Court Opinion

ID: 4030236
Source: CourtListenerOpinion
Date Created: 2016-08-31 16:04:52.823305+00
Date Added: 2024-06-11T14:06:27.729724
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

LOUIS E. BIZZARI,                                      )
                                                       )
                 Plaintiff,                            )       C.A. No. 10709-JL
                                                       )
          v.                                           )
                                                       )
SUBURBAN WASTE SERVICES,                               )
INC., SUBURBAN WASTE                                   )
SERVICES OF DELAWARE, INC.,                            )
and FELT PROPERTIES, LLC,                              )
                                                       )
                 Defendants.                           )

                                Submitted: May 16, 2016
                                Decided: August 30, 2016

                                 MEMORANDUM OPINION

William J. Rhodunda, Jr., Esquire and Nicholas G. Kondraschow, Esquire,
RHODUNDA & WILLIAMS, LLC, Wilmington, Delaware; Attorneys for Louis E.
Bizzari.

Sidney S. Liebesman, Esquire and Lisa Zwally Brown, Esquire, MONTGOMERY,
McCRACKEN, WALKER & RHOADS, LLP, Wilmington, Delaware; Attorneys
for Suburban Waste Services, Inc., Suburban Waste Services of Delaware, Inc.,
and Felt Properties, LLC.

LeGROW, Judge1

1
    Sitting as a Vice Chancellor by designation under Del. Const. art. IV, § 13(2).
      This action involves a demand to inspect books and records of two Delaware

entities. The inspection demand was made by an individual who owns a one-third

interest in each entity and serves as a director or manager of the entities. The

stated purposes of the inspection were to (1) value the plaintiff’s interests in the

entities, (2) investigate possible mismanagement and wrongdoing, and (3) fulfill

the plaintiff’s fiduciary duties to the entities. The entities resisted the demand on

the basis that the plaintiff’s true purpose was not his stated purposes or,

alternatively, on the basis that the scope of the inspection sought was too broad.

      Although the plaintiff, in his capacity as a stockholder and member of the

entities, is entitled to a limited inspection of the entities’ financial information, it is

his right to inspect as a director and manager that is the challenging aspect of this

case. Unquestionably, there is a strong presumption under Delaware law that a

fiduciary is entitled to broad access to the books and records of the entity he

serves. In this case, however, the defendant entities convincingly established that

the plaintiff has engaged in efforts to compete with, and inflict reputational harm

on, the entities. The plaintiff’s actions in that regard largely were driven by his

intense hatred of the entities’ other two owners and principals. The complicated

interpersonal relationship between the entities’ three owners and principals,

coupled with the plaintiff’s familial relationship with one of the entities’ main

competitors, makes this case highly unusual and makes the prospect of the plaintiff

                                            1
misusing the books and records both real and troubling. The plaintiff’s false

testimony during trial in this matter further calls into question his willingness to

abide by any order of this court limiting his use of the books and records. In short,

I conclude that the entities have carried their rather substantial burden of proving

that the plaintiff’s demand to inspect books and records in his capacity as a director

and manager is not motivated by a proper purpose. The relief the plaintiff seeks

therefore largely is denied.

               FACTUAL AND PROCEDURAL BACKGROUND

       A. The parties

       These are the facts as I find them after trial. The plaintiff, Louis E. Bizzari,

is the founder of the defendant companies, Suburban Waste Services of Delaware,

Inc. (“Suburban Waste of DE”) and Felt Properties, LLC (“Felt”).2 Mr. Bizzari has

been involved in waste management services for his entire career and is “third

generation” in that industry.3 Felt operates as a holding company for properties

owned by Suburban Waste of DE, but the distinction between the companies

largely is formalistic, with all the day-to-day operations occurring at Suburban

Waste of DE.4 Therefore, unless the distinction between the two is important, I

2
  Mr. Bizzari’s complaint also sought inspection from Suburban Waste Services, Inc., a
Pennsylvania corporation. Mr. Bizzari voluntarily dismissed Suburban Waste Services, Inc. on
September 3, 2015.
3
  Trial Transcript (hereinafter “Tr.”) vol. I, 36.
4
  Tr. vol. I, 10, 113-14.
                                             2
will refer to Suburban Waste of DE and Felt collectively throughout this opinion as

“Suburban Waste.”

