 documents produced by

Globalstar.92 He testified that Globalstar’s production was deficient with respect to

Mudrick Capital’s demand in multiple ways. The production lacked the following

requested documents:

         • Emails related to the stated purposes; 93

         • Documents concerning the valuation of FiberLight;94

         • Draft board minutes; 95

91
      Saito, 806 A.2d at 115.
92
      Tr. 76:13-20.
93
      Tr. 76:21-76:23.
94
      Tr. 106:13-107:2.
95
      Tr. 76:24-77:2.

                                         20
              • Draft presentations; 96 and

              • Draft agendas. 97

Globalstar’s production also failed to include any privilege log to indicate whether

documents were withheld or on what basis documents were redacted. 98

        After Mr. Mudrick testified as to what was missing from the production, he

credibly testified as to issues and questions raised by the Merger and by documents

included in the production. A selection of those issues and questions are laid out

here:

              • Monroe owns a majority of Thermo stock; 99

              • Globalstar is paying $1.645 billion for the Merger assets that are
                controlled by Monroe with no explanation for that valuation; in
                particular, the Company valued FiberLight at $1.245 billion, although
                it is likely worth $300-500 million;100

              • The Special Committee valued FiberLight at $1.245 billion, but all the
                information concerning FiberLight appears to have come from
                Monroe;101

96
        Tr. 77:3-77:6.
97
        Id.
98
        Pl.’s Opening Br. 10.
99
        Tr. 54:19-24; PTO ¶ 34.
100
        Tr. 42:23-51:4.
101
        Tr. 92:14-96:23; see JX 117, at 2.

                                              21
         • Neither the Special Committee nor Moelis appear to have included in
           their analysis the failed attempt to sell FiberLight in 2016 for less than
           $500 million;102

         • There are unresolved accounting and governance concerns surrounding
           FiberLight, which are cited in the Special Committee minutes as issues
           that may affect FiberLight’s value; 103

         • The Special Committee was negotiating for much of the time without
           an outside financial advisor;104

         • The Special Committee initially retained conflicted advisors (Allen &
           Co. and Centerview Partners) to advise on the Merger, while those
           advisors were also representing the Company in a possible sale of
           Globalstar; 105

         • Moelis in its fairness opinion disclaimed having performed “any
           independent evaluation or appraisal of any of the assets included” in the
           Merger transaction;106

         • The Special Committee’s negotiations were very brief, and the limited
           information provided in the Board and Special Committee minutes
           regarding the negotiations contradicts the April 24, 2018 Moelis
           presentation. 107

102
      Tr. 95:2-17.
103
      Tr. 105:15-19, 108:5-109:1; JX 115, at 1-2.
104
      Tr. 92:14-96:23; see JX 117, at 2.
105
      Tr. 126:20-127:11.
106
      JX 117, at 2; Tr. 93:18-94:1.
107
      Tr. 86:19-87:4; compare JX 118 with Pl.’s Opening Br., Ex. 2, at 1 (contradictory
      dates of negotiation).

                                           22
         • Globalstar is paying $162 million to Thermo to transfer Globalstar’s
           $1.7 billion in net operating losses to Thermo; 108

         • Monroe proposed, and the Board unanimously approved, that the
           members of the Special Committee receive an award of 225,000 shares
           of Globalstar stock on the same day the Committee approved the price
           of their one and only counteroffer, which they did without the
           assistance of a financial advisor;109

         • Globalstar’s Corporate Secretary, Richard Roberts, is also Thermo’s
           general counsel; 110

         • Monroe told Mr. Mudrick that he (Monroe) expected to get sued in
           connection with the Merger, was prepared for the same, and advised
           people to be careful in their writings in anticipation of litigation; 111

         • Special Committee minutes reference that Monroe had contacted all of
           the Special Committee members and that they were instructed not to
           speak to Monroe directly; 112 and

         • The Chair of the Special Committee has a son who was hired as a
           regional sales manager at Globalstar during the period the Special
           Committee was considering the Merger. 113

      Several documents strongly support Mr. Mudrick’s testimony:

         • Special Committee minutes state that “[t]he members of the Committee
           asked numerous questions regarding . . . the potential conflicts of

108
      Tr. 22:11-16, 52:2-55:10.
109
      Tr. 123:13-124:24; JX 126, at 11-12.
110
      Tr. 80:9-12.
111
      Tr. 82:3-8.
112
      Tr. 114:2-7.
113
      Tr. 118:22-119:2; JX 123, at 12; JX 124, at 2.

