   IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

INTER-LOCAL PENSION FUND                 )
GCC/IBT,                                 )
                                         )
           Plaintiff,                    )
                                         )
      v.                                 )   C.A. No. 2017-0910-MTZ
                                         )
CALGON CARBON                            )
CORPORATION,                             )
                                         )
           Defendant.                    )

                         MEMORANDUM OPINION

                        Date Submitted: October 17, 2018
                         Date Decided: January 25, 2018

R. Bruce McNew, COOCH & TAYLOR, P.A., Wilmington, Delaware; Randall J.
Baron, David T. Wissbroecker, and Christopher H. Lyons, ROBBINS GELLER
RUDMAN & DOWD LLP, San Diego, California and Nashville, Tennessee;
Attorneys for Plaintiff

Stephen C. Norman and Tyler J. Leavengood, POTTER ANDERSON &
CORROON LLP, Wilmington, Delaware; Eric Landau and Travis Biffar, JONES
DAY, Irvine, California; Attorneys for Defendant

ZURN, Vice Chancellor.
        An institutional stockholder of a publicly traded company seeks books and

records to investigate suspected mismanagement and wrongdoing under the familiar

standard of 8 Del. C. § 220. The stockholder is purportedly concerned about the

motivations for, and process leading up to, the company’s acquisition.

        The parties dispute a range of issues, including whether the stockholder’s

demand for books and records meets Section 220’s form and manner requirements,

and whether that demand fails as a lawyer-driven effort under Wilkinson v.

A. Schulman, Inc.1 due to counsel’s leading role in monitoring the stockholder’s

investments, identifying potential issues with those investments, and drafting and

prosecuting the demand and subsequent litigation. This post-trial opinion finds that

the demand is technically compliant with Section 220 and that the stockholder’s

asserted purposes are its own. Although not all of the bases for inspection advanced

by the stockholder are credible under Section 220, I conclude that the stockholder

has met its burden to justify a limited investigation. I also conclude that narrowed

versions of the stockholder’s requested categories of documents are necessary and

essential to accomplish that investigation.




1
    2017 WL 5289553 (Del. Ch. Nov. 13, 2017).


                                          2
I.        BACKGROUND
          The facts recited in this post-trial opinion are the Court’s findings based on

the paper record presented at trial.2 That record includes the pleadings;3 the parties’

joint exhibits,4 particularly Defendant’s November 28, 2017 definitive proxy

statement (the “Proxy”);5 and the stipulated facts in the parties’ Joint Pretrial

Stipulation.6 The following facts were either uncontested in this summary statutory

action, or were proven by a preponderance of the evidence.

          A.      The Parties And Relevant Nonparties
          Defendant Calgon Carbon Corporation (“Calgon”) is a Delaware corporation,

headquartered in Moon Township, Pennsylvania, that provides filtration and

decontamination products and services.7 For the relevant periods of this action,

Calgon’s board (the “Board”) had nine directors: Randall S. Dearth, John J. Paro,

Timothy G. Rupert, J. Rich Alexander, Louis S. Massimo, Donald C. Templin,

William J. Lyons, William R. Newlin, and Julie S. Roberts.8 Dearth was Chairman


2
  The parties did not submit post-trial briefing. I refer to the parties’ pre-trial briefing as
the “Opening Br.,” “Answering Br.,” and “Reply Br.” I refer to the trial transcript as the
“Trial Tr.”
3
    Docket Item (“D.I.”) 1, 3.
4
    I refer to the parties’ joint exhibits submitted for trial as “JX.”
5
    JX 18.
6
    D.I. 54 [hereinafter the “Pre-trial Stip.”].
7
    Pre-trial Stip. ¶ II(1).
8
    Opening Br. 4-5.
                                                   3
of the Board and Calgon’s President and CEO. Calgon’s executive officers included