       B. Suburban Waste’s operations

       For the first 13 years of Suburban Waste’s existence, Mr. Bizzari managed

the operations side of the business, while his wife, Christina Bizzari, managed the

finances. Mr. Bizzari’s approach to business operations was decidedly informal;

neither he nor anyone else at the companies had an official title, Mr. Bizzari

submitted bids on various projects by developing them “in his head” without

utilizing a set formula or process, he paid employees under the table, and he relied

on an uncertified accountant to prepare the companies’ financial statements.5

       Whether by reason of Mr. Bizzari’s management style, the faltering

economy, or otherwise, Suburban Waste lost money for several consecutive years

leading up to 2013.6 In that year, Mr. and Mrs. Bizzari added a new owner to the

business, David DiIenno, who brought to the table both an infusion of cash and

more than three decades of experience in the waste management business. In

exchange for his buy-in, Mr. DiIenno received a 20% interest in each of Suburban

Waste of DE and Felt, interests that later were increased to 33.33%.7 As a result of

5
  Id. at 36-37, 41, 46-47.
6
  Id. at 38.
7
  JX 7-10. Mr. Bizzari disputes the validity of the Amended and Restated Stockholders
Agreement and the Amended and Restated Limited Liability Company Agreement, which had
the effect, among other things, of increasing Mr. DiIenno’s ownership of Suburban Waste of DE
and Felt. See JX 8, 10. That factual dispute is not germane to these proceedings. I assume for
                                              3
that increase, Mr. Bizzari, Mrs. Bizzari, and Mr. DiIenno each owned one-third of

Suburban Waste. In addition to each being directors of Suburban Waste of DE and

managers of Felt, each owner received a newly minted title: Mr. DiIenno was

named Chief Executive Officer of Suburban Waste, Mr. Bizzari was named Chief

Operating Officer, and Mrs. Bizzari was named Chief Financial Officer.8

       After he joined Suburban Waste, Mr. DiIenno set to work developing new

procedures for Suburban Waste’s operations, including budgeting and improving

day-to-day operations, obtaining a workers’ compensation policy, formalizing the

bidding process, putting all employees on the payroll, and having Suburban

Waste’s accounts audited by a certified accountant, all of which Mr. Bizzari

concedes were positive developments for Suburban Waste. 9                   Mr. Bizzari’s

“volatile” temper, however, negatively impacted employee morale, particularly his

repeated threats to quit and his negative comments regarding the companies and

their future.

       Solvency and financial stability are important in all businesses, but

particularly are critical in the waste management industry because of the need to

obtain bonding and credit facilities to sustain operations and bid on jobs. Mr.

the sake of this decision that the parties each own one-third of each company, but my ruling
would not change if the ownership percentage was different.
8
  JX 7-10.
9
  Tr. vol. I, 38, 63, 90-91.
                                             4
Bizzari and Mr. DiIenno agreed about that point at trial. 10 The true state of

Suburban Waste’s finances did not become apparent until after a certified

accountant audited Suburban Waste’s books.         Faced with Suburban Waste’s

financial position and Mr. Bizzari’s effect on employee morale, Mr. DiIenno

became concerned that Mr. Bizzari’s negative comments about Suburban Waste

adversely could affect its reputation. That reputation, critical to Suburban Waste’s

continued operations, could be damaged by any rumored financial difficulties,

which would spread quickly through the insular waste management community.11

       C. Mr. Bizzari takes a leave of absence.

       In April 2014, Mr. Bizzari began a leave of absence from Suburban Waste

occasioned by some medical issues he was confronting. At the suggestion of his

physicians, Mr. Bizzari stepped away from Suburban Waste’s day-to-day

operations, leaving things in Mr. DiIenno’s and Mrs. Bizzari’s hands.

Approximately four months later, Mr. Bizzari “reappeared” at Suburban Waste’s

offices without advanced warning. He quickly concluded, based on perceived

reactions to his presence, that he was not wanted there.12 Mr. Bizzari contends he

was frozen out of Suburban Waste without explanation and that he stopped

10
   Id. at 47-48, 127, 138.
11
   Id. at 146-49, 154.
12
   Id. at 16.
                                         5
receiving a paycheck in November 2014. 13 Mr. DiIenno tells a more nuanced

story.

         D. Mr. Bizzari competes with Suburban Waste.
         According to Mr. DiIenno, whose story I find credible, Mr. Bizzari ceased

working at Suburban Waste in the fall of 2014, 14 having concluded he was not

wanted at the offices. Shortly thereafter, Mr. Bizzari regularly was seen on the

premises of his father’s waste management company, B&L Hauling (“B&L”),

which is Suburban Waste’s direct competitor, often competing with Suburban

Waste for municipal projects.15 Mr. Bizzari’s car frequently was parked at B&L’s

offices, and he was seen driving one of B&L’s vehicles. 16 Mr. DiIenno also

learned that Mr. Bizzari contacted one or more bonding companies on B&L’s

behalf to assist B&L in obtaining bonding. Mr. Bizzari concedes that he assisted

his father in this way.17 Mr. Bizzari also began soliciting Suburban Waste’s long