                                          23
             interest and a discussion ensued” but give no information regarding
             these “potential conflicts of interest”;114

         • Special Committee minutes state that the members of the Special
           Committee requested an evaluation of each member’s independence
           and, after the evaluation, a report of the results,115 but no subsequent
           minutes reference any such report;

         • Special Committee minutes state that each member of the Special
           Committee had conversations with Monroe about the Merger and that
           the members agreed that “independent conversations with Mr. Monroe
           on the terms of the contemplated [Merger] transaction should be
           avoided to the extent possible”; 116

         • The Special Committee’s counsel advised the Special Committee that
           “it is appropriate to discuss further a minority shareholder vote
           requirement given the related party nature” of the Merger,117 and the
           Special Committee wanted a majority-of-the-minority provision; 118

         • Thermo’s counsel advised the Special Committee against requesting a
           majority-of-the-minority provision in the Merger; 119

         • Special Committee minutes state that FiberLight’s accounting issues
           may “result in a material change that would necessitate revisiting the
           transaction value”; but no subsequent minutes address these issues, and
           the value does not appear to change. 120

114
      Pl.’s Opening Br., Ex. 7, at 2.
115
      Id., Ex. 8, at 1.
116
      Id., Ex. 10, at 1.
117
      Id., Ex. 3, at 2.
118
      JX 110, at 2.
119
      Pl.’s Opening Br., Ex. 6, at 2-3.
120
      JX 115, at 2.

                                          24
The produced documents raise, but do not resolve, the same issues described in Mr.

Mudrick’s testimony. They also suggest that there were communications outside the

produced documents that directly relate to these issues.

      Mudrick Capital’s stated purposes are to investigate possible breaches of

fiduciary duty by the Board and Special Committee concerning the Merger, the

Merger Agreement, and the related voting agreement; evaluate the fairness of the

Merger and the independence of the members of the Special Committee; value

Mudrick Capital’s stock; and communicate with other minority stockholders

regarding litigation and other potential corrective measures.121 The issues addressed

in Mr. Mudrick’s testimony and the produced documents go to the crux of these

purposes. And the testimony and documents suggest that communications exist

outside the produced documents that directly relate to these purposes.

      A.      Mudrick Capital Is Entitled to Globalstar’s Emails
      Mudrick Capital seeks emails from January 1, 2017, to May 4, 2018, from

(1) C.E.O., Chair, and controlling stockholder of Globalstar, James Monroe;

(2) General Counsel of Globalstar, L. Barbee Ponder IV; (3) Chair of the Special

Committee, Patrick McIntyre; and (4) member of the Special Committee, John

Kneuer. 122

121
      PTO ¶ 3.
122
      Pl.’s Opening Br. 10-11.

                                         25
      For the statutory tool provided in Section 220 “to be meaningful, . . . [a]

stockholder who demands inspection . . . should be given access to all of the

documents in the corporation’s possession, custody or control, that are necessary to

satisfy [that stockholder’s] proper purpose.” 123 Generally, “[t]he source of the

documents and the manner in which they were obtained by the corporation have little

or no bearing on a stockholder’s inspection rights. The issue is whether the

documents are necessary and essential to satisfy the stockholder’s proper

purpose.” 124 Thus, where the stockholder carries its burden of establishing that

documents, including emails, are necessary for the stockholder’s purpose, those

documents must be produced.125

      As the Delaware Supreme Court has held, “[d]ocuments are ‘necessary and

essential’ pursuant to a Section 220 demand if they address the ‘crux of the

shareholder’s purpose’ and if that information ‘is unavailable from another

source.’” 126 Although “[t]he starting point—and often the ending point—for a

123
      Saito v. McKesson HBOC, Inc., 806 A.2d 113, 114-15 (Del. 2002).
124
      Id. at 118.
125
      Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 792 (Del. Ch. 2016); Lavin v. W.
      Corp., 2017 WL 6728702, at *14 (Del. Ch. Dec. 29, 2017).
126
      Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr. Fund IBEW, 95 A.3d 1264,
      1271 (Del. 2014) (quoting Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 371-72
      (Del. 2011)).

