Court Opinion

ID: 9404826
Source: CourtListenerOpinion
Date Created: 2023-06-26 14:04:05.545983+00
Date Added: 2024-06-11T17:20:17.594077
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

TARNJIT SINGH GILL and JAGJIT SINGH              )
GILL,                                            )
                                                 )
                  Plaintiffs,                    )
                                                 )
      v.                                         ) C.A. No. 2023-0349-BWD
                                                 )
REGENCY HOLDINGS, LLC, a                         )
Delaware limited liability company,              )
                                                 )
                  Defendant.                     )

                 MASTER’S POST-TRIAL FINAL REPORT

                          Final Report: June 26, 2023
                         Date Submitted: June 21, 2023

David E. Ross and Roger S. Stronach, of ROSS ARONSTAM & MORITZ LLP,
Wilmington, Delaware, Attorneys for Plaintiffs Tarnjit Singh Gill and Jagjit Singh
Gill.

Paul J. Loughman and Daniel M. Baker, of YOUNG CONAWAY STARGATT &
TAYLOR, LLP, Wilmington, Delaware; OF COUNSEL: Reagan D. Pratt and Paul
D. Flack, of PRATT & FLACK, Houston, Texas, Attorneys for Defendant Regency
Holdings, LLC.

DAVID, M.
       This post-trial final report resolves one of seven lawsuits involving siblings

Tarnjit “Mitch” Singh Gill, Jagjit “Jag” Singh Gill, and Jagjit “Jackie” Kaur, their

family company, Regency Holdings, LLC (“Regency,” or the “Company”), and

Regency’s subsidiaries. Through this action, Mitch and Jag1 seek an order to compel

inspection of Regency’s books and records pursuant to Section 18-305 of the

Delaware Limited Liability Company Act.

       For decades, Plaintiffs managed the family business alongside their father,

who gifted them each 23.05% of the membership interests in the Company. After

their father died unexpectedly in 2020, however, Plaintiffs’ mother removed them

from positions of authority at the Company and its subsidiaries and asked their sister,

Jackie, to manage the Company, due to allegations that Plaintiffs had mismanaged

and misappropriated the Company’s assets. Those and related allegations are the

subject of numerous lawsuits in the United Kingdom and Texas. Plaintiffs now seek

books and records to evaluate the status of the business and financial condition of

the Company, value their membership interests, and investigate potential

wrongdoing.     The Company has rejected the demand, asserting, among other

defenses, that the gifts of membership interests Plaintiffs received from their father

are invalid due to breaches of fiduciary duty, fraud, and undue influence, and that

1
  For clarity, this report refers to the parties by their first names, but no disrespect is
intended.
                                            1
Plaintiffs’ true purposes are to gain a litigation advantage in the six other pending

suits.

         In this final report, I reiterate my prior ruling in discovery that this summary

books and records proceeding is not the appropriate forum to litigate the validity of

the underlying transactions through which Plaintiffs acquired their membership

interests, and Plaintiffs are entitled to rely on the Company’s membership ledger to

establish their standing to demand books and records. I further conclude that

Plaintiffs have stated proper purposes for seeking books and records; those purposes

are their actual, primary purposes for making the demand; the Company cannot deny

the inspection under Section 18-305(c); and Plaintiffs are entitled to inspect some,

but not all, of the books and records they seek.

I.       BACKGROUND

         The following facts are drawn from the factual stipulations in the parties’ pre-

trial order, the deposition testimony of three witnesses that was submitted in lieu of

live testimony at trial, and 95 joint trial exhibits.2

2
 The joint trial exhibits are cited herein as “JX __”. The deposition testimony of Mitch
Gill, Jag Gill, and Jackie Kaur, located at JX 86-88, is cited herein as “M. Gill at __”, “J.
Gill at __”, and “J. Kaur at __”, respectively.
Many of the facts presented at trial will be the subject of further litigation in the numerous
other lawsuits the parties have filed. Where it is not necessary to my ruling to resolve these
factual disputes, I do not, and instead summarize the parties’ positions for context.

                                              2
         A.     The Parties and Relevant Non-Parties

         Regency is a Delaware limited liability company that serves as a holding

company for subsidiaries that own and operate real estate assets in the United

Kingdom and Texas.          These assets include airport property, residential and

commercial rental properties, and a hotel.

         Regency’s founder, Jagmail Singh Gill (“Jack”), and his wife, Amarjit Gill,

had three children—Plaintiffs Mitch and Jag, and their sister, Jackie. Jack’s father

began the Gill family business in the 1950s as a clothing company in London. Over

the years, operations expanded to include real estate.3 In 1989, the family purchased

the David Wayne Hooks Memorial Airport in Houston, Texas.4 In the late 2000s,

Jack’s brother passed away, prompting a “demerger” through which the business’s

assets were divided between Jack and his brother’s heirs.5

         Jack allocated portions of the Gill family assets to himself, Jag, Mitch, and

Jackie, and kept others in the family portfolio.6 Jack then reorganized the portfolio

assets with Regency as the holding company. At the time of Regency’s formation,

Jack executed a limited liability company agreement to govern its operations (as

3
    J. Kaur at 198.
4
    M. Gill at 168.
5
    J. Kaur at 209.
6
    Id. at 209-10.

                                           3
amended and restated, the “Operating Agreement”). Jack appointed himself and

Mitch as Regency’s two directors.7 As reflected in a ledger of membership interests

attached to the Operating Agreement, Jack owned 100% of the membership interests

in the Company.8

       The Operating Agreement requires that Regency maintain “[p]roper and

complete records and books of account of the business of the” Company “on a basis

consistent with . . . treatment [as a disregarded entity for United States income tax

purposes] and on the same basis utilized in preparing the [Company]’s United States

federal income tax (if required).” JX 3, Operating Agreement §§ 13(b), (d). Under

the Operating Agreement, “[t]he Member and its duly authorized representatives

may, for any reason reasonably related to its interest as a member of the [Company],

examine the [Company]’s books of account and make copies and extracts therefrom

at its own expense.” Id. § 13(e).

7
  JX 3, Operating Agreement § 6 (“[T]he business and affairs of the Company shall be
managed exclusively by a Board of Directors[.] . . . The number of Directors who shall
serve on the Board shall be two (2) . . . . The initial Directors, who are hereby elected by
the Member, shall be Jagmail Singh Gill [Jack] and Tarnjit Singh Gill [Mitch], each of
whom shall serve as a Director until his or her successor has been elected and qualified or
until his or her earlier death, resignation or removal, as the case may be.”).
8
 The Operating Agreement provides that “[t]he Company shall maintain records of
Membership Interests and certificates in the books and records of the Company.” JX 3,
Operating Agreement § 10(d).

                                             4
      B.     The Role of the Gill Siblings in the Management of Regency’s
             Businesses
      Regency wholly owns three subsidiaries—Glissen Properties Ltd. (a U.K.

entity), Transomas Investments Ltd. (a U.K. entity), and Jetson Properties Ltd. (an

Isle of Man entity). Jetson Properties Ltd. wholly owns West Properties Holdings

Ltd. (a U.K. entity) (“West Properties”), which, in turn, wholly owns Transomas

Ltd. (a U.K. entity), as well as 49% of Gill Aviation Inc. (a Texas entity). West

Properties is also a 48.51% limited partner, and Gill Aviation Inc. is the general

partner, of Northwest Airport Management LP (a Texas entity) (“Northwest

Airport”). The following graphic illustrates that organizational structure:

                                          5
         Plaintiffs refer to the U.K. entities collectively as the “Regency Companies”

and the two Texas entities as the “Airport Companies.”

         After Plaintiffs obtained degrees (Jag with a master’s degree in tax and Mitch

with a bachelor’s degree in finance), they joined the family business.9 Mitch

eventually became responsible for managing the Regency Companies in the U.K. In

addition to serving as a director of Regency, he served as a director of Glissen

Properties Ltd., Transomas Investments Ltd., West Properties, and Transomas Ltd.

         Jag became responsible for managing the Airport Companies in Texas. Jag

served as a director of Gill Aviation Inc. and became President of Northwest Airport,

which expanded from an airport asset to also include a hotel, residential properties,

and commercial properties leased to government agencies.

         In the eight years preceding the events in this action, Jackie, who holds a B.S.

in Economics and International Relations from the London School of Economics

and a law degree from the University of Houston,10 was not involved in Regency’s

businesses.

9
    M. Gill at 168.
10
     J. Kaur at 199, 202.

                                             6
      C.    Jack Assigns Membership Interests in the Company to Plaintiffs.

      On April 5, 2018, Jack executed two Assignment Agreements to “assign and

transfer” membership interests of the Company to each of Mitch and Jag. Those

Assignment Agreements state, in part:

             WHEREAS, the Assignor [Jack] currently owns a certain
      percentage Membership Interest in REGENCY HOLDINGS, LLC, a
      Delaware limited liability company (the “Company”), after taking into
      account a contemporaneous transfer of a percentage of his Membership
      Interest in the Company to [Mitch and Jag];

            WHEREAS, the Assignor wishes to assign and transfer to
      Assignee, as a gift, an amount of his Membership Interest in the
      Company having an aggregate fair market value, as finally determined
      for United States federal gift tax purposes, equal to Five Million Six
      Hundred Thousand Dollars ($5,600,000.00), the transferred
      Membership Interest in the Company is referred to herein as the
      “Subject Interest”;

           WHEREAS, the Assignor wishes that the Assignee shall become
      a Member in the Company in his own right;

             WHEREAS, pursuant to Section 17 of the Amended and
      Restated Limited Liability Company Operating Agreement of the
      Company (as may be further amended from time to time, the
      “Operating Agreement”), a Member may assign in whole or in part their
      Membership Interests, and the transferee shall be admitted to the
      Company as a Member upon its execution of an instrument signifying
      its agreement to be bound by the terms and conditions of the Operating
      Agreement, which instrument may be a counterpart signature page to
      the Operating Agreement;

            WHEREAS, the Assignee is willing to accept the Subject Interest
      pursuant to the terms set forth herein and in the Operating Agreement.