time employees to come work for B&L, a fact Mr. Bizzari denies but that credibly

was confirmed by the testimony of two Suburban Waste employees who provided

specific details regarding Mr. Bizzari’s offer to them.18 Finally, although he has no

direct proof of such, Mr. DiIenno suspects Mr. Bizzari also may have called

13
   Pl.’s Opening Post-Trial Br. 2.
14
   Tr. vol. I, 154-55.
15
   Id. at 56-57, 170.
16
   Mr. Bizzari’s denial of this fact was not credible. The same can be said for much of his
testimony. Id. at 60, 166-70.
17
   Id. at 58-60.
18
   Tr. vol. II, 226-28, 237-38.
                                                 6
Suburban Waste’s banks and credit agencies and suggested that Suburban Waste’s

demise was imminent.19 Mr. Bizzari concedes he spoke with Suburban Waste’s

bankers during this period.20

       It would seem counterintuitive for Mr. Bizzari to engage in conduct that

competes with, and damages the reputation and productivity of, Suburban Waste.

Mr. Bizzari’s motive to do so, however, was strong; he discovered during this time

period that Mrs. Bizzari and Mr. DiIenno were engaged in a romantic

relationship.21 When that relationship began is a disputed fact that need not be

resolved for purposes of this action. What is important is that Mr. Bizzari believes

the relationship began in 2013 and was concealed from him for more than a year.22

He attributes the demise of his marriage with Mrs. Bizzari to her relationship with

Mr. DiIenno. Mr. and Mrs. Bizzari are now, or were at the time of trial, engaged in

a custody dispute regarding their minor children.23 Mr. Bizzari’s understandable

anger about the relationship between his wife and his business partner was

palpable at the time of trial. In contrast to that crumbling marital and business

partnership, Mr. Bizzari’s relationship with his father in the fall of 2014 was

flourishing. Indeed, Mr. Bizzari acknowledged that, after years of estrangement,

19
   Tr. vol. I, 164-66.
20
   Id. at 68-69.
21
   Id. at 52-53, 191-92.
22
   Id. at 52-53.
23
   Id. at 55-56.
                                         7
he and his father had re-established a relationship that was stronger than it ever had

been.24

        E. The inspection demand

        On January 13, 2015, Mr. Bizzari sent a letter to Suburban Waste of DE and

Felt demanding inspection of those companies’ books and records pursuant to 8
Del. C. § 220 and 6 Del. C. § 18-305 (the “Inspection Demand”).25 The Inspection

Demand sought access to 25 categories of documents, which roughly can be

divided into the following types of information: (1) information regarding the

ownership and governance of the companies, namely the stock/member ledger, a

statement of the value of property and services contributed by each stockholder or

member to the companies, and charters, bylaws, stockholder agreements, operating
                                                      26
agreements, and similar governing documents;               (2) financial information

regarding each company, including both high-level documents, such as financial

statements, balance sheets, and tax returns, as well as details and minutia such as

compensation paid to every employee, all documents reflecting each operating,

administrative, production sales, and all other expenses, credit, security, and pledge

agreements, check registers, bank statements, cancelled checks, cash receipts, and

24
   Id. at 60.
25
   JX 11.
26
   Id. at Categories 1-2, 10, 25.
                                          8
bank deposits; 27 and (3) documents relating to the actual or possible sale of

company assets.28

       Mr. Bizzari indicated the purpose of the Inspection Demand was to:

       (i) monitor the performance of each Company, (ii) determine the
       value of [his] stockholder/member interest in each Company, and (iii)
       to [sic] investigate all claims, facts and circumstances relating to (a)
       the status of each Company’s business, (b) each Company’s financial
       condition, (c) each Company’s financial activities, (d) the financial
       activities of each Company’s stockholders/members taken on behalf
       of each Company, (e) wrongdoing, (f) improper transactions, (g)
       waste, and (h) mismanagement.29
The Inspection Demand did not specify what possible mismanagement, waste, or

wrongdoing Mr. Bizzari believed might have been committed by or on behalf of

Suburban Waste. When Suburban Waste did not permit Mr. Bizzari to inspect the

requested books and records, he filed this action.

       This case was not immediately expedited because the parties engaged in

negotiations in an effort to resolve their dispute. When those negotiations broke

down, Mr. Bizzari then filed a motion to expedite and a two-day trial was held in

October 2015. The second day of trial was limited to the relatively brief testimony

of two Suburban Waste employees whom Mr. Bizzari solicited to work for B&L.

The parties then engaged in post-trial briefing and argument.