Senior Vice President and CFO, Robert Fortwangler; Executive Vice President of

the Advancement Materials, Manufacturing, and Equipment Division, and former

CFO, Stevan Schott; Executive Vice President of the Core Carbon and Services

Division, James Coccagno; and Senior Vice President, General Counsel, and

Secretary, Chad Whalen.9 On March 9, 2018, Kuraray Co., Ltd. and its affiliates

(together, “Kuraray”) acquired Calgon (the “Acquisition”).10

          Plaintiff Inter-Local Pension Fund GCC/IBT (the “Fund”) has been a Calgon

stockholder at all times relevant to this action.11 The Fund is an Illinois trust operated

by a board of trustees.12       Nonparty Lawrence C. Mitchell is the Fund’s plan

administrator and was designated to testify on behalf of the Fund under Court of

Chancery Rule 30(b)(6) in this action.13 The Fund retains nonparties Robbins Geller

Rudman & Dowd LLP (“Robbins Geller”) as one of its outside counsel in connection

with securities litigation.14 Robbins Geller also represents the Fund in this action.



9
    Id.
10
     Pre-trial Stip. ¶ II(8).
11
     Id. ¶ II(2).
12
     Trial Tr. 30.
13
   Mitchell sat for Rule 30(b)(6) depositions on May 11 and June 28, 2018. This decision
cites to the deposition transcripts as Mitchell Dep. I and II.
14
     Mitchell Dep. I at 17.


                                            4
           B.     Kuraray And Calgon Discuss A Potential Partnership, But Calgon
                  States That It Is Not For Sale.
           Kuraray, a Japanese company, first contacted Calgon regarding a “potential

partnership” on August 5, 2016.17 After some correspondence between the two

companies, executives from both met on October 18 at Calgon’s headquarters.18 In

a November 29 email to a Calgon representative, Kuraray suggested further

discussions, to include Dearth, of “potential collaboration such as business alliances,

capital tie-up, or M&A.”19

           On January 10, 2017, Kuraray executed a non-disclosure agreement and

toured Calgon’s facilities.20 In advance of these meetings, Calgon retained financial

advisor Morgan Stanley & Co. LLC (“Morgan Stanley”) and counsel Jones Day.21

Kuraray reiterated its desire to acquire Calgon. A Calgon representative advised

Kuraray that Calgon was not for sale, but Kuraray nonetheless contacted Dearth a

week after the tour to request due diligence, again pressing a potential combination




17
     Proxy at 30.
18
     Id. at 31.
19
     Id.
20
     Id.
21
     Id.


                                            6
of the companies. On January 19, Dearth thanked Kuraray for its interest, but

declined to offer due diligence and confirmed that Calgon was not for sale.22

           Discussions between the companies continued,23 but Kuraray’s persistence

faltered when Japanese news agencies reported that Japanese authorities were

investigating potential antitrust violations related to companies that included

Kuraray and Calgon’s Japanese division.24 After a few months, on May 31, Dearth,

Coccagno, and Whalen met again with Kuraray representatives.25 Calgon continued

to assert that it was not for sale, but Kuraray nonetheless stated that it might deliver

an indication of interest in June 2017.26

           C.     Calgon Forms A Board Group To Consider Kuraray’s Indication
                  Of Interest, And The Parties Negotiate The Acquisition.
           On June 5, the Board held a special meeting to consider Kuraray’s potential

proposal.27 The Board formed a working group comprising Dearth, Rupert, Newlin,

Lyons, and Alexander (the “Working Group”), while retaining the ultimate decision

on any transaction.28 On June 14, Kuraray sent Dearth a draft sixty-day exclusivity


22
     Id. at 31-32.
23
     Id. at 32.
24
     Id.
25
     Id. at 33.
26
     Id.
27
     Id.
28
     Id.


                                            7
agreement and a proposal to acquire Calgon at $20 per share, contingent on

customary due diligence and the Board’s approval (the “Proposal”). Under the

Proposal, Kuraray would keep Calgon headquartered in the United States and would

rely on the existing management and employee base.29

           On June 29, following deliberations with Morgan Stanley and Jones Day, the

Working Group determined to recommend that the Board proceed with tailored due

diligence to Kuraray.30 The Proxy indicates that the Working Group and its advisors