            NOW THEREFORE, the undersigned hereby agree as follows:

                                        7
         1.    The Assignor hereby assigns and transfers to the Assignee a
         portion of the Assignor’s Membership Interest in the Company equal
         in value, as finally determined for United States federal gift tax
         purposes, to Five Million Six Hundred Thousand Dollars
         ($5,600,000.00) . . . .

         4.     The Assignee hereby agrees to be bound by all of the provisions
         of the Operating Agreement as a Member (with respect to the Subject
         Interest) and by its execution of this Assignment Agreement hereby
         delivers a counterpart signature page to the Operating Agreement as
         confirmation that the Assignee shall be bound by all the terms and
         conditions of the Operating Agreement as a Member. . . .

         6.    The Assignor, as Director of the Company, agrees to amend the
         ownership schedule attached as Exhibit A to the Operating Agreement,
         and also to issue new Membership Certificates to himself and the
         Assignee, upon a final determination of the Assignee’s percentage
         Membership Interest in the Company resulting from the assignment
         under this agreement.11

         On June 6, 2018, Jack and Plaintiffs executed addenda to the Assignment

Agreements agreeing that, based on an appraisal, the $5.6 million gifts to Plaintiffs

each represented a 17.55% membership interest in the Company.12 On December

15, 2018, Jack and Plaintiffs executed additional addenda to the Assignment

Agreements voiding the prior addenda and agreeing that, based on a revised

appraisal, the $5.6 million gifts to Plaintiffs each represented a 23.05% membership

interest in the Company.13

11
     JX 9 at 0001-2.
12
     Id. at 0004.
13
     Id. at 0006.

                                           8
         Also on December 15, 2018, Jack and Mitch, as Regency’s directors, executed

a Resolution by Consent of the Directors of Regency Holdings, LLC, dated

December 15, 2018, resolving to amend the ownership schedule attached to the

Operating Agreement as set forth in Exhibit A. Exhibit A is a ledger of “Percentage

Interests of the Members and Status of Membership Certificates” reflecting Jack,

Mitch, and Jag’s respective 53.9%, 23.05% and 23.05% interests in the Company.14

The directors also resolved to issue membership certificates as reflected in Exhibit

B, which attaches membership certificates issued to Jack, Mitch, and Jag reflecting

those same membership interests.15

         D.      Amarjit Reviews the Company’s Finances Following Jack’s Death.

         Tragically, on April 2, 2020, Jack suddenly passed away from COVID-19.16

Jack’s property—including his majority membership interests in Regency—passed

to his wife, Amarjit.

         After Jack’s death, Jackie assisted Amarjit with reviewing her finances.

Jackie testified that when she did, she discovered that Plaintiffs had misappropriated

Company assets and engaged in self-dealing transactions.17 For example, Jackie

14
     JX 11 at 0003.
15
     Id. at 0004-7.
16
     M. Gill at 203; J. Gill at 192-93; J. Kaur at 212-13.
17
     J. Kaur at 237-40.

                                                9
claims that she found Transomas Investments Ltd. had incurred a £10 million debt

with the Bank of Singapore that was used to fund renovations at the Westbourne

Hyde Park hotel, an asset that Mitch purportedly purchased from Transomas at an

unfair price in 2015.18 Jackie further asserts that Mitch had been using revenues

from Transomas to pay his own hotel staff.19

         Jackie also discovered a “unique type of ledger”20 in use at the Airport

Companies. Plaintiffs explain that while Jack was in charge of the business, the Gill

family extensively used “lines of credit,” through which “money [was] taken out of

the airport” by a family member “for non-airport purposes”; that expense was

recorded and “attributed to that person’s line of credit”; the line of credit “would

then be a loan outstanding and a receivable for the airport”; and “[f]rom time to time

. . . when [Jack] saw fit, he would then agree to write those lines of credit off . . . and

those would be recorded in tax returns . . . .”21 Plaintiffs claim that this “line of credit

system” was “scrupulously tracked” and approved by their father, and that it

compensated Jag for the nominal salary he was paid, rewarded family members

(including Plaintiffs) for good performance, and was consistent with their father’s

18
     M. Gill at 191.
19
     Def.’s Answering Pre-Trial Br. [hereinafter, “AB”] at 5, Dkt. 69.
20
     Pls.’ Op. Pre-Trial Br. [hereinafter, “OB”] at 9, Dkt. 68.
21
     M. Gill at 219-20.

                                               10
intentions that “‘[o]ne day, Sons, this will all be yours.’”22 Jackie believes that

through the “line of credit” system, Jag misappropriated over $9 million from the

Company in the 10 years before his father’s death, and absconded with another

$800,000 in the first eleven months after Jack’s death.23 Jackie also maintains that

Jag misappropriated $2.25 million in “developer commissions” and “management

fees,” and challenges additional fees paid for trusts and estate planning that solely

benefitted Plaintiffs.24

          E.       Amarjit Makes Changes at the Company and its Subsidiaries.

          In the months following Jack’s death, Amarjit decided to remove Plaintiffs

from positions of authority at Regency and asked Jackie to step in and manage the

Company and its subsidiaries in their place.

          In June and July 2020, Amarjit appointed Jackie as a director of Glissen

Properties Ltd., Transomas Investments Ltd., West Properties, and Transomas Ltd.25

22
   OB at 10 (citing M. Gill at 222). See also M. Gill at 221 (“[H]ad my dad not passed
away unexpectedly, Regency was going to be a hundred percent owned by myself and Jag.
. . . So, yeah, on occasion, monies were written off, but it was done . . . in the family
business, and it was pattern and practice for many years.”).
23
  AB at 2 (“Jag’s ‘system’ was to use airport funds to pay every personal expense he ever
had, whether it be for his mortgage, his property taxes, his income taxes, his children’s
private school tuitions, or jewelry, in addition to his personal credit card charges that
commonly ran to $30,000 per month.”).
24
     Id. at 2-3.
25
     Pre-Trial Stip. and Order [hereinafter, “PTO”] ¶ 15, Dkt. 76.

                                              11
         On December 16, 2020, Amarjit executed an “Action by Personal

Representative of Jagmail Singh Gill,” purporting to “exercise [Jack]’s rights under

the Operating Agreement to remove [Mitch] as a director of the Company and to

replace him as a director of the Company with [Jackie],” and to “elect [her]self as a

director of the Company as the successor director to [Jack].”26 Recitals in the Action

by Personal Representative explain that Jack’s will “le[ft] his entire U.S. Estate to”

Amarjit and appointed her as executor, and further state that “Section 18-705 of the

Delaware Limited Liability Company Act provides that if a member who is an

individual dies the member’s personal representative may exercise all of the

member’s rights for the purpose of settling the member’s estate or administering the

member’s property.”27

         Plaintiffs dispute the validity of the Action by Personal Representative,

arguing that it is unsettled law whether the personal representative of an estate has

authority to remove directors under 6 Del. C. § 18-705.28 Nevertheless, Plaintiffs

acknowledge Amarjit’s wishes that Mitch be removed as a director, and explain that

Mitch “worked to ensure a smooth transition” by providing Jackie with the

26
     JX 41 at Recital D.
27
     Id. at Recitals A, C.
28
     OB at 19 n.14.

                                         12
Company’s records.29 Mitch also resigned as a director of Glissen Properties Ltd.,

Transomas Investments Ltd., West Properties, and Transomas Ltd. by February 19,

2021.30

          In May 2021, Amarjit gifted her 51% interest in Gill Aviation Inc. to Jackie.31

Jackie then removed Jag as director of Gill Aviation Inc., elected herself sole director

effective June 25, 2021, “seized the . . . buildings and its records,” and reduced Jag’s

visibility into the Airport Companies’ operations.32

          F.       The Parties File Lawsuits in the U.K. Business Court.

          In the summer of 2021, Jackie demanded that Plaintiffs repay amounts that

she contends were misappropriated from the Company.33 A barrage of lawsuits

followed. First, Mitch’s company, Kheri Trading Limited (“KTL”), sued Regency’s

Transomas subsidiaries in the High Court of Justice, Business and Property Courts

of England and Wales (“U.K. Business Court”), seeking to compel Transomas to

release a lien on the Westbourne Hyde Park hotel.34 A few months later, the

Transomas subsidiaries sued KTL and Mitch in the U.K. Business Court, seeking to

29
     Id. at 18.
30
     PTO ¶ 16.
31
     J. Gill at 196.
32
     Id. at 197.
33
     OB at 20; JX 45-48.
34
     PTO ¶ 20.

                                            13
rescind the sale of the hotel and to recover £4.5 million that Mitch allegedly used for

the benefit of his own companies.35

         In September 2022, Mitch, KTL, and Gill London I Limited (a company

owned by Jag) sued Jackie, the Transomas subsidiaries, and Whitechurch Lane

Limited (another company owned by Amarjit) in the U.K. Business Court, asserting

claims for debts allegedly owed by Jack’s estate, Amarjit’s company, and the

Transomas subsidiaries under certain oral loans.36 In October 2022, the Transomas

subsidiaries sued Lime Green Investments Limited and Kheri Properties Limited

(companies owned by Mitch) in the U.K. Business Court for over £600,000 in unpaid

interest on debts owed under promissory notes.37

         G.      Plaintiffs Discover “Suspicious” Transfers at the Airport
                 Companies.

         Plaintiffs claim that about one year after Amarjit transferred management

control of Regency to Jackie, they began to suspect that Jackie was engaged in

wrongdoing at the Company. They deny that their suspicions were prompted by

Jackie’s investigation into their own alleged wrongdoing.