27
   Id. at Categories 3-9, 11-22.
28
   Id. at Categories 23, 24.
29
   Id. at 3.
                                          9
                                          ANALYSIS

          Mr. Bizzari demanded inspection of the books and records both in his

capacities as a stockholder of Suburban Waste of DE and a member of Felt, as well

as in his capacities as a director and a manager of those two companies,

respectively. As the standard governing the Inspection Demand, as well as the

possible scope of inspection, varies based on Mr. Bizzari’s capacity, I analyze Mr.

Bizzari’s demand as a stockholder/member separately from his demand as a

director/manager.

          Mr. Bizzari contends he is entitled to inspect Suburban Waste’s books and

records in his capacity as a stockholder/member because he has stated two proper

purposes for inspection: valuing his interest in Suburban Waste and investigating

possible mismanagement or wrongdoing by Mr. DiIenno and Mrs. Bizzari. 30

Suburban Waste disputes the propriety of Mr. Bizzari’s stated purposes,

contending (i) he has not demonstrated a credible basis from which this Court may

infer possible mismanagement or wrongdoing, and (ii) Mr. Bizzari’s true purpose

is to compete with, and inflict reputational harm on, Suburban Waste because of

his personal animus toward Mr. DiIenno and Mrs. Bizzari.

          Mr. Bizzari separately contends he is entitled to nearly unfettered access to

Suburban Waste’s books and records in his capacity as a director of Suburban

30
     Pl.’s Opening Post-Trial Br. 7-11.
                                             10
Waste of DE and a manager of Felt.               Suburban Waste resists that notion,

contending that Mr. Bizzari’s recent actions competing with the companies and

attempting to damage their reputation in the community demonstrate that his stated

purpose is not his true purpose and that he demanded inspection solely to gain

access to Suburban Waste’s confidential information with the aim of harming

Suburban Waste.

       I.     Mr. Bizzari is entitled to inspect high-level financial information
              for the purpose of valuing his shares, subject to a confidentiality
              order.
       Stockholders of Delaware corporations enjoy a qualified statutory right to

inspect the corporation’s stock ledger, a list of its stockholders, and its other books

and records. 31 Members of a limited liability company similarly enjoy certain

inspection rights under the Limited Liability Company Act (the “LLC Act”). The

parties have not drawn any distinction between the rights Mr. Bizzari may enjoy as

a stockholder of Suburban Waste of DE and the rights he may enjoy as a member

of Felt, presumably because of the interconnected nature of the two businesses and

because this Court treats Section 220, and the cases interpreting it, as the corporate

analogue to inspection rights under Section 18-305 of the LLC Act.32 I therefore

will not draw any distinction in this opinion between Mr. Bizzari’s inspection

rights as a stockholder as opposed to his rights as a member.
31
  Saito v. McKesson HBOC, Inc., 806 A.2d 113, 116 (Del. 2002); 8 Del. C. § 220(b).
32
  See, e.g. NAMA Hldgs., LLC v. World Mkt. Ctr. Venture, LLC, 948 A.2d 411, 421, n. 30 (Del.
Ch. July 20, 2007).
                                            11
       A stockholder may inspect books and records if the demand complies with

the form and manner requirements of the statute and the stockholder states a proper

purpose for inspection. A stockholder’s purpose is “proper” if it is “reasonably

related to such person’s interest as a stockholder” and is not adverse to the

company.33 When a stockholder seeks to inspect books and records other than a

stocklist, the stockholder bears the burden of establishing that his primary purpose

is proper. 34   If a stockholder carries that burden, any secondary purpose is

considered irrelevant.35 Any number of purposes may be proper, depending on the

context of a particular case, but a stockholder’s purpose must not be adverse to the

company, unrelated to a legitimate interest of the stockholder, or intended to harass

the corporation.36 Here, Mr. Bizzari argues he has stated two proper purposes for

inspection: (1) investigating possible mismanagement or wrongdoing, and (2)

valuing his interest in Suburban Waste.

       A. Mr. Bizzari has not stated a proper purpose with respect to
          investigating possible waste, mismanagement, or wrongdoing.
       Although investigation of corporate waste, mismanagement, or wrongdoing

is a proper purpose for which to demand inspection of books and records,37 the

33
   8 Del. C. § 220(b); CM & M Grp., Inc. v. Carroll, 453 A.2d 788, 792 (Del. 1982).
34
   Beiser v. PMC-Sierra, Inc., 2009 WL 483321, at *2 (Del. Ch. Feb. 26, 2009).
35
   Norfolk Cty. Ret. Sys. v. Jos. A. Bank Clothiers, Inc., 2009 WL 353746, at *5 (Del. Ch. Feb.
12, 2009); BBC Acq. Corp. v. Durr-Fillauer Med., Inc., 623 A.2d 85, 88 (Del. Ch. 1992).
36
   CM & M Grp., Inc., 453 A.2d at 792.
37
   Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 567 (Del. 1997); Dobler v.
Montgomery Cellular Hldg. Co., 2001 WL 1334182, at *3 (Del. Ch. Oct. 19, 2001).
                                              12
simple invocation of the phrase “mismanagement and wrongdoing” is not