                                         26
sufficient inspection will be board level documents evidencing the directors’

decisions and deliberations, as well as the materials that the directors received and

considered,” this is a case in which the production of emails in response to a Section

220 demand is warranted.127 Here, Mudrick Capital has adequately shown that

(1) the produced documents do not allow it to adequately address the stated

purposes, and (2) the produced documents also suggest that other documents exist,

including emails, that address the crux of the stated purposes and are unavailable

from another source. Mudrick Capital has met its burden of showing that emails

from January 1, 2017, to May 4, 2018, to or from Monroe, Ponder, and McIntyre128

127
      Yahoo!, 132 A.3d at 790. Defendant relies on three cases to argue that emails are
      not appropriate in a Section 220 demand: In re UnitedHealth Grp., Inc. Section 220
      Litig., 2018 WL 1110849 (Del. Ch. Feb. 28, 2018); In re Plains All Am. Pipeline,
      L.P. Unitholders Books & Records Litig., 2017 WL 6016570 (Del. Ch. Aug. 8,
      2017); and Elow v. Express Scripts Hldg. Co., 2017 WL 2352151 (Del. Ch. May 31,
      2017). These cases do not support Defendant’s argument. None of those cases
      prohibit the production of emails in response to a Section 220 demand. And if they
      did, they would be contrary to Delaware Supreme Court precedent (see Wal-Mart
      Stores, 95 A.3d 1264; Saito v. McKesson HBOC, Inc., 806 A.2d 113 (Del. 2002)),
      which this Court is bound to follow, that provides emails where plaintiffs show that
      emails are necessary to satisfy the stated purpose. Here Plaintiff met that burden.
128
      Monroe is the Executive Chairperson of the Board and Chief Executive Officer of
      Globalstar, PTO ¶ 33, and “Monroe’s central role in the Merger is undisputed,” Pl.’s
      Opening Br. 11 n.5; he is the controller of both Globalstar and Thermo, PTO ¶¶ 33,
      34; and Special Committee minutes reference communications between him and the
      Special Committee members, Pl.’s Opening Br., Ex. 10, at 1. Globalstar’s 30(b)(6)
      representative stated in his deposition that Ponder is in possession of many of the
      requested documents. JX 105, at 101-02. McIntyre, in his role as Chair of the
      Special Committee, was involved in Merger negotiations. See JX 014, at 1.
      Regarding Kneuer, Mudrick Capital provides only two reasons for requesting
      Kneuer’s emails: (1) Kneuer was the only director to receive compensation in 2017,

                                           27
are necessary “to effectively address the problem[s Mudrick Capital has identified],

either through derivative litigation or through direct contact with the corporation’s

directors and/or stockholders.” 129

      B.       Mudrick Capital Is Entitled to FiberLight Valuation Materials in
               Globalstar’s Possession
      Mudrick Capital has requested documents and communications transmitted or

dated January 1, 2016, to May 4, 2018, relating to the valuation of FiberLight or the

2016 failed sale of FiberLight.130 In 2016, FiberLight attempted an auction for $350-

450 million. 131 Especially in the context of an interested transaction, purchasing a

company for $1.245 billion when the company failed to garner $350 million two

years earlier with no explanation of the new valuation provides a credible basis to

investigate mismanagement, waste, or wrongdoing—a point which Globalstar does

not dispute.

      The value of the Merger assets, including FiberLight, and information

regarding the process the Special Committee used to assign that value are necessary

      and (2) Kneuer is a member of the Special Committee. Pl.’s Opening Br. 11 & n.5.
      Plaintiff has raised no issue regarding 2017 compensation, and Plaintiff offers no
      explanation for why Kneuer’s emails are necessary in addition to the production of
      McIntyre’s emails.
129
      Saito, 806 A.2d at 115.
130
      Pl.’s Reply Br. 25-27.
131
      JX 2, at 2.