35
     Id. ¶ 21; JX 55.
36
     PTO ¶ 22; JX 62.
37
     PTO ¶ 23; JX 64.

                                          14
         Instead, Plaintiffs contend that beginning in 2022, “decisions that at first

might be chalked up to a difference in management style appeared to escalate to

mismanagement and even potential misappropriation.”38 Mitch testified that “the

number of staff members [Jackie] was employing” was “not the way [his] father

would have managed things” because “[h]e would have been a bit more careful with

the money.”39 He also claims that Jackie was “very aggressive and belligerent” with

the Bank of Singapore when she “failed to comply with their on-boarding,” and

Mitch was concerned that the £10 million loan could be foreclosed upon if Jackie

did not comply.40

         Additionally, before his access to Northwest Airport’s bank accounts was

suspended, Jag observed that transfers totaling approximately $2.4 million had been

made from Northwest Airport to West Properties. According to Plaintiffs, the

Airport Companies had never transferred funds to any Regency company, and West

Properties had no apparent need for cash since it does not have operations, payroll,

or expenses.41 Mitch testified that months later, in November 2022, a former

Company employee told him that Jackie was “running the bank accounts dry” and

38
     OB at 21.
39
     M. Gill at 211.
40
     Id. at 211-13.
41
     Id. at 187-88.

                                          15
“spending all the money” “on the lawyers.”42 Separately, Jag testified that Jackie

told him she “do[es]n’t care how much money [she] spend[s] because it’s not [her]

money.”43

          Jag also observed that on May 13, 2022, the Company made a $600,000

payment to the I.R.S. to pay a tax penalty owed by Jack’s estate,44 and on May 17,

2022, a $170,838.71 payment was made to Jackie’s personal account.45

          H.     Plaintiffs Serve the Demand.

          On May 24, 2022, Plaintiffs, through counsel, sent a demand to the Company

pursuant to 6 Del. C. § 18-305 (the “Initial Demand”), seeking to inspect six

categories of books and records of the Company and certain of its subsidiaries,46

explaining that, “[b]y virtue of Messrs Gill’s positions as Members in Regency they

are entitled to receive information relating to the running of the Regency Companies

under both Delaware law and the relevant operating agreements.”47

          The six categories of documents sought in the Initial Demand included:

42
     M. Gill at 133, 213-14.
43
     J. Gill at 157.
44
     Id. at 200; JX 74 at 0001.
45
     JX 74 at 0002.
46
 Plaintiffs no longer seek books and records of Gill Aviation Inc. or Northwest Airport
Management, L.P. PTO ¶ 35.
47
   JX 57 at 0001. The Company contends that the Initial Demand was not properly served
in accordance with the statute.

                                           16
         1. All financial statements, profit and loss statements, and general
            ledgers;

         2. All loan accounts (including at least directors’ or shareholder’s
            loans);

         3. Copies of all bank and account statements;

         4. Copies of all payroll records;

         5. Copies of any tax returns.

         6. Copies of all correspondence with [the Company’s accountants,]
            Perry Patel and/or Silver Levene[.]48

The Initial Demand also sought “confirmation” of the following information:

         1. Whether any loans have been advanced to Jackie Kaur or Amarjit
            Kaur, or related parties;

         2. Details of any payments, distributions, or dividends paid to or made
            on behalf of or to Jackie Kaur, Amarjit Kaur or related parties; or

         3. All payments made to any of the following and the details thereof:
               a. accountants;
               b. legal advisors; and/or
               c. any further professional advisors, including but not limited to
                  any payments made to Perry Patel and/or Silver Levene;

         4. The Regency Companies’ current assets and liabilities; and

         5. Confirmation of any related-party transactions undertaken.49

48
     Id. at 0002.
49
     Id. at 0002.

                                             17
          On June 7, 2022, Plaintiffs, through counsel, sent the Company a second

demand letter that was nearly identical to the Initial Demand.50

          On September 28, 2022, Plaintiffs, through new counsel, served a “renewed

demand” on the Company pursuant to 6 Del. C. § 18-305 (the “Demand”), seeking

to inspect the same categories of books and records of the Company sought in the

Initial Demand, for the following stated purposes:

          (1) evaluating the status of the business and financial condition of the
          Regency Companies; (2) investigating improprieties in the corporate
          governance, regulatory compliance, reporting, and controls of the
          Regency Companies, including but not limited to the purported removal
          of Mitch Gill as Director and manager; (3) investigating
          mismanagement of the Regency Companies; (4) understanding the
          current cash financial position of the Regency Companies; (5)
          evaluating their substantial membership interests in the Regency
          Companies; and (6) evaluating the propriety of any transfers of funds
          from the Regency Companies to accountants, legal advisors, and/or any
          other professional advisors.51

Like the Initial Demand, the Demand states that, “[b]y virtue of Messrs. Gill’s

positions as Members in Regency, they are entitled to receive information relating

to the running of the Regency Companies under both Delaware law and the relevant

operating agreements.” 52 Unlike the Initial Demand, the Demand further asserts

50
     JX 58.
51
  Id. at 4. The Demand also seeks to confirm “[w]hether any transactions have taken place
with Regency Holding I, LLC, and the details thereof.” Id.
52
     Id. at 2.

                                            18
that, “by virtue of his position as Director and manager of Regency, Mitch Gill is

afforded ‘the right to examine all of the information described in [6 Del. C. § 18-

305(a)] for a purpose reasonably related to the position of manager.’”53

           I.    Procedural History
           On March 21, 2023, Plaintiffs filed their Verified Complaint to Compel

Inspection of Books and Records (the “Complaint”).

           Ten days after the Complaint was filed, on March 31, 2023, Amarjit sued

Plaintiffs in Probate Court No. 3 of Harris County, Texas, seeking a declaration that

Plaintiffs do not own valid membership interests in Regency or Northwest Airport

(the “Texas Probate Action”). The complaint in the Texas Probate Action alleges

that prior to Jack’s death, Jack and Amarjit entrusted Mitch and Jag to consult with

their attorneys and financial advisors concerning the structuring of their personal

estates to minimize their exposure to estate and inheritance taxes.54 In 2017, when

the U.S. government increased the amount of the gift and estate tax “Applicable

Exclusion Amount,” Mitch and Jag “used this as an excuse” to claim that Jack and

Amarjit’s consultants and attorneys had advised them to gift membership interests

in Regency to Plaintiffs, which led to Jack executing the Assignment Agreements.55

53
     Id.
54
     JX 75 ¶¶ 18-19.
55
     Id. ¶ 27.

                                          19
The complaint asserts that “[s]ince Mitch and Jag placed themselves in a position in

which their self-interest would conflict with their obligations as a fiduciary, the

resulting transactions were presumptively unfair and void.”56

          This action was reassigned to me on April 4, 2023.57 At that time, in a letter

to counsel, the Chancellor directed the parties to “confer on a schedule designed to

resolve this action before the Master within sixty days and submit a proposed

schedule within one week,” stayed exceptions to interlocutory reports, and advised

“that pleading-stage motions are generally disfavored by this court in summary

proceedings” and “[t]he assigned Master is likely to deny a proposed schedule that

contemplates case-dispositive motions unless the parties demonstrate that there is a

compelling need or extraordinary circumstances.” Dkt. 7.

          On April 11, 2023, the parties filed letters attaching competing scheduling

orders. Plaintiffs’ proposed schedule contemplated a one-day trial in June. The

Company proposed a briefing schedule on a motion to dismiss or stay, arguing “that

this action is nothing but an impermissible attempt to interfere with the jurisdiction

56
     Id. ¶ 40.
57
  On April 4, 2023, Jag, purporting to act derivatively on behalf of Northwest Airport,
sued Jackie and Gill Aviation, Inc. in the District Court of Harris County, Texas. JX 76.
The next day, on April 5, 2023, Northwest Airport sued Jag, Mitch, and related parties for
debts allegedly owed under their lines of credit in the District Court of Harris County,
Texas. JX 77.

                                            20
and discovery rules of the courts [in the U.K. and Texas] already hearing [these]

disputes.”58 On April 12, 2023, I held a scheduling conference during which I

largely granted Plaintiffs’ proposed trial schedule, while leaving open the possibility

for parallel briefing on the Company’s motion to stay, explaining:

         As the Chancellor, I think, made pretty clear in her letter when she was
         reassigning this case to me, case dispositive motions in summary
         proceedings are generally disfavored. And the arguments previewed in
         defendant’s letter submitted last night are defenses commonly raised in
         books and records cases that are most appropriately presented in pretrial
         briefing rather than in a preliminary motion. So I am not going to
         permit case dispositive motions in this case, including a motion to
         dismiss. Nothing will preclude the defendants from raising all of their
         arguments in support of dismissal in their pretrial briefs. That includes
         arguments about standing, the defendant’s position that the plaintiffs
         are impermissibly seeking records of subsidiaries, that the filing of
         other lawsuits established a lack of a proper purpose, or whatever other
         arguments the defendants come up with.

         The defendant’s letter last night also previewed argument for a stay of
         this litigation in favor of other litigation filed in other courts. I’m not
         going to preclude the defendant from filing a motion to stay. . . . A
         deadline for the motion and a response can be built into the [trial]
         schedule, but that should not delay any other dates in the schedule that
         have to proceed in parallel with all other deadlines. . . . I did review
         the letters last night. And based on those letters, I’ll be candid, I didn’t
         really see a basis to stay what is designated by statute as a summary
         proceeding in favor of a later-filed litigation in another forum. But I’m
         open. And the parties are free to allocate their clients’ resources to
         briefing a motion to stay if they think that that makes sense.59

58
     Dkt. 11 at 2.
59
  Gill v. Regency Holdings, LLC, C.A. No. 2023-0349-BWD, at 7-9 (Del. Ch. Apr. 12,
2023) (TRANSCRIPT).

                                             21
         On April 14, 2023, I entered a scheduling order setting a one-day trial for June

21, 2023.60 The Company did not move to stay. The case proceeded to discovery.