sufficient to obtain access to corporate books. Mere suspicion, or a subjective

belief of wrongdoing, without more, is not enough to state a proper purpose. 38

Instead, a stockholder whose stated purpose is investigation of mismanagement

must provide “some evidence” to suggest a “credible basis” from which this Court

may infer “possible” mismanagement, waste, or wrongdoing have occurred.39

       This credible basis standard has been described as the “lowest possible

burden of proof” under Delaware law.40 The standard falls far short of requiring a

stockholder to prove by a preponderance of the evidence that mismanagement or

wrongdoing actually has occurred.41 The burden is not insubstantial, however, as it

is designed to strike a balance between granting stockholders access to corporate

records and protecting corporations and their stockholders from wasteful fishing

expeditions based entirely on curiosity.42

       Mr. Bizzari alleges he has met the credible basis standard by introducing

evidence that: (1) Mr. DiIenno and Mrs. Bizzari sought to remove him from his

positions as director and manager in contravention of Suburban Waste’s governing

documents, (2) Mr. DiIenno and Mrs. Bizzari sold or negotiated a potential sale of

38
   City of Westland Police & Fire Ret. Sys. v. Axcelis Techs., Inc., 1 A.3d 281, 287 (Del. 2010);
Marathon P’rs, L.P. v. M&F Worldwide Corp., 2004 WL 1728604, at *5 (July 30, 2004).
39
   Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 118 (Del. 2006).
40
   La. Mun. Police Emp. Ret. Sys. v. Countrywide Fin. Corp., 2007 WL 2896540, at *10.
41
   Axcelis Techs., Inc., 1 A.3d at 287; Countrywide Fin. Corp., 2007 WL 2896540, at *10.
42
   Seinfeld, 909 A.2d at 118.
                                               13
one or more of Suburban Waste’s properties, even though a sale of such assets

requires Mr. Bizzari’s consent, and (3) Mr. DiIenno and Mrs. Bizzari may be

mishandling Suburban Waste’s finances because its accounts payable have

increased substantially in the last year. 43 Shortly after trial in this inspection

action, Mr. Bizzari filed an action against Mr. DiIenno and Mrs. Bizzari for breach

of fiduciary duty associated with the efforts to remove him as a director and

manager and the efforts to sell certain Suburban Waste assets without his consent.

That action (the “Plenary Action”) remains pending in this Court. 44                           The

defendants in the Plenary Action have answered that complaint and discovery

presumably will proceed in the ordinary course.

       By filing the Plenary Action, Mr. Bizzari effectively conceded that the books

and records he seeks are not necessary or essential to his stated purpose of

investigating mismanagement or wrongdoing with respect to the removal or asset

sale issues.45 Mr. Bizzari and his counsel presumably concluded they possessed

sufficient information under Rule 11 to file the complaint without first inspecting
43
   Pl.’s Opening Post-Trial Br. 11-12.
44
   Bizzari v. DiIenno, C.A. No. 12109-VCG.
45
   See King v. Verifone Hldgs., Inc., 12 A.3d 1140, 1150 (Del. 2011) (holding dismissal of an
inspection action is proper when the stockholder’s plenary complaint is still pending and the
court in which the plenary action was filed has not granted leave to amend); Cent. Laborers
Pension Fund v. News Corp., 2011 WL 6224538, at *1 (Del. Ch. Nov. 30, 2011) (acknowledging
as a general rule that a books and records action to investigate mismanagement or wrongdoing
cannot be maintained simultaneously with a derivative action relating to the same alleged
mismanagement or wrongdoing); Baca v. Insight Enters., Inc., 2010 WL 2219715, at *4 (Del.
Ch. Jun. 3, 2010) (holding the filing of a derivative complaint is inconsistent with a stockholder’s
representation that inspection is necessary to investigate possible mismanagement or
wrongdoing).
                                                14
books and records.        As no motion to dismiss has been filed challenging the

sufficiency of the allegations, Mr. Bizzari can complete any additional

“investigation” under the much broader discovery that will be available to him

under the Court’s rules.         The availability of discovery in the Plenary Action

undercuts Mr. Bizzari’s alleged need to investigate mismanagement through an

inspection demand.46

       As to the remaining allegation, I cannot conclude that an increase in

Suburban Waste’s accounts payable, standing alone, amounts to evidence from

which the Court may infer possible mismanagement or wrongdoing. Mr. Bizzari

argues this figure indicates Suburban Waste must not be paying its bills in a timely

manner. Without any other evidence suggesting Suburban Waste is not paying its

bills when they come due, the mere indication that expenses have increased is not

evidence from which mismanagement or wrongdoing may be inferred.