decided it was “highly unlikely” that any other company would want to buy

Calgon.31         On July 5, the Board met and agreed with the Working Group’s

recommendation.32 The next day, Dearth and Coccagno told Kuraray that Calgon

would provide due diligence, but that Kuraray’s Proposal of $20 per share was too

low.33

           The Board determined that its investment committee34 should review and

report to the Board on Calgon’s strategic financial plan in connection with the




29
     Id.
30
     Id. at 33-34.
31
     Id. at 34.
32
     Id.
33
     Id.
34
  As detailed by the Proxy, Calgon’s investment committee was tasked with, “among other
things, oversee[ing] [Calgon’s] financial metrics for purposes of strategic plans and

                                            8
Proposal.35 On July 17, senior management presented the investment committee

with proposed adjustments to Calgon’s strategic plan.36 The Proxy does not detail

the nature of these adjustments other than to state that the committee concluded they

were “reasonable and appropriate.”37 On July 18, the investment committee advised

the Board that senior management’s proposed adjustments to Calgon’s strategic plan

were “reasonable and appropriate,” and the Board adopted the revised projections.38

           Calgon’s management continued to negotiate with Kuraray. On August 8,

Calgon formally engaged Morgan Stanley in connection with the Proposal or other

possible transactions.39 By that time, Morgan Stanley and management had already

advised the Working Group, during the June 29 meeting, on the subject of whether

other companies were likely to be in a position to make a topping bid. Morgan

Stanley’s engagement letter provided for a $2 million fee upon the announcement of

a transaction and a second contingent fee equal to 1.44% of the ultimate transaction




review[ing] financial valuations in connection with mergers and acquisitions activities[.]”
Id. at 34-35.
35
     Id.
36
     Id.
37
     Id. at 35.
38
     Id.
39
     D.I. 82 at Ex. 1; Proxy at 36.


                                            9
value upon consummation.40 The Proxy approximated the combined figure at $19

million.41

           On August 21, Kuraray increased its proposal to $21.50 per share (the

“Second Proposal”).42 At an August 23 Board meeting, Morgan Stanley advised the

Board that the Second Proposal compared favorably to its preliminary financial

valuation of Calgon.43 Senior management also advised the Board that other parties

were unlikely to compete with the Second Proposal. Dearth informed the Board that,

to date, “there had been no other overtures or discussions from Kuraray [other than

the Proposal] to” management or Morgan Stanley about potential management

retention agreements.44 The Board, noting that no other bids or indications of interest

had emerged despite what the Proxy describes as “market rumors” of the Proposal,

determined to proceed with confirmatory due diligence for an acquisition at $21.50

per share with Kuraray, but declined to extend exclusivity.45




40
     D.I. 82 at Ex. 1.
41
     Proxy at 62.
42
     Id. at 36.
43
     Id. at 36-37.
44
     Id. at 37.
45
     Id.


                                          10
           On August 29, Dearth and Coccagno met with Kuraray representatives while

traveling for business.46 The Proxy indicates that Dearth and Coccagno “inferred”

from indirect statements at the meeting that Kuraray still intended to retain senior

management at Calgon following the Acquisition.47 During a September 5 Board

meeting, as the parties and their advisors continued to negotiate the Acquisition,

Dearth recounted the August 29 discussions.48 The Board directed Jones Day to

ensure that Kuraray’s advisors did not broach post-closing employment

arrangements with Dearth, absent advance independent Board approval.49

           At that September 5 meeting, a group of directors defined by the Proxy as

“independent directors” (the “Outside Directors”)50 met without Morgan Stanley or

senior management and further determined that, as phrased by the Proxy, “all other

material terms of a potential transaction [should] be agreed before Mr. Dearth, or

other members of the senior management team, discussed post-closing employment



46
     Id.
47
     Id.
48
     Id. at 38.
49
     Id.
50
   The Proxy refers to a group of “independent directors” without specifying who is in the
group. The parties’ briefing and pleadings also do not clarify the composition of that group,
although Calgon states that all directors but Dearth are “outside, non-management
directors.” Answering Br. 52. I refer to the group from the Proxy as the “Outside
Directors” for convenience when I draw facts from the Proxy, but I do not make any
findings or rulings regarding the independence of any Calgon directors in this decision.


