                                                      EFiled: Sep 24 2014 03:37PM EDT
                                                      Transaction ID 56082893
                                                      Case No. 8663-VCN

                            COURT OF CHANCERY
                                  OF THE
                            STATE OF DELAWARE


 JOHN W. NOBLE                                             417 SOUTH STATE STREET
VICE CHANCELLOR                                            DOVER, DELAWARE 19901
                                                          TELEPHONE: (302) 739-4397
                                                          FACSIMILE: (302) 739-6179


                               September 24, 2014



Timothy R. Dudderar, Esquire                 Scott G. Wilcox, Esquire
Samuel L. Closic, Esquire                    Whiteford Taylor Preston LLC
Potter Anderson & Corroon LLP                The Renaissance Centre, Suite 500
1313 North Market Street                     405 North King Street
Wilmington, DE 19801                         Wilmington, DE 19801

      Re:   Jefferson v. Dominion Holdings, Inc.
            C.A. No. 8663-VCN
            Date Submitted: May 28, 2014

Dear Counsel:

      This is yet another dispute between a shareholder and the corporation about

the scope of inspection in a proceeding under 8 Del. C. § 220.           The Court

concluded after trial that the stockholder had demonstrated a proper purpose for his

request. The matter involves a corporation with a limited number of shareholders

and no public reporting duties. Thus, another question is the confidentiality to be

accorded documents that would not ordinarily find their way into the public light.
Jefferson v. Dominion Holdings, Inc.
C.A. No. 8663-VCN
September 24, 2014
Page 2



The Court addresses the debate in two phases: first, determining the scope of the

production and second, balancing the confidentiality concerns.

        Plaintiff Rodney Jefferson (“Jefferson”) demonstrated that valuing his

holdings in Defendant Dominion Holdings, Inc. (“Source4”) is a primary and

proper purpose for the inspections which he proposed.

        Tax returns and financial reports are requested.1       Yet, Jefferson seeks

“supporting documents relating thereto.” The scope of such a request is not

entirely clear; more importantly, why supporting documentation is necessary is not

readily apparent. The numbers on the tax returns and financial reports should

suffice.

        Executive compensation is another proper topic. Jefferson reasonably seeks

compensation information tied to individuals in their given positions. Jefferson,

however, seeks social security numbers and other personal information (or, at least,

his requests can be read as encompassing such information). No legitimate reason

to release personal information beyond individual names has been offered.




1
    The request for financial statements has not been waived.
Jefferson v. Dominion Holdings, Inc.
C.A. No. 8663-VCN
September 24, 2014
Page 3



      Source4 proposes to provide “audited consolidated annual financial

statements” for the period of 2010 through 2013.          For purposes of valuing

Jefferson’s stake in the corporation, that should be adequate. Why the unaudited

financial statements (as opposed to just the audited final statements) are needed has

not been explained.

      Source4’s audited financials are done on a consolidated basis. That is,

various subsidiaries are not independently audited. Jefferson has not shown why

subsidiary-by-subsidiary (as opposed to consolidated) reports are needed to fulfill

the purposes of his inspection. Production is limited to those audited financials

that already exist. It is not an objective of a Section 220 proceeding to require the

corporation to compile various financial data in a particular format when it has not

done so and when the stockholder has offered no reason why the corporation’s

standard practices should not be respected.2




2
  The parties had debated the production of various general ledgers (or information
to be extracted from them) maintained by Source4 and its subsidiaries. That
debate apparently has been resolved. See Pl.’s Opp’n to Def.’s Mot. for Entry of
Def.’s Orders ¶ 4.
Jefferson v. Dominion Holdings, Inc.
C.A. No. 8663-VCN
September 24, 2014
Page 4



      If the requested books and records are maintained in an electronic format

that may be readily used by Jefferson, there is no reason why production should

not be in that form. To the extent the information is maintained on paper, and not

readily available in electronic form, production in paper format is a reasonable

means of responding to the inquiry.3 Payment by the stockholder of the reasonable

costs of copying company paper records is part of the Section 220 process.4

      Confidentiality agreements provide a rational, reasonable, and enforceable

methodology for dealing with corporate books and records that otherwise would

not be subject to public review. A closely held corporation does not need to make

all of its records available to the public simply because it has a stockholder with a

legitimate basis for inspecting corporate records. Allowing a shareholder the right

to inspect corporate books and records should not automatically result in the

release of its private—even if not necessarily confidential—information.           A

balancing of the needs of the stockholder and the reasonable expectations of the

corporation is required. That balancing is best achieved through a confidentiality

3
  Thirty calendar days is a reasonable timeframe for production of all categories of
Source4’s books and records.
4
  To the extent that there was a dispute over court costs, the parties have resolved
that issue.
Jefferson v. Dominion Holdings, Inc.
C.A. No. 8663-VCN
September 24, 2014
Page 5



agreement that both (a) reasonably protects the confidentiality of the books and

records and (b) allows the stockholder to review the documents, not only with his

advisors, but also with other shareholders who share similar views.        Thus, a

stockholder should be allowed to share the information, but only with those who

(a) have some reasonable basis for review and (b) agree to preserve

confidentiality.5

      A reasonable confidentiality agreement protects the Court from being called

upon to inquire into the motives that may have animated a stockholder’s desire to

inspect the corporation’s books and records. Undoubtedly, there will be times

when the inspection is motivated by hostility toward incumbent management,

inspection not motivated strictly by the best interests of the corporation. In this

instance, Jefferson’s desire to value his shares provides a genuine and proper

purpose. Whether there might be some secondary, ulterior motive lurking in the

background that would incentivize the release of the corporation’s documents is a

question that the Court need not resolve. Source4’s confidentiality concerns are

adequately protected by a confidentiality order.

5
  The form of a confidentiality order is not prescribed. Any person acquiring
access to the books and records should execute a confidentiality undertaking.
Jefferson v. Dominion Holdings, Inc.
C.A. No. 8663-VCN
September 24, 2014
Page 6



      Finally, there appears to be some dispute about what confidentiality

provisions apply to documents that have been (or will be) released. To clarify, the

Court is not addressing documents disclosed in litigation up to this point. The

treatment of those documents is governed by Rule 5.1 and the confidentiality order

under which they were provided.

      Accordingly, the scope of the production has been defined, and the method

for preserving confidentiality has been explained. Counsel are required to prepare

and to submit an implementing form of order.

                                       Very truly yours,

                                       /s/ John W. Noble

JWN/cap
cc: Register in Chancery-K