It did not go smoothly.

         On April 28, 2023, Plaintiffs filed a Motion for Protective Order, seeking to

limit extraordinarily broad discovery requests served by the Company, including

requests to support the Company’s standing defense that Jack’s gifts of membership

interests to Plaintiffs under the Assignment Agreements were invalid due to breaches

of fiduciary duty, fraud, or undue influence.61 On May 2, 2023, following oral

argument, I granted in part and denied in part the Motion for Protective Order,

explaining that the Court would not decide the validity of the transactions through

which Plaintiffs acquired their membership interests:

         [A]s articulated in Pogue [v. Hybrid Energy, Inc., 2016 WL 4154253
         (Del. Ch. Aug. 5, 2016)], in a typical case, the stock ledger controls
         record stockholder status, and a stockholder may point to the stock
         ledger to show prima facie that she is, in fact, a holder of record.

         The [P]laintiffs here have made a prima facie case of standing. Exhibits
         B and C attached to the complaint evidence the membership interests
         held in the LLC. The defendant argues it’s not fair to rely on documents
         that were created when the plaintiff was a director, but defendant
         doesn’t challenge the accuracy of the membership interests in those
         documents other than to challenge the validity of an underlying
         transaction through which the membership interests were transferred on

60
     Dkt. 16.
61
     Dkt. 28.

                                            22
         grounds of breach of fiduciary duty, fraud, undue influence, or similar
         theories.

         Under that theory, the fiduciary duties that allegedly were breached
         were owed to Jack and Amarjit, not to the [C]ompany. So it’s not even
         apparent to me that the [C]ompany has standing here to raise that as a
         defense. But what is clear to me is that it’s not appropriate to have a
         mini trial-within-a-trial in seven weeks to adjudge the validity of a
         transfer of membership interests that occurred in 2018 on a limited
         record in order to assess the [P]laintiffs’ standing to obtain books and
         records. A summary books and records proceeding is not the right
         vehicle to raise those arguments.62

         On May 9, 2023, Plaintiffs filed a Motion to Compel, and on May 16, 2023,

the Company filed a Motion to Compel and Motion for Protective Order. On May

16, 2023, following oral argument, I denied Plaintiffs’ Motion to Compel and

granted the Company’s Motion to Compel and Motion for Protective Order.63

         On May 19, 2023, a Friday afternoon, Plaintiffs filed an Emergency Motion

for a Protective Order and for Clarification, in advance of depositions scheduled to

begin Monday morning. That day, I denied the motion and provided additional

guidance via two minute orders filed on the docket.64

         A one-day trial on a paper record was held on June 21, 2023.

62
  Gill v. Regency Holdings, LLC, C.A. No. 2023-0349-BWD, at 36-38 (Del. Ch. May 2,
2023) (TRANSCRIPT).
63
     See Dkts. 54, 66.
64
     Dkts. 56-57.

                                           23
II.    ANALYSIS

       Section 18-305(a) of the Limited Liability Company Act affords members of

a Delaware limited liability company the right to obtain books and records of the

company “from time to time upon reasonable demand for any purpose reasonably

related to the member’s interest as a member of the limited liability company.” 6

Del. C. § 18-305(a). Section 18-305(b) further provides that “[e]ach manager shall

have the right to examine all of the information described in subsection (a) of this

section for a purpose reasonably related to the position of manager.” 6 Del. C. § 18-

305(b). Section 18-305(e) requires that a demand for books and records “shall be in

writing and shall state the purpose of the demand.” 6 Del. C. § 18-305(e).

       Inspection rights under Section 18-305 may be expanded or limited by the

governing limited liability company agreement. The Operating Agreement provides

that “[t]he Member and its duly authorized representatives may, for any reason

reasonably related to its interest as a member of the [Company], examine the

[Company]’s books of account and make copies and extracts therefrom at its own

expense.” JX 3, Operating Agreement § 13(e). The parties’ arguments assume that

this language is co-extensive with Section 18-305.65

65
   OB at 32; Pls.’ Reply Br. [hereinafter, “RB”] at 1, Dkt. 72 (“Regency does not dispute
. . . that Plaintiffs’ rights are coterminous with the Act . . . .”). Although “[t]he phrase

                                            24
      The Company does not contest that the Demand complies with the form and

manner requirements of Section 18-305. The Company does, however, contest that

(i) Plaintiffs have standing as members or managers of the Company to obtain books

and records; (ii) Plaintiffs have demonstrated a proper purpose reasonably related to

their interests as members or managers of the Company; and (iii) Plaintiffs’ stated

purposes in making the Demand are their actual, primary purposes for seeking books

and records. The Company further asserts that (iv) inspection may be denied

because its manager believes in good faith that providing any books and records to

Plaintiffs in response to the Demand would be adverse to the interests of the

Company.

      A.     Plaintiffs Have Demonstrated Standing to Obtain Books and
             Records as Members, But Not Managers, of the Company.

      Entitlement to books and records under Section 18-305 is “status related”—

under the statute, only a member or a manager may access the company’s books and

records. To demonstrate standing, Plaintiffs must establish their status as members

or managers of the Company.

‘books of account’ is a less expansive term than ‘books and records,’” the parties have not
distinguished between entitlement to “books of account” under the Operating Agreement
and “books and records” under the statute. RED Cap. Inv. L.P. v. RED Parent LLC, 2016
WL 612772, at *3 (Del. Ch. Feb. 11, 2016) (citing Madison Real Estate Immobilien-
Anlagegesellschaft Beschrankt Haftende Kg v. Kanam USA XIX Ltd., 2008 WL 1913237,
at *12 n.91 (Del. Ch. May 1, 2008), and Arbor Place, L.P. v. Encore Opportunity Fund,
L.L.C., 2002 WL 205681 (Del. Ch. Jan. 29, 2002)).

                                            25
             1. Plaintiffs’ Standing as Members of Regency

      The Company contends that Plaintiffs are not valid members because the

Assignment Agreements through which they acquired their membership interests are

invalid due to breach of fiduciary duty, fraud, or undue influence. Earlier in this

litigation, the Company sought (but was denied) discovery to support its defense that

Plaintiffs lack standing on that basis. The Company still seeks dismissal or a stay of

this action in favor of the Texas Probate Action where Amarjit is currently

challenging the validity of the Assignment Agreements.

      I recommend denying the Company’s request for dismissal or a stay for two

reasons. First, as I explained in ruling on the Motion for Protective Order, this Court

is not the appropriate forum “to challenge the validity of an underlying transaction

through which the membership interests were transferred on grounds of breach of

fiduciary duty, fraud, undue influence, or similar theories.”         Gill v. Regency

Holdings, LLC, C.A. No. 2023-0349-BWD, at 36-38 (Del. Ch. May 2, 2023)

(TRANSCRIPT). “Caselaw determining who is a stockholder or a holder of record

under Section 220”—the corporate analog of Section 18-30566—“generally relies on

the corporation’s existing stock ledger.” Knott Partners L.P. v. Telepathy Labs, Inc.,

66
   “‘Delaware courts have interpreted Section 18-305 by looking to cases interpreting
similar Delaware statutes concerning corporations and partnerships,’ such as Section 220
of the Delaware General Corporation Law.” Riker v. Teucrium Trading, LLC, 2020 WL
2393340, at *4 (Del. Ch. May 12, 2020), judgment entered, (Del. Ch. 2020).

                                          26
2021 WL 5493092, at *4 (Del. Ch. Nov. 23, 2021). “In a typical case, the stock

ledger controls record-stockholder status, and a stockholder may point to the stock

ledger to show, prima facie, that she is in fact a holder of record.” Pogue, 2016 WL

4154253, at *3. As a practical matter, this rule is essential, because “requiring an

analysis of why and under what circumstances a [books and records] plaintiff came

to hold [her interest in the company] could significantly complicate the nature of this

summary and often expedited proceeding.” Deephaven Risk Arb Trading Ltd. v.

UnitedGlobalCom, Inc., 2005 WL 1713067, at *6 (Del. Ch. July 13, 2005).

      Although the ledger is prima facie evidence of standing in a books and records

proceeding, the Court may, in limited circumstances, look beyond the ledger where

the prima facie case is rebutted by other evidence. See Pogue, 2016 WL 4154253,

at *3 (“[I]nclusion on a stock ledger is prima facie evidence of stock ownership, but

. . . the corporate defendant may rebut that presumption by clear and convincing

evidence.”). But the few cases in which the Court has considered evidence beyond

the ledger to assess a standing defense have done so on narrow grounds, where the

defense could be resolved based on factual admissions or contract interpretation.67

For example, in Pogue v. Hybrid Energy, Inc., the Court declined to rely on a ledger

67
   See Knott Partners L.P., 2021 WL 5493092, at *4 (noting that “the Court seldom uses
this authority [to look beyond the stock ledger], occasionally acknowledging its existence
but typically declining to inquire beyond the ledger itself”).

                                           27
where the plaintiff conceded that the stock issuance through which he obtained his

stock was void because it was not authorized under the corporation’s certificate of

incorporation.68 2016 WL 4154253, at *1. In Prokupek v. Consumer Capital

Partners LLC, the Court dismissed a books and records action under Section 18-305

where it could determine as a “matter[] of contract interpretation” that the plaintiff

“was no longer a member of [the company] when he demanded inspection.” 2014

WL 7452205, at *3-4 (Del. Ch. Dec. 30, 2014).