       For those reasons, I conclude Mr. Bizzari failed to meet his burden of

establishing a credible basis to investigate possible mismanagement or

wrongdoing.

46
   Cent. Laborers Pension Fund, 2011 WL 6224538, at *2, n. 11 (“In Verifone, the Supreme
Court concluded that the opportunity given to the shareholder to amend the complaint in the
derivative action in the face of dismissal satisfied the statutory proper purpose standard. In
contrast, it is the proper purpose standard that limits [plaintiff] in [this] 220 Action. Until its
implicit representation that it has sufficient facts for its pleadings in the Derivative Action is
rejected (or, perhaps, seriously called into question) by the Court handling the Derivative Action,
it simply cannot identify that proper purpose that is consistent with the statutory standard.”).
                                                15
       B. Mr. Bizzari is entitled to inspect high-level financial information for
          the purpose of valuing his interest in Suburban Waste.
       Mr. Bizzari also contends he is entitled to inspect Suburban Waste’s books

and records in order to value his interests in Suburban Waste of DE and Felt. The

valuation of a stockholder’s interest is a valid purpose to inspect books and

records.47 Because minority stockholders of privately held corporations “do not

receive the mandated, periodic disclosures associated with a publicly held
                                                                                 48
corporation, [those stockholders] face certain unique risks.”                          Minority

stockholders in private corporations may “have a legitimate need to inspect the

corporation’s books and records to value their investment, in order to decide

whether to buy additional shares, sell their shares, or take some other action to

protect their investment.”49

       Suburban Waste concedes that Mr. Bizzari’s valuation purpose is a proper

one and that he is entitled to inspect books and records “that would enable him to

value his shares.” 50 Suburban Waste contends, however, that the bulk of the

records Mr. Bizzari seeks are not necessary to satisfy that purpose. A stockholder

who states a proper purpose for inspection is entitled to inspect only those records

47
   CM & M Grp., Inc., 453 A.2d at 792.
48
   Thomas & Betts Corp. v. Leviton Mrg. Co., 685 A.2d 702, 713 (Del. Ch. 1995).
49
   Id.; see also Macklowe v. Planet Hollywood, Inc., 1994 WL 560804, at *4 (Del. Ch. Sept. 29,
1994) (“When a minority shareholder in a closely held corporation whose stock is not publicly
traded needs to value his or her shares in order to decide whether to sell them, normally the only
way to accomplish that is by examining the appropriate corporate books and records.”).
50
   Pl.’s Opening Post-Trial Br. 17.
                                               16
that are “essential and sufficient” to achieve his purpose. 51 A document is

“essential” under Section 220 if “it addresses the crux of the shareholder’s

purpose,” and the “information the document contains is unavailable from another

source.”52 Put another way, a stockholder seeking to inspect books and records

must specifically and discretely identify, with “rifled precision,” the documents

sought.53 This inquiry necessarily depends on the context of each case.54

       As I read the Inspection Demand, categories 3-24 relate to Mr. Bizzari’s

valuation purpose. The bulk of those categories seek line-item details that are

reflected or incorporated in the company’s financial statements and therefore need

not separately be provided in order for Mr. Bizzari or his accountant to obtain an

accurate valuation of Mr. Bizzari’s interest.           Mr. Bizzari established that the

requests for the following categories of books and records were necessary and

essential to valuing his interests: (i) financial statements, income statements,

balance sheets, and communications from accountants, 55 (ii) tax returns and

schedules thereto,56 (iii) agreements encumbering Suburban Waste’s assets,57 and

(iv) documents concerning the actual or possible acquisition of any stockholder’s

or member’s interest in Suburban Waste of DE or Felt.

51
   Macklowe, 1994 WL 560804, at *6; see 8 Del. C. § 220(c).
52
   Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 371-72 (Del. 2011) (citations omitted).
53
   Sec. First Corp., 687 A.2d at 570.
54
   Espinoza, 32 A.3d at 372.
55
   JX 11, Category 3.
56
   Id. at Category 5.
57
   Id. at Category 15.
                                              17
          The remaining requests seek granular detail for which Mr. Bizzari could not

articulate any need. When asked to explain what he needs to value his shares, Mr.

Bizzari offered nothing more specific than “[e]verything that I asked for.” Mr.