                                             11
arrangements with Kuraray.”51 Jones Day communicated the determination to

Dearth and Whalen, who then told Coccagno, Schott, and Fortwangler.52 All five

individuals purportedly agreed to refrain from post-closing employment discussions

with Kuraray until the Outside Directors approved otherwise.53

           The parties continued to negotiate the Acquisition terms. On September 6,

Kuraray’s advisors requested a meeting with Dearth to extend an offer of post-

transaction employment.54 At a September 7 Board meeting, the Outside Directors

purportedly agreed that Dearth should not receive or discuss any retention offers

until the material terms of the merger agreement were negotiated, and Dearth

concurred with the decision.55 On September 14, the Outside Directors determined

that the material terms were sufficiently firm to allow Dearth to now discuss post-

transaction employment with Kuraray, although draft agreements were still being

exchanged for the Acquisition.56




51
     Proxy at 38.
52
     Id.
53
     Id.
54
     Id.
55
     Id. at 38-39.
56
     Id. at 39-40.


                                           12
           On September 15, Dearth met with Kuraray to discuss his retention

arrangements.57 At that meeting, Kuraray provided Dearth with employment term

sheets for Dearth, Coccagno, Schott, Fortwangler, Whalen, and another member of

Calgon’s management.58 The Proxy discloses that each term sheet included the

following benefits, among others: (i) no assumed material change in title and

position, (ii) an equivalent base salary, and (iii) a one-off retention bonus, payable

three years post-closing, of $1,250,000 (for Coccagno, Schott, Fortwangler, and

Whalen) and $5,500,000 (for Dearth).59

           Dearth communicated the contents of the term sheets to the Board at a

September 16 meeting.60 The Outside Directors believed that Dearth could not

feasibly negotiate his retention agreement before the targeted September 21

announcement date.61 Accordingly, they directed Jones Day to inform the relevant

parties that senior management was not to negotiate personal employment

arrangements with Kuraray at that time.62




57
     Id. at 40.
58
     Id.
59
     Id. at 40-41, 63.
60
     Id. at 40-41.
61
     Id. at 41.
62
     Id.


                                         13
           But on September 17 and again on September 18, Kuraray pressed its “critical

priority” to negotiate retention arrangements with at least Dearth.63 The Board

purportedly remained steadfast in refusing to permit retention negotiations until the

definitive terms of the Acquisition were set.64         That time came soon, as, on

September 19, Calgon and Kuraray agreed on the material terms, and Dearth was

permitted to negotiate his retention arrangements with Kuraray.65

           On September 20, Dearth committed to remain as CEO, with further

negotiations to follow.66 That same day, the Board adopted and approved the merger

agreement.67 On September 21, Calgon, Kuraray, and Kuraray’s affiliates agreed to

and executed an Agreement and Plan of Merger (the “Merger Agreement”) for

Kuraray to acquire Calgon at $21.50 per share in cash.68

           As detailed in the Proxy, senior management and the Board also had a sizable

amount of value in equity awards, particularly Dearth, that were convertible in large

part to cash payments from the entity surviving the Acquisition. The Fund cites

these equity awards as one source of its concerns with the merger process. In


63
     Id. at 41-42.
64
     Id. at 42.
65
     Id.
66
     Id. at 42-43.
67
     Id. at 43; Pre-trial Stip. ¶ II(3).
68
     Proxy at 43.


                                            14
seeks to investigate (i) “the events leading to the [] Acquisition in order to determine

whether it is appropriate to pursue litigation” and (ii) “the independence and

disinterestedness of the directors generally with respect to the [] Acquisition.”71

          The Demand makes thirteen requests for books and records (the “Requests”).