       By contrast, this Court has declined to look beyond the ledger where doing so

would effectively convert a summary books and records proceeding into a plenary

action. In Holtzman v. Gruen Holding Corp., then-Vice Chancellor Chandler denied

a similar motion to stay where the company argued that the plaintiff was not a

“proper” stockholder entitled to inspection because he had breached contractual

obligations under a stockholders agreement to tender his stock to the company. 1994

WL 444756, at *2 (Del. Ch. Aug. 5, 1994). An action in Pennsylvania was filed to

68
   In Knott Partners L.P. v. Telepathy Labs, Inc., the Court held that where a corporation
failed to update its stock ledger but conceded in documentation circulated outside the
corporation that the same entity was in fact a stockholder as of that date, the corporation
could not rely on the deficient ledger it controlled to deprive the stockholder of its
inspection rights. 2021 WL 5493092, at *5-6. Given that Plaintiffs appear on the ledger
here, that case is inapposite.
More recently, in Handler v. Centerview Partners Holdings L.P., the Court permitted
targeted discovery into partnership status in a books and records action where, unlike here,
there was no partnership ledger to which the parties could refer. 2023 WL 1955151, at *3
(Del. Ch. Feb. 13, 2023), report and recommendation adopted, (Del. Ch. 2023).

                                            28
determine whether the plaintiff was “obligated to tender all of his stock in the

company” under that agreement; according to the company, “[i]f that determination

[wa]s ultimately made by the Pennsylvania court, [the plaintiff] would not be a

stockholder entitled to demand inspection of books and records under 8 Del. C.

§ 220.” Id. The Court denied the motion, explaining that “when a stock ledger exists

and no other reason appears to question its authenticity or accuracy, our law has

always accorded prima facie stockholder status to one whose name appears on such

a ledger.” Id.69

         Here, Plaintiffs have produced two Assignment Agreements through which

Jack assigned membership interests in the Company to Mitch and Jag, and a

Resolution by Consent of the Directors of Regency Holdings, LLC, dated December

15, 2018, attaching a ledger and membership certificates reflecting Mitch and Jag’s

membership interests in the Company.70 That evidence presents a prima facie case

69
   See also, e.g., Western Air Lines, Inc. v. Kerkorian, 254 A.2d 240, 242 (Del. 1969)
(affirming the Court of Chancery’s holding that, where a plaintiff “proved that he was a
stockholder of record” of the company, evidence that the plaintiffs acquired his shares in
violation of federal law was “irrelevant” and could not defeat his inspection rights);
Odyssey Partners v. Trans World Corp., 1983 WL 20288, at *1 (Del. Ch. Mar. 21, 1983)
(denying request to continue trial where the company argued it could not “be ready for trial
on such short notice” because “its primary defense” was that the plaintiff had violated
federal securities laws “in its effort to wage its proxy battle,” holding that the Court would
not “entertain any evidence at the hearing” about those alleged violations given the
summary nature of a books and records action).
70
     JX 11.

                                             29
of Plaintiffs’ status as members of the Company. Aside from its theories that the

gifts of membership interests under the Assignment Agreements are invalid, the

Company has offered no evidence to rebut Plaintiffs’ standing.71

       Second, the Company’s request to stay this action in favor of the Texas

Probate Action “proceeds on a false premise.” Holtzman, 1994 WL 444756, at *3.

In that action, Amarjit seeks to invalidate the Assignment Agreements due to breach

of fiduciary duty, fraud, and undue influence. “Even if one assumes” that the Texas

Probate Action will ultimately invalidate the Assignment Agreements under those

theories, “it remains undeniable that as of now” Plaintiffs are members of the

Company, and their right to inspection “exists even though the possibility exists that

[they] may later be divested of [their] [membership interests] in some other

proceeding or be declared in some future proceeding to be holding [their] [interests]

contrary to law or private agreement.” Id. (emphasis added).

71
   Although a summary books and records action is not the appropriate forum to litigate
breach of fiduciary duty theories, the Company is not foreclosed from raising any
arguments to challenge Plaintiffs’ prima facie standing as members. Plaintiffs anticipated
one such argument in briefing—they acknowledge “potential blemishes” in the wording of
the Assignment Agreements, which “assign,” rather than “transfer,” membership interests
to Plaintiffs. Despite the inconsistent wording, Plaintiffs point out that the recitals in the
Assignment Agreements reflect Jack’s intention to transfer the interests such that Plaintiffs
would be “admitted to the Company . . . as a member,” JX 3 § 17, and that the Company’s
ledger was updated to reflect Plaintiffs’ membership interests. JX 11. The Company has
not pursued this argument, and it is therefore waived. See Emerald Partners v. Berlin, 726
A.2d 1215, 1224 (Del. 1999) (“Issues not briefed are deemed waived.”).

                                             30
         The Company argues otherwise, essentially claiming that the transfer of

membership interests under the Assignment Agreements never occurred because

Plaintiffs stood on both sides of the transaction, rendering the agreements

“presumptively void.”72 Assuming the Company even has standing to challenge the

validity of agreements to which it is not a party on grounds of breach of fiduciary

duties owed to someone else, a gift to a fiduciary is not automatically “void.” Rather,

a gift to a fiduciary will “be presumed to be voidable . . . and [the recipient] has the

burden of proving the fairness of the transaction.” In re Est. of Surian, 1990 WL

100794, at *4 (Del. Ch. July 12, 1990) (emphasis added).73 In other words, the

“presumption” addresses who bears the burden of proving fairness; the transaction

is nevertheless effective unless and until declared otherwise. For purposes of this

action, “[a]ll that matters presently is that [Plaintiffs] [are] current record [members]

and that [they] ha[ve] stated a proper purpose” for inspection. Holtzman, 1994 WL

444756, at *3 (emphasis in original).

72
     AB at 38.
73
  See also Coleman v. Newborn, 948 A.2d 422, 429 (Del. Ch. 2007) (“Upon the finding of
a fiduciary relationship, the party seeking to sustain the transfer can overcome the
presumption of fraud by showing the fairness of the transaction.”).

                                           31
         Accordingly, Plaintiffs have met their burden to demonstrate by a

preponderance of the evidence that they are members of the Company with standing

to inspect its books and records.

                2. Mitch’s Standing as a Manager of Regency
         Plaintiffs separately contend that Mitch is entitled to inspect books and

records as a manager of the Company.74

         On December 16, 2020, Amarjit executed an “Action by Personal

Representative of Jagmail Singh Gill,” purporting to “exercise [Jack]’s rights under

the [Operating Agreement] to remove [Mitch] as a director of the Company and to

replace him as a director of the Company with [Jackie].”75 According to Plaintiffs,

that action may have been invalid because it is an open question whether the personal

representative of an estate has authority to remove directors under 6 Del. C. § 18-

705.76 Plaintiffs concede, however, that after Jack’s death, Amarjit became the

Company’s majority member, and in that capacity, had the power to remove and

74
  Under the Operating Agreement, the managers of the Company are its directors. JX 3,
Operating Agreement § 1(b) (“The Member has requested that all references to managers
shall mean directors and therefore shall be changed to be called directors instead.”).
75
     JX 41 at Recital D.
76
     OB at 35-36.

                                         32
replace directors.77 Moreover, Mitch’s purported removal as a director of Regency

occurred two and a half years ago, in December 2020.78 Despite “question[ing]” the

validity of his removal,79 Mitch never took legal action to challenge it. Instead,

Mitch complied with the “handover” of Company records to Jackie “because [his]

mother asked [him] to do so”80; resigned as a director of Glissen Properties Ltd.,

Transomas Investments Ltd., West Properties, and Transomas Ltd.; and has not

fulfilled the roles of a manager since.

         For these reasons, Plaintiffs have not met their burden to prove by a

preponderance of the evidence that Mitch is a manager of the Company.

77
  See M. Gill at 203 (“After my father passed away, that ownership interest in Regency
would have passed on to my mother.”); Compl. ¶ 12 (“Several months after his death,
Jack’s membership interests transferred to Amarjit.”); id. ¶ 13 (“Several months after
Jack’s death, Amarjit became a member and 53.9% owner of Regency.”). See also JX 3,
Operating Agreement ¶ 6(d) (“Any incumbent Director may be removed and replaced at
any time, with or without cause, by the Member.”).
78
  Cf. Simple Glob., Inc. v. Banasik, 2021 WL 2587894, at *14 (Del. Ch. June 24, 2021),
judgment entered, (Del. Ch. 2021) (explaining in the “Section 225 context, even a delay of
a month and a half has been held sufficient to bar a claim under the doctrine of laches”);
Klaassen v. Allegro Dev. Corp., 2013 WL 5739680, at *20 (Del. Ch. Oct. 11, 2013)
(holding plaintiff’s seven-month delay in challenging his removal as a director was barred
by laches).
79
     OB at 36.
80
  M. Gill at 205-6 (stating that Mitch agreed to cede control of the Company to Jackie
“because [his] mother asked” and “out of respect and love for [his] mum, [he] . . . listened”).

                                              33
         B.     Plaintiffs Have Established Proper Purposes for Inspection.

         “To inspect books and records, a member of a Delaware LLC, like a

stockholder of a Delaware corporation, must first establish by a preponderance of

the evidence the existence of a proper purpose for inspection.” Sanders v. Ohmite

Hldgs., LLC, 17 A.3d 1186, 1193 (Del. Ch. 2011) (internal quotations omitted). A

proper purpose is any purpose “reasonably related to the member’s interest as a

member.” 6 Del. C. § 18-305(f)(2).

         As explained below, Plaintiffs have established proper purposes for inspection

of the Company’s books and records.

                1. Plaintiffs Have Stated Proper Purposes to Value their
                   Membership Interests and Evaluate the Status of the Business.

         Plaintiffs seek books and records for the purpose of “evaluating their

substantial membership interests in the Regency Companies.”81 The Demand also

“reformulates” the valuation purpose “in terms employed in the LLC Act”82 by

seeking to “evaluat[e] the status of the business and financial condition of the

Regency Companies” and “understand[] the current cash financial position of the

Regency Companies.”83

81
     JX 61, Demand at 4.
82
     Sanders, 17 A.3d at 1193.
83
     JX 61, Demand at 4.

                                           34
         Under Delaware law, a member’s desire to value her interests in the

company—particularly where the company is privately held—“has long been held

as a proper purpose” to inspect books and records. Woods Tr. of Avery L. Woods Tr.

v. Sahara Enterprises, Inc., 238 A.3d 879, 890 (Del. Ch.), judgment entered sub

nom. In re Woods v. Sahara Enters., Inc. (Del. Ch. 2020) (citing cases). The Demand

therefore states a proper purpose.