Bizzari did not explain how requests for all compensation paid to employees,

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 Suburban Waste’s financial statements. It is a

stockholder’s burden to prove each category of documents is essential to his

purpose.

          Even if the question was a close one regarding Mr. Bizzari’s need for this

detailed information, the evidence of Mr. Bizzari’s conflicting motives and past

conduct in competing with Suburban Waste leaves me firmly convinced that he is

not seeking that information for valuation purposes, but rather to obtain a detailed

view of Suburban Waste’s finances, vendors, clients, and creditors, all of which

Mr. Bizzari could use to further his vendetta against Mr. DiIenno and Mrs. Bizzari.

In defining the scope of an inspection, this Court may consider any ulterior

motives of the stockholder demanding inspection.58 In my view, and as explained

58
     Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d 160, 167 (Del. Ch. 1987).
                                                18
in greater detail below, Mr. Bizzari’s ulterior motives counsel against any finding

that the detailed financial information he seeks is essential to his valuation purpose.

      In addition, and for those same reasons, any inspection necessarily will be

predicated on Mr. Bizzari’s agreement to abide by a confidentiality order entered

by this Court. The parties are instructed to negotiate the terms of such an order and

to file a proposed order with the Court within ten days of the date of this opinion.

      II.    Mr. Bizzari’s motives for inspecting the remaining books and
             records are not reasonably related to his position as a director or
             manager.
      Independent of his rights as a stockholder and member of Suburban Waste

of DE and Felt, Mr. Bizzari also maintains he is entitled broadly to inspect

Suburban Waste’s books and records by virtue of his position as a director of

Suburban Waste of DE and a manager of Felt. Mr. Bizzari contends, correctly,

that Suburban Waste bears the burden of establishing that his motives in seeking

inspection are improper, and contends, incorrectly in my view, that Suburban

Waste has not carried its burden in this regard. Suburban Waste, on the other

hand, urges that the evidence at trial demonstrated that Mr. Bizzari’s motives are

inconsistent with his fiduciary obligations and with the interests of Suburban

Waste and its stockholders. Having considered the evidence at trial and observed

the witnesses’ credibility, I agree with Suburban Waste.

                                          19
       I reach that conclusion with due regard for the fact that there is a strong

presumption under Delaware law that a director of a corporation is entitled to

“essentially unfettered” access to the books and records of the corporation of

which he is a fiduciary.59 The public policy underlying that rule is plain: a director

charged with fiduciary obligations to protect and preserve a corporation must have

access to the corporation’s books and records if he reasonably can be expected to

perform his duties.60 For that reason, a director seeking inspection of books and

records “makes out a prima facie case when he shows that he is a director, he has

demanded inspection and his demand has been refused.”61 A corporation resisting

such inspection bears the burden of proving that the director does not have a proper

purpose for the requested inspection.62 The number of cases in which this Court

has concluded a director’s purpose was not proper is predictably small. This case

qualifies as one of the rare exceptions to this Court’s general reluctance to

conclude that a fiduciary’s presumed right to access books and records has been

rebutted.

       During trial, Suburban Waste demonstrated, not only through the testimony

of Mr. DiIenno and the two Suburban Waste employees whom Mr. Bizzari

59
   Milstein v. DEC Ins. Brokerage Corp., C.A. Nos. 17586 and 17587 (Del. Ch. Feb. 1, 2000)
(TRANSCRIPT) (bench ruling quoted in Schoon v. Troy Corp., 2006 WL 1851481, at *1, n.8
(Del. Ch. Jun. 27, 2006)).
60
   Holdgreiwe v. Nostalgia Network, Inc., 1993 WL 144604, at *3 (Del. Ch. Apr. 29, 1993).
61
   Henshaw v. Am. Cement Corp., 252 A.2d 125, 129 (Del. Ch. 1969).
62
   Holdgreiwe, 1993 WL 144604, at *3.
                                             20
solicited to work at B&L, but also through Mr. Bizzari’s own admissions, that Mr.

Bizzari’s conduct during the last year had been entirely inconsistent with Suburban

Waste’s interests. For example, Mr. Bizzari’s allusions to employees or banks

about financial difficulties or improprieties at Suburban Waste likely have

damaged Suburban Waste’s reputation in a way that is difficult to quantify, let

alone rectify. He directly worked with Suburban Waste’s competitor, B&L, by

assisting B&L with bonding, driving B&L’s trucks, and attempting to poach some

of Suburban Waste’s long-time employees.        Suburban Waste also effectively

demonstrated that, although damaging Suburban Waste’s reputation and operations

may be inconsistent with his financial interests, Mr. Bizzari has allowed his

emotional distress over the relationship between Mr. DiIenno and Mrs. Bizzari to

cloud his judgment.