The Requests read:72

          1.       Copies of all books and records provided to or referred to by the
                   individuals who drafted the [Proxy], including all
                   correspondence described in the Proxy;
          2.       Minutes of meetings of the Board or any committee thereof since
                   August 1, 2016 (final versions or the most recent draft where
                   final versions are not available), together with any attachments,
                   presentations, reports, or other materials provided to Board
                   members in preparation for or reviewed at those meetings,
                   relating to the Merger Agreement, the [] Acquisition or any other
                   strategic transactions/alternatives;73

          3.       Any indications of interest, term sheets, draft acquisition
                   agreements, or similar offers relating to the Company, together
                   with any presentations or materials in support of such offers
                   provided to Calgon Carbon by Kuraray or any other actual of
                   potential acquirors of Calgon Carbon;




71
     Id. at 1-2.
72
     Id. at 2-3.
73
   The Fund defines “strategic transactions” or “strategic alternatives” to “refer not only to
alternative proposals for the acquisition of the Company, but also other potential strategic
avenues, including, but not limited to, any spinoff of the Company’s businesses, sales of
certain business lines, acquisitions of other companies by the Company, or any other
potential business strategies to be pursued by the Company.” Id. at 2 n.1.
                                              16
4.   Materials provided by Calgon Carbon to its financial or other
     advisors, including Morgan Stanley [], since August 1, 2016
     regarding the [] Acquisition and/or consideration of strategic
     alternatives (including, but not limited to, projections);

5.   Presentations or memoranda prepared by Morgan Stanley or any
     other financial advisors before or after they were officially
     engaged, and provided to the Board or the Company’s named
     executive officers since August 1, 2016 regarding the []
     Acquisition and/or consideration of strategic alternatives;

6.   Monthly, quarterly, and/or other periodic financial summaries
     provided to the Board or any committee thereof in connection
     with meetings held since August 1, 2016 concerning Calgon
     Carbon’s historical and projected financial performance;
7.   Documents, correspondence, reports or drafts thereof concerning
     any business plan, valuation, budget, financial guidance, forecast
     or projection concerning any of the assets to be acquired pursuant
     to the [] Acquisition, including, but not limited to, projected cash
     flows, revenues, income, EBIT, EBITDA or earnings per share,
     used for any purpose, whether relating to existing or new
     products or lines of business;

8.   Books and records sufficient to show the interests, financial or
     otherwise, of any director or officer of the Company in the []
     Acquisition or any strategic alternative;

9.   Any materials created, modified or provided to the Board or any
     committee thereof since August 1, 2016 concerning the
     independence or non-independence of any director, including
     any disclosure questionnaires and any books and records relating
     to appointment of directors to serve or any committee of the
     Board;




                                  17
      10.    All books and records reflecting communications between
             Randall S. Dearth, Stevan R. Schott, James A. Coccagno, Robert
             Fortwangler, or Chad Whalen, on the one hand, and any officer,
             director, employee or agent of Morgan Stanley, Goldman Sachs
             [], Kuraray, or any other potential acquiror of the Company or
             any part thereof, on the other hand, including notes, calendar
             entries and electronic communications74 regarding the []
             Acquisition or any other potential strategic alternatives involving
             Calgon Carbon;

      11.    Copies of all confidentiality agreements between the Company
             and any potential acquiror of the Company or any part thereof;

      12.    Copies of all engagement letter agreements between the
             Company and Morgan Stanley and any amendments thereto;
      13.    All documents produced to any other stockholder or their counsel
             in response to a demand pursuant to [Section] 220 or in
             connection with any stockholder litigation that relates to the []
             Acquisition, including but not limited to [certain actions against
             Calgon], as well as transcripts of any depositions of Calgon
             Carbon officers or directors taken in connection with any such
             litigation.