               2. Plaintiffs Have Stated a Proper Purpose to Investigate
                  Interested-Party Payments.
         Plaintiffs also seek to “investigat[e] improprieties in the corporate

governance, regulatory compliance, reporting, and controls of the Regency

Companies,” “investigat[e] mismanagement of the Regency Companies,” and

“evaluat[e] the propriety of any transfers of funds from the Regency Companies to

accountants, legal advisors, and/or any other professional advisors.”84

         Under Delaware law, the desire to investigate mismanagement is a proper

purpose. However, “[a] mere statement of a purpose to investigate possible general

mismanagement, without more, will not entitle” a member to broad inspection relief.

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

proper investigation purpose, a member “must present some evidence to suggest a

credible basis from which a court can infer that . . . wrongdoing may have occurred.”

84
     JX 61, Demand at 4.

                                         35
Pettry v. Gilead Scis., Inc., 2020 WL 6870461, at *10 (Del. Ch. Nov. 24, 2020),

judgment entered, (Del. Ch. 2020).

         The credible basis standard imposes “the lowest possible burden of proof.”

Seinfeld, 909 A.2d at 123. It does not require a member to prove that the wrongdoing

“actually occurred.” Marmon v. Arbinet-Thexchange, Inc., 2004 WL 936512, at *4

(Del. Ch. Apr. 28, 2004). It does not require a member “to show by a preponderance

of the evidence that wrongdoing is probable.” Lebanon Cnty. Employees’ Ret. Fund

v. Amerisourcebergen Corp., 2020 WL 132752, at *8 (Del. Ch. Jan. 13, 2020), aff’d,

243 A.3d 417 (Del. 2020).        It requires only that a member “establish by a

preponderance of the evidence that there is a credible basis to suspect a possibility

of wrongdoing.” Pettry, 2020 WL 6870461, at *11 (emphasis in original). That

burden may be “‘satisfied by a credible showing, through documents, logic,

testimony or otherwise, that there are legitimate issues of wrongdoing.’” Id.

         To demonstrate a credible basis to investigate mismanagement, Plaintiffs

attempt to create an inference that Jackie has “run[] the bank accounts dry”85 by

secretly siphoning Company assets and forming new entities in which to hide them.

To support that theory, Plaintiffs identify (i) two instances in which it appears Jackie

85
     M. Gill at 214.

                                          36
used Company funds to pay personal expenses;86 (ii) account statements showing

approximately $2.4 million in transfers made from Northwest Airport to West

Properties;87 and (iii) two new “Regency” entities that were formed in November

2022.88

         First, Plaintiffs cite account statements showing a $600,000 transfer to the

I.R.S. to pay Jack’s personal tax liabilities and another $170,838.71 transfer made

directly to Jackie’s personal account. The Company suggests that those payments

do not evidence wrongdoing because “the airport had regularly paid Jack’s tax

liabilities before Jackie came along,” and Plaintiffs have not demonstrated that the

payment to Jackie “would represent an unreasonable salary for her two years as

CEO, President, Secretary, and sole director” of Northwest Airport. 89 Whether

characterized as the investigation of possible wrongdoing or as an independent

proper purpose, “how directors and senior officers are compensated and whether

they are the beneficiaries of any related-party transactions are basic facts that

stockholders are entitled to know.” Woods, 238 A.3d at 900. Plaintiffs have stated

86
     JX 74.
87
     M. Gill at 70; id. at 188; JX 73.
88
     JX 71.
89
     AB at 32.

                                          37
a proper purpose to investigate payments made to or on behalf of the Company’s

managers, family members, or other interested parties.

       Next, Plaintiffs contend that transfers from Northwest Airport to West

Properties amounting to $2.4 million give rise to an inference of possible

wrongdoing at the Company’s subsidiaries90 because West Properties had no

legitimate need for the funds, never previously received funds from Northwest

Airport, and did not have a line of credit with Northwest Airport.91 The implication

is that Jackie has engaged in a secret scheme to funnel millions of dollars out of the

Company for illicit reasons, and Plaintiffs need “to understand what happened to the

$2.4 million (and likely more) that Jackie took.”92 The suspicion Plaintiffs try to

create around these transfers, however, is dispelled by their own repeated admissions

90
   The Company argues that seeking to investigate wrongdoing based on these transfers is
improper because they are the subject of a lawsuit that Jag filed derivatively on behalf of
Northwest Airport in Texas court days after this action was initiated. AB at 26. This
argument mischaracterizes Plaintiffs’ reasons for describing the transfers. Plaintiffs
stipulate that they do not seek documents from Northwest Airport in this litigation. Instead,
they assert that a pattern of mismanagement at Northwest Airport gives rise to a credible
inference of wrongdoing at Regency’s other subsidiaries, given that those subsidiaries are
all managed by the same person.
91
  RB at 16; see also OB at 24. Plaintiffs also assert that if the transfers were “above-board
‘distributions’” to West Properties, then Jag, as a partner of Northwest Airport, would have
received a pro rata distribution, but he did not. The Company counters that Jag owes
Northwest Airport an “eight-figure debt” and “it would be a long time before he would be
entitled to cash, as opposed to credits against his debt.” AB at 33.
92
  RB at 16; see also M. Gill at 214 (testifying that Plaintiffs need books and records “to
get to the bottom of this to find out what’s going on”).

                                             38
that the transfers apparently were used to fund the ongoing litigations. Indeed, Mitch

testified that a former Company employee told him that Jackie was “running the

bank accounts dry” and “spending all the money” “on the lawyers,”93 and Plaintiffs

sought injunctive relief in Texas premised on similar representations.94 Given those

concessions, the transfers Plaintiffs identify do not support a credible basis to suspect

that Jackie has been secretly siphoning Company funds.

         Finally, Plaintiffs point to evidence that two new entities bearing the

“Regency” name—Regency Holdings I, LLC and Regency Holdings DE Inc.—were

formed in November 2022.95 Plaintiffs now agree that one of those entities, which

was formed by an individual in Australia, “may in fact have been a coincidence,”

93
  M. Gill at 133, 211-14. Jag also testified that Jackie told him she “do[es]n’t care how
much money [she] spend[s] because it’s not [her] money,” but I am not convinced that this
self-serving account of their conversation is credible. J. Gill at 155, 156.
94
   JX 92 ¶ 1 (“Jackie has withdrawn millions of dollars from NWAM’s bank accounts to
directly pay expenses and liabilities that have no legitimate business purpose for NWAM,
as well as to fund her personal vendetta against Mitch and Jag”); id. ¶ 32 (“Jag and Mitch
are concerned that Jackie is using her control of NWAM to divert its funds in order to cover
the very considerable costs involved in the English Proceedings.”); id. ¶ 38 (“A former
employee working for Jackie recently told Mitch that Jackie had emptied Regency
Holdings’ bank accounts and ‘spent all the money’ in pursuing these claims driven by
personal animosity. He indicated that Regency Holdings’ bills—whether for company
work or otherwise—could only be met by extracting funds from Regency Holdings’
subsidiaries and transferring them to the UK. This is exactly what is happening with the
unauthorized distributions from NWAM to West Properties.”).
95
     JX 71.

                                            39
but claim it is “still unclear” who formed the other.96 Even assuming it was Jackie,

the formation of a single entity, alone or in combination with the other arguments

Plaintiffs have raised, does not give rise to a credible inference of possible

wrongdoing.97

         Accordingly, Plaintiffs have stated a proper purpose to investigate payments

made to or on behalf of the Company’s managers, family members, or other

interested parties, but have not demonstrated a credible basis to investigate

mismanagement more broadly.

                 3. Plaintiffs’ Stated Purposes Are Their Actual, Primary Purposes.

         The Company asserts that even if the purposes identified in the Demand are

facially proper, they are not Plaintiffs’ actual or primary purposes for seeking books

and records of the Company.

         “[O]nce a [member] has identified a proper purpose . . . the burden shifts to

the corporation to prove that the [member]’s avowed purpose is not her actual

purpose and that her actual purpose for conducting the inspection is improper.”

96
     RB at 17.
97
   Plaintiffs also assert that they are entitled to books and records “to probe Jackie’s
continued engagement of a person [Mr. Patel] she says defrauded the Companies.” RB at
24. Plaintiffs do not assert that they believe Mr. Patel defrauded the Company. Jag testified
that “Perry Patel was an integral part of [the] family business,” and Mitch testified that
correspondence with Mr. Patel could provide “an objective opinion of what is going on.”
J. Gill at 221; M. Gill at 233-34. Instead, it appears Plaintiffs seek this information for
impeachment purposes. This does not provide a credible basis to suspect wrongdoing.

                                             40
Woods, 238 A.3d at 891. “[O]ur courts have given credence to such defenses only

where it is evident from the facts on the record that the plaintiff’s actual,

predominating, purpose is something unrelated to the plaintiff’s purpose as a

stockholder.” Sutherland v. Dardanelle Timber Co., 2006 WL 1451531, at *9 (Del.

Ch. May 16, 2006). “The issue of whether a concept so elusive as purpose or motive

is ‘primary’ or ‘secondary’, involves a judgment that necessarily is qualitative, not

mathematical.” Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d

160, 166-67 (Del. Ch. 1987). If a member’s primary purpose is proper, “any

secondary purpose or ulterior motive of the [member] becomes irrelevant.’” Riker,

2020 WL 2393340, at *4.

      Based on the evidence presented at trial, I find that Plaintiffs’ stated purposes

are, in fact, the primary purposes motivating the Demand. Mitch and Jag devoted

their entire careers to running Regency and its subsidiaries alongside their father.