                                          28
and essential to “investigate possible breaches of fiduciary duty, mismanagement,

corporate waste, and improper influence and conduct by members of . . . the Special

Committee . . . with respect to the negotiation, execution, and approval of the . . .

Merger Agreement.” 132 FiberLight is a privately held company. 133 It is therefore

difficult, if not impossible, for Mudrick Capital to obtain accurate valuation

information for FiberLight. Even if this was possible, external information would

not explain how the Special Committee assigned a value of $1.245 billion to

FiberLight. Because this information is necessary to Mudrick Capital’s stated,

proper purpose, Globalstar must produce FiberLight valuation materials in its

possession.

      C.      Mudrick Capital Is Not Entitled to Draft Materials

              1.    Draft minutes
      Mudrick Capital requests all drafts of Board and Special Committee minutes

for January 1, 2017, to May 4, 2018. 134 Mudrick Capital argues that the final minutes

are “sanitized.”135 Plaintiff supports this argument with two pieces of evidence:

132
      JX 57, at 1 (purpose (i)).
133
      Tr. 23:6.
134
      Pl.’s Reply Br. 25-26.
135
      Tr. 80:9-13. Mudrick Capital also argues that Globalstar waived any objection to
      producing draft Board and Special Committee minutes by failing to respond to
      Plaintiff’s arguments. Pl.’s Reply Br. 25-26. I disagree. Although Globalstar does
      not specifically argue in its Answering Brief that Mudrick Capital is not entitled to

                                           29
(1) that Monroe told Mr. Mudrick that the Company expected litigation related to

the Merger, 136 and (2) Globalstar’s Corporate Secretary, Richard Roberts, is also

Thermo’s general counsel. 137

      Mudrick Capital provides no convincing explanation for why the draft

minutes are any more or less “sanitized” than the final minutes. More importantly,

however, Mudrick Capital simply has not shown that draft minutes are necessary in

light of all the documents that have been and will be produced; thus, that demand is

denied.

             2.      Other draft materials
      Mudrick Capital provides no convincing explanation for why Draft Materials

outside of draft minutes are necessary to satisfy any of its stated purposes.138

      draft minutes, Globalstar addresses Plaintiff’s argument by asserting that Plaintiff
      needs no additional information generally. Def.’s Answering Br. 13 (“Mudrick
      needs no further information.”); id. at 12-13 (“The [final] Board and Special
      Committee Minutes disclosed significant information . . . .”).
136
      Tr. 81:1-6.
137
      Tr. 80:9-12.
138
      See Pl.’s Opening Br. 43.

                                           30
Because Mudrick Capital has not shown that these Draft Materials are necessary to

one of the stated purposes, that demand is denied.139

       D.     Globalstar Must Provide Privilege Logs
       Globalstar must provide a privilege log that reflects documents withheld or

redacted for any privilege for all productions, including past productions. 140

III.   CONCLUSION
       For the foregoing reasons, I find that Mudrick Capital is entitled to (1) emails

and other communications related to Mudrick Capital’s revised document requests

and limited to custodians Monroe, Ponder, and McIntyre for the time period of

January 1, 2017, to May 4, 2018, and (2) documents and communications related to

the valuation of FiberLight and the 2016 failed sale of FiberLight for the time period

of January 1, 2016, to May 4, 2018; Mudrick Capital is not entitled to Draft

Materials; and Globalstar is required to produce a privilege log that reflects

documents withheld or redacted for any privilege for all productions, including past

productions. The parties shall submit an order consistent with this memorandum

opinion within three business days.

       IT IS SO ORDERED.

139
       If Draft Materials were found to be necessary to one of the stated purposes, then I
       would be required to address privilege issues. That analysis is not required, and the
       parties have not adequately briefed these privilege issues.
140
       Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 796 (Del. Ch. 2016).

                                            31