      Because, in the past, Mr. Bizzari has demonstrated a willingness to compete

directly with Suburban Waste by assisting B&L, and because he remains motivated

to do so as a result of his extreme anger and resentment of Suburban Waste’s other

two principals, to say nothing of his ongoing divorce and custody dispute with

Mrs. Bizzari, I conclude Mr. Bizzari demanded the inspection to either (1) further

his efforts to damage Suburban Waste or (2) hold Suburban Waste hostage in order

to effectuate a desirable settlement of the parties’ larger disputes regarding the

companies’ future. Either way, he did not demand the inspection in order to carry

                                        21
out his fiduciary obligations to the companies.          In my view, permitting the

inspection would enable Mr. Bizzari to breach his fiduciary duties, not uphold

them.

          Mr. Bizzari vigorously resists any implication that he has acted or might act

in a manner injurious to Suburban Waste’s reputation or its financial security. He

was not, however, an effective witness on his own behalf. Mr. Bizzari admitted he

has violated the law in the past by paying employees “under the table.” He

conceded that he called upon relationships he developed at Suburban Waste to

assist B&L in its efforts to obtain new bonding. 63 He denied, unconvincingly,

contacting Suburban Waste’s employees about coming to work at B&L, but that

testimony was contradicted by the detailed and credible testimony of two of the

employees.          In addition, Mr. Bizzari’s own testimony regarding his thriving

relationship with his father after years of estrangement, compared to his visible

contempt for Mr. DiIenno and Mrs. Bizzari, leaves little question regarding where

his loyalties and interests lie. Suburban Waste therefore has carried its burden in

proving that Mr. Bizzari’s purpose for seeking access to Suburban Waste’s books

and records, other than its high-level financial information, is not reasonably

related to his interests as a director or manager.

63
     Tr. vol. I, 58-60.
                                            22
         Notable in its absence at trial or in post-trial briefing was any effort by Mr.

Bizzari to assuage concerns about his motives by indicating a willingness to sign a

tightly-worded (or, indeed, any) confidentiality agreement or offer his interest in

Suburban Waste as collateral for his guarantee not to misuse the books and records

were he permitted to inspect them. Nor did Mr. Bizzari offer testimony of anyone

at B&L to corroborate his denial of Suburban Waste’s accusations. His failure

effectively to rebut Suburban Waste’s evidence, and his refusal to acknowledge

and attempt to ameliorate the concerns about his motives only further draws into

question his intended purpose.

         III.    Mr. Bizzari’s false testimony is not sufficient to bar the limited
                 relief to which he otherwise is entitled.
         Although the argument largely is mooted by my conclusion that Mr. Bizzari

is entitled to inspect only a small portion of the books and records he demanded, I

nevertheless briefly will address Suburban Waste’s contention that Mr. Bizzari’s

conduct during the course of this litigation bars him from obtaining the relief he

seeks. Suburban Waste argues that Mr. Bizzari perjured himself regarding his

efforts to solicit Suburban Waste’s employees and that this false testimony

“undermines the integrity of the judicial process.”64 Suburban Waste urges that

Mr. Bizzari’s request for inspection should be denied on that basis and that the case

64
     Defs.’ Answering Br. 27.
                                            23
should be dismissed under Court of Chancery Rule 41(b). 65          Suburban Waste

reasons that it would send a poor signal to potential witnesses were there no

consequence to providing false testimony to the Court.66

          Far from the absence of consequences, however, the most natural

consequence for false testimony is for the trial court to conclude that the witness is

not credible. That is not to say that other consequences may not be appropriate or

warranted in a particular case. Here, however, the consequence of my conclusion

that Mr. Bizzari’s testimony was not credible is the follow-on conclusion that he is

not entitled to the vast majority of the relief he seeks. In this case, no additional

sanction is warranted.

                                   CONCLUSION

          For the foregoing reasons, Mr. Bizzari is entitled to inspect the limited

categories of documents referenced in Section I. (B.) of this Opinion, subject to an

appropriate confidentiality order. Suburban Waste SHALL prepare a proposed

form of order conforming to this Opinion, including appropriate confidentiality

restrictions, and SHALL file it with the Court within TEN DAYS of the date of

this Opinion.      Before filing the proposed form of order, the parties SHALL

exchange drafts and SHALL confer regarding any disputed terms in the order.

Any dispute regarding the terms of the proposed order may not be raised to the

65
     Id. at 30.
66
     Id.
                                          24
Court unless or until the parties have met and conferred, in person, regarding the

dispute. Any objection Mr. Bizzari has to the proposed form of order SHALL be

submitted within THREE DAYS of the date Suburban Waste’s proposed form of

order is filed.

       IT IS SO ORDERED.

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