They assert they are the owners of 46% of the Company. They do not trust their

sister. It is eminently believable that after losing visibility into the operations of the

companies they ran for three decades, Plaintiffs want to understand the status of the

business, the value of their interests, and whether self-dealing has occurred.

      Those purposes were borne out in each of Mitch and Jag’s testimony. For

example, Mitch testified that:

      [A]s an owner, a member, a director of Regency, I just want
      transparency, something that Jackie hasn’t been giving me. So whether

                                           41
          it’s about the prosecution, whatever she’s not able to share with me
          under privilege or whatever it may be, I’m not asking for that. I’m
          actually asking for, what are the funds being used for? What’s going
          on with the companies? And it’s got nothing to do with these cases.
          All I want to know is, together with my brother as a 46 percent
          shareholder member and owner of Regency, we want to know what is
          going on with the company. Is that too much to ask?98

He further testified:

          My books and records request is to understand what is going on in the
          company, how is it performing, how is [Jackie’s] management going,
          is she a competent operator, is she kind of squandering money? I need
          to know all those questions. It’s not specifically what you’re talking
          about. You’re narrowing it down, and I’m trying to say to you I just
          want generally to know how exactly is the company performing now
          that Jackie is operating it?

          Prior, it was me in the UK and my brother in the U.S. And for many
          years, we knew exactly what was going on, and whatever was going on,
          Jackie has those documents and information. I’ve been shut out since
          2020, and I want to be understanding how things are going. As an
          owner, I think I have that right.99

And again, Mitch explained:

          [S]orry to state the obvious, but as an owner, a member, a director of
          Regency and for all the concerns I have in the payments that I see and
          the various other . . . explanations I’ve given, as a stakeholder in
          Regency, most notably an active member, owner, I want to know
          what’s going on. And I want to know, is Jackie dissipating the value of
          what myself and my brother and even my mother [own].100

98
     M. Gill 100.
99
     Id. at 102-3.
100
      Id. at 237.

                                            42
Jag similarly testified:

          I want to know the financial position of this entity, Regency, and its UK
          subsidiaries. We’ve talked about these cash flows between the U.S. and
          the UK subsidiaries, so I certainly want to know about the cash position
          in the UK and its subsidiaries, I want to know how do I evaluate my
          membership interest in Regency and is that appreciating or
          deteriorating? . . . I have no visibility to any of that, and so, I’m
          generally concerned about that . . . .101

          The Company nevertheless raises several arguments in support of its position

that Plaintiffs’ stated purposes are not their actual or primary purposes for making

the Demand. None carry the day.

          First, the Company argues that Plaintiffs’ valuation purpose is not genuine

because Plaintiffs have failed to “identify a credible potential end use of a

valuation.”102 “If a stockholder cannot identify a credible potential end use, then the

court may infer that the stockholder’s stated purpose is not its actual purpose.”

Woods, 238 A.3d at 893 (citing Marathon P’rs, L.P. v. M & F Worldwide Corp.,

2004 WL 1728604, at *8 (Del. Ch. July 30, 2004)). But that is not dispositive. Based

on the evidence, the Court instead “may credit the stockholder’s valuation purpose.”

Id. Plaintiffs’ testimony persuades me that they do, in fact, seek to understand the

status of the business and value of their interests, even if they have not identified a

101
      J. Gill at 222-23.
102
      AB at 23.

                                             43
specific end use for that information. As Plaintiffs explain, “Jag and Mitch are 46%

members of a company that holds a significant portion of their net worth . . . . Their

reasons for wanting to value their interests are self-evident.”103

         Second, the Company contends that Plaintiffs do not actually seek to

investigate wrongdoing. According to the Company, prior to Jack’s death, Plaintiffs

regularly used Company assets to pay personal expenses, including personal tax

liabilities. The Company says that if Plaintiffs did not believe their own personal

expenditures were wrongful, they cannot honestly believe that Jackie’s payment of

personal expenses is wrongful. Plaintiffs disagree, claiming the “line of credit” used

at the Airport Companies was different because it was “scrupulously tracked,” and

turn the Company’s argument back on it, suggesting that if Jackie believes their prior

draws were wrongful, then she must concede her own are as well. To my mind,

these arguments simply confirm the parties’ mutual distrust, and I remain convinced

that Plaintiffs sincerely seek to investigate the legitimacy of any personal payments

Jackie has authorized.

         Third, the Company argues that the Demand itself demonstrates that

Plaintiffs’ true purpose is not to investigate wrongdoing or to value their interests in

the Company, but to investigate Regency’s ability to continue financing the

103
      RB at 12.

                                          44
litigations in the U.K. and Texas, and to improperly obtain discovery to advance

those other lawsuits. The Company asserts that the Demand seeks records and

details of payments to the Company’s legal advisors; the Demand requests

communications with the Company’s accountant, Perry Patel, that Plaintiffs were

denied during discovery in the U.K. litigations; and, despite arguing here that the

transfers from Northwest Airport to West Properties “made no sense,” Jag

represented in the Texas litigation that the transfers were used to pay litigation

expenses.         On that last point, the Company says that “inconsistency” proves

Plaintiffs “are attempting to conceal here that their true purpose in bringing this

action is to acquire highly confidential information about Regency’s current and

continuing willingness and ability to fund its litigation with Mitch and Jag, and the

course of Regency’s confidential investigations in support of its claims and

defenses.”104

         Plaintiffs deny that the Demand was prompted by any desire to obtain an

advantage in the other litigations.       The timing of the Demand supports that

conclusion. Plaintiffs sent their initial demand to the Company on May 24, 2022,

days after Jag discovered the $600,000 and $170,838.71 personal payments, and a

few weeks after he began to see transfers from Northwest Airport to West Properties.

104
      AB at 19.

                                           45
As Plaintiffs explain, “[t]his was well after the parties filed their now-consolidated

hotel claims in 2021 . . . and well before they filed their second set of UK claims in

September and October 2022.”105

          And, again, Plaintiffs’ testimony about their purposes was credible. Mitch

testified that “whether it’s about the prosecution, whatever [Jackie]’s not able to

share with me under privilege or whatever it may be, I’m not asking for that.”106 He

said:

          I’m not sure what I’m asking for regarding the litigation. What I am
          asking you for is all the documents, all the paperwork, so that I can see
          how the companies are performing. I’m not necessarily trying to
          understand what her case is against me. I’m asking, how is the
          company performing? As an owner, I have that right.107

Weighing the evidence, I find it implausible that Plaintiffs, who believe they

collectively own 46% of the Company yet no longer have any insight into its

operations, are primarily motivated by gaining a litigation advantage as opposed to

actually understanding the status of the business, the value of their interests, and

whether Jackie is self-dealing.108

105
      RB at 21 (citing JX 50, JX 55, JX 62, and JX 64).
106
      M. Gill at 100.
107
      Id. at 101-2.
108
  The Company relies on Berkowitz v. Legal Sea Foods, Inc., 1997 WL 153815 (Del. Ch.
Mar. 24, 1997), in which the Court found that a stockholder of a private, family-run

                                             46
       For these reasons, I find that the Company has not met its burden to prove by

a preponderance of the evidence that Plaintiffs’ actual, primary purposes for seeking

books and records are other than those stated in the Demand.

       C.     The Company Has Not Established a Good Faith Belief That
              Disclosing the Information Sought in the Demand Will Harm the
              Company.

       Section 18-305(c) empowers the manager of a limited liability company to

withhold books and records from the members where the manager believes in good

faith that disclosure of information would not be in the best interests of the company

or could damage the company or its business:

       The manager of a limited liability company shall have the right to
       keep confidential from the members, for such period of time as the
       manager deems reasonable, any information which the manager
       reasonably believes to be in the nature of trade secrets or other
       information the disclosure of which the manager in good faith
       believes is not in the best interest of the limited liability company or
       could damage the limited liability company or its business or which
       the limited liability company is required by law or by agreement with a
       third party to keep confidential.

company sought books and records for the primary purpose of “facilitat[ing] the
prosecution” of claims in a Massachusetts lawsuit. But in that case, unlike here, “the
plaintiff . . . made no real effort to advocate his position in any credible way,” and instead
“filed an eight page posttrial brief that advanced essentially conclusory assertions, and
made no effort to address the factual or legal problems inherent in his case.” Id. at *3. Of
course, the Court’s factual findings in that case do not control here.

                                             47
6 Del. C. § 18-305(c) (emphasis added).109

          Relying on this section, the Company asserts that even if the purposes stated

in the Demand are Plaintiffs’ actual, primary purposes, the Company may refuse to

permit inspection because Jackie, as a manager of the Company, believes in good

faith that “allowing any part of the requested inspection would have both the purpose

and effect of providing Mitch and Jag with a strategic and tactical advantage in their

multiple lawsuits against Regency.”110 According to the Company, Plaintiffs “are

using funds they took from the Regency companies to fund a barrage of litigation in

the hope that the companies, drained of cash, will be unable to fund a defense,” and

“[t]he financial records they seek here would reveal just how well their strategy is

working and how much longer they will need to sustain it.”111 The Company asserts

that “even the most basic financial records would indicate the legal spend,” and

“information about the companies’ free cash flow, savings, and credit lines would

give Mitch and Jag unprecedented insight into Regency’s ability to resist their siege

of lawsuits.”112

109
   At trial, Plaintiffs argued for the first time that the Operating Agreement supersedes
Section 18-305(c). That argument was not briefed and is therefore waived. See Emerald
Partners, 726 A.2d at 1224.
110
      AB at 14.
111
      Id. at 15.
112
      Id. at 15-16.

                                            48
          The Company bears the burden to prove Jackie’s good faith belief that

disclosing any information sought in the Demand would not be in the best interest

of the Company. Bond Purchase, L.L.C. v. Patriot Tax Credit Properties, L.P., 746

A.2d 842, 846 (Del. Ch. 1999). The Company has not met that burden.

          When asked what harm the inspection would cause, Jackie testified that

expedited litigation is “burdensome” and Plaintiffs face “conflicts of interest” due

to the pending litigations.113 She also explained that inspection should be denied

because only the person “who’s running the business” should be the one “looking

at” the Company’s finances—she testified that “I don’t think as an owner, everyone

needs to be doing that.”114 In response to leading questions on direct examination,

Jackie did confirm her agreement that the Company’s subsidiaries would not

“benefit” from Plaintiffs learning how much has been spent on the litigation and how

much cash remains available to fund it.115 But that testimony did not convince me

113
      J. Kaur at 262-63.
114
      Id. at 161.
115
    Id. at 263 (“Q. [I]f Mitch and Jag knew how much Transomas was spending on the
litigation, would that be a benefit to Transomas? A. I don’t think so.”); id. at 264 (“Q. Do
you want Mitch and Jag to know how much you’re spending or Transomas is spending on
its attorneys in the UK litigation? A. No, I don’t think that’s appropriate in litigation. I’m
not aware of any situation where that’s allowed in litigation. So I think claiming an interest
that would give you something that’s an unfair advantage in litigation that you’re choosing
to pursue or defending, wouldn’t be appropriate.”); id. at 266 (“Q. [C]an you . . . think of
anything that would become good for Transomas Investments by Mitch knowing how

                                             49
that Jackie sincerely believes providing Plaintiffs with access to books and records

would not be in the best interests of the Company for the reasons that counsel asserts.

          This conclusion is supported by the Company’s failure to even attempt to

identify, with any precision, the information that, if disclosed, would harm the

Company. Jackie testified that she was “not sure which specific books are being

sought here.”116 And counsel conceded at trial that some information sought in the

Demand—such as information reflecting interested-party transactions—would not

reveal the Company’s legal spend or ability to fund the litigations going forward.

Yet in an effort to wholly resist the Demand, the Company argues that “allowing any

part of the requested inspection” would cause harm and refuses to produce, in its

own words, “even the most basic financial records.”117 I find this position was not

asserted in good faith.

much it’s spending on the litigation in London? . . . A. No, I think it’s contrary to the
interests of Transomas Investments, Limited. I can’t think of how that would be helpful to
the interests of the company.”); id. at 267 (“Q. Do you think there’s any benefit that you
can think of to Transomas, Limited of Mitch and Jag knowing how much cash flow is
available to fund litigation against Mitch and Jag and their companies in all the litigation
they brought and has been brought against them? . . . A. No, I don’t think it would be of
any benefit to the company. I think it would be contrary to the best interest of the
company.”).
116
      Id. at 185.
117
      AB at 14, 16 (emphasis added).

                                            50
       Beyond that, the purported harm the Company claims to face is overblown.118

It is no secret that the Company has incurred substantial legal expenses.119 By

making the argument, the Company seems to concede that its litigation spend is

unsustainable. While I do not entirely discount the advantage Plaintiffs could gain

by understanding the Company’s financial position, any incremental leverage does

not outweigh Plaintiffs’ right to obtain books and records for the proper purposes

stated in the Demand.120

       Accordingly, the Company has not met its burden to support its defense under

Section 18-305(c) and cannot withhold documents on that basis.

118
   See AB at 16 (“If litigation were war, such disclosure to the enemy of one’s resources
available for the fight would be considered treason.”) (citing CONVENTIONAL
AMMUNITION IN SURPLUS 9 (James Bevan, ed., 2008), for the proposition that
“ammunition stockpiles are regarded as national secrets”).
119
   M. Gill at 79 (“Q. So you are, of course, well aware that the Regency subsidiaries have
substantial legal expenses in the . . . UK, right?”); AB at 15 (arguing that “[t]he financial
records [Plaintiffs] seek here would reveal” whether “the companies, drained of cash, will
be unable to fund a defense”); id. at 15-16 (“[T]he size of the legal fees relative to the
normal expenses of the Transomas companies are such that even the most basic financial
records would indicate the legal spend”); id. at 18-19 (“Mitch and Jag admit that it is pretty
obvious why Regency would need substantial sums transferred from the airport to its UK
subsidiaries: to fund the expenses of the ‘English Proceedings’”).
120
    See Kortum v. Webasto Sunroofs, Inc., 769 A.2d 113, 124 (Del. Ch. 2000) (noting that
when stockholders seeking inspection own a large percentage of a privately held company,
“there often is no identifiable corporate interest separate and apart from the interests of the
. . . stockholders or if there is, the interest of the corporation in protecting itself from
unwarranted intrusion is considerably diminished”).

                                              51
      D.     Scope of Production

      Because Plaintiffs have established a right to inspection, I address the scope

of the Demand.

      Section 18-305(g) provides that “[i]f a member is entitled to obtain

information under this chapter or a limited liability company agreement for a

purpose reasonably related to the member’s interest as a member or other stated

purpose, the member’s right shall be to obtain such information as is necessary and

essential to achieving that purpose.” 6 Del. C. § 18-305(g). The Company has not

argued that any specific categories of information sought in the Demand are not

necessary and essential to Plaintiffs’ stated purposes,121 and it does not contest that,

if inspection is ordered, Plaintiffs are entitled to books and records held by

Regency’s subsidiaries in the U.K.

      The Demand seeks six categories of books and records and five additional

categories of information from the Company. Those specific requests can be

grouped into three broader categories: requests for financial documents (Document

Requests 1-5 and Information Requests 3 and 4); requests concerning interested-

121
    As a result, the Company has waived any objection to the scope of the relief
recommended herein on the basis that any particular documents are not necessary and
essential to the purposes stated in the Demand. See Emerald Partners, 726 A.2d at 1224.

                                          52
party payments and transactions (Information Requests 1-2 and 5); and requests for

correspondence with the Company’s accountants (Document Request 6).

              1. Financial Documents
       Document Requests 1 and 5 and Information Request 4 seek financial

statements, profit and loss statements, and general ledgers; copies of tax returns; and

documents reflecting the Company’s current assets and liabilities. These documents

are necessary and essential to Plaintiffs’ valuation purpose.

       Document Requests 2, 3, and 4 seek all loan accounts; copies of all bank and

account statements; and copies of all payroll records. Plaintiffs have not satisfied

their burden to demonstrate that this granular information is essential to their

valuation purpose.122

       Information Request 3 seeks documents reflecting all payments made to the

Company’s accountants, legal advisors, and other professional advisors.                This

request is overbroad. “A request for all documents concerning any payment made

to any advisor is more akin to discovery in plenary litigation than a [books and

122
    See J. Gill at 219 (requesting bank account statements for “more detail”). See also
Bizzari v. Suburban Waste Servs., Inc., 2016 WL 4540292, at *7 (Del. Ch. Aug. 30, 2016)
(finding plaintiff failed to prove that requests for “monthly cash flow statements, all sales
and expenses, credit, security, and pledge agreements, schedules of accounts payable and
accounts receivable, check registers, and bank statements would aid in valuing his interests
beyond the aggregate information contained in [the company’s] financial statements”).

                                             53
records] request.” Woods, 238 A.3d at 902. Plaintiffs are entitled to documents

showing the total amount of payments made annually to each advisor.

             2. Documents Concerning             Interested-Party      Payments      and
                Transactions

      Information Requests 1, 2, and 5 seek documents showing whether any loans

have been advanced to Jackie, Amarjit, or other related parties; payments,

distributions, or dividends paid to or made on behalf of or to Jackie, Amarjit, or

related parties; and any related-party transactions undertaken by the Company. As

noted above, whether stated as a valuation purpose, investigation purpose, or its own

independent purpose, Plaintiffs are entitled to information reflecting “basic

information about how [the Company’s managers] are compensated” and “how their

fiduciaries are taking money out of the corporation.” Woods, 238 A.3d at 900-01.

These requests are appropriately tailored to the purposes of the Demand.123

             3. Correspondence with the Company’s Accountants
      Document Request 6 seeks all correspondence with the Company’s

accountants, Perry Patel and Silver Levene. This information may be relevant to

Plaintiffs’ valuation purpose, and could also bear on Plaintiffs’ investigation purpose

to the extent communications refer to interested-party transactions. However, the

123
   To the extent payments to Jackie are reflected on payroll records (see Document Request
4), those must be produced as well.

                                           54
documents discussed above are sufficient for those purposes, and Plaintiffs have not

demonstrated a need for informal communications. I therefore recommend that this

request be denied.

          E.      Plaintiffs’ Request to Amend the Pleadings Should be Denied.
          Plaintiffs seek to amend their pleadings to the evidence, pursuant to Court of

Chancery Rule 15(b), to add a request for “the Regency Companies’ governing

documents, including any limited liability company agreements, resolutions, transfer

agreements, ownership ledgers, or other foundational documents that have been

created or amended since April 2020.”124 As of trial, Plaintiffs had not served a

written demand seeking those documents. Because a demand for books and records

must strictly comply with the form and manner requirements of Section 18-305, I

recommend that Plaintiffs’ request be denied, but nothing herein precludes Plaintiffs

from serving another demand on the Company.

          Relatedly, Plaintiffs “conditionally” move for fees in the event that Regency’s

document productions reveal that it has engaged in “self-help” by amending its

governing documents.125 At trial, Plaintiffs’ counsel confirmed that Plaintiffs are

124
      OB at 49.
125
      Id. at 55-56.

                                            55
not asking the Court to rule on that request at this time. It may be renewed when

and if appropriate.

III.   CONCLUSION
       I recommend that judgment be entered for Plaintiffs as described above. The

parties should meet and confer regarding a form of order memorializing the scope

of the production. This is a final report and exceptions may be taken pursuant to

Court of Chancery Rule 144(d)(2). The stay of exceptions entered under the

Chancellor’s April 4, 2023 letter is hereby lifted.

                                          56