      The Demand also details the Fund’s purposes for inspection, including: (i)

“whether the Board’s process and knowledge was sufficient to render [the

Acquisition process] reasonable, or whether it was a breach of fiduciary duty under

Delaware law”; (ii) “whether wrongdoing occurred in connection with (or as a result

of) the[] [compensation and retention] side benefits to the Company’s senior

officers”; (iii) “whether the consideration offered in connection with the []

Acquisition is fair to stockholders and whether the stockholders have been


74
  The Fund clarifies that “[t]o be clear, this includes e-mails of directors or officers,
whether or not stored on the Company’s servers.” Id. at 3 n.2.
                                           18
adequately informed of all material facts necessary to make that determination”; and

(iv) “whether wrongdoing or mismanagement has taken place such that it would be

appropriate to file a breach of fiduciary duty action against the Board . . . [and] the

independence and disinterestedness of the directors generally and with respect to the

[] Acquisition.”75

           On December 21, Calgon responded to the Demand.76 Calgon declined to

produce any books and records and challenged the Fund’s purported purposes and

credible bases for the Demand, the scope of the Requests, the timing of the Demand,

and the Fund’s compliance with the technical requirements of Section 220.77 On

December 22, the Fund sued to enforce the Demand. Months later, on March 9,

2018, Kuraray acquired Calgon.78




75
     Id. at 4-7.
76
     JX 2.
77
     Id.
78
     Pre-trial Stip. ¶ II(8).


                                          19
         The action proceeded to trial before me, sitting as Master in Chancery, on July

24, 2018.79 The parties elected to forego post-trial briefing. On October 9, after

being confirmed as Vice Chancellor, I offered the parties another opportunity to

submit post-trial briefing in light of the altered appellate options for this opinion.80

On October 17, the parties elected to stand on their previous submissions. 81 I took

the matter under advisement. This is my post-trial opinion.




79
   During pre-trial briefing, Calgon argued, in part, that Mitchell’s deposition testimony
demonstrated the Demand was a lawyer-driven effort and that the Fund lacked a proper
purpose. As a counterstroke, the Fund attached an affidavit signed by Mitchell to its reply
brief (the “Affidavit”) that introduced new facts meant to distinguish the Demand from the
request for stockholder inspection at issue in Schulman. See 2017 WL 528955. Calgon
moved to strike the Affidavit, and, under the parameters I established, the Fund opted to
offer Mitchell for a second deposition rather than withdrawing the Affidavit. Following
that deposition, it was clear that Mitchell lacked the knowledge to support the Affidavit.
Calgon moved to dismiss the action under Rule 41, claiming the Fund violated the Court’s
rules and orders (the “Motion”). On July 22, 2018, as then-Master in Chancery, I issued a
draft report denying the Motion, but setting in place remedial safeguards and shifting costs
in Calgon’s favor (the “Report”). D.I. 78. The Report found that the Fund had threatened
the legitimacy of this proceeding by: (i) failing to properly notarize the Affidavit, and (ii)
submitting the Affidavit, which I found to be an entirely lawyer-drafted document that
contained statements Mitchell could not support with personal knowledge. Id. at 17, 19-
20. As a result, the Report recommended a tailored remedy: Calgon could rely on the
Affidavit and second deposition for its arguments, but the Fund could not. In addition, the
Report recommended that the Fund bear Calgon’s fees and costs related to the Motion. Id.
at 20-23. No party took exceptions to that Report, and it is hereby adopted by the Court.
80
     D.I. 89.
81
     D.I. 92.


                                             20
II.       ANALYSIS
          “Under Section 220 of [the] Delaware General Corporation Law, stockholders

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

proper purpose.”82 “It is well established that a stockholder’s desire to investigate

wrongdoing or mismanagement is a ‘proper purpose.’”83 “Such investigations are

proper, because where the allegations of mismanagement prove meritorious,

investigation furthers the interest of all stockholders and should increase stockholder

return.”84 The stockholder bears the burden of proof to establish a “credible basis”

in support of that proper purpose, but need only present “some evidence . . . from

which the Court of Chancery could infer there were legitimate issues of possible

waste, mismanagement or wrongdoing that warrant[] further investigation.”85 “The

‘credible basis’ standard is the lowest burden of proof known in our law[.]”86

           The Fund purportedly made the Demand to investigate potential

mismanagement or wrongdoing associated with, and the Board’s independence and

disinterestedness regarding, the Acquisition. Calgon challenges the Demand on a



82
  Mudrick Capital Mgmt., L.P. v. Globalstar, Inc., 2018 WL 3625680, at *6 (Del. Ch. July
30, 2018).
83
  Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 121 (Del. 2006) (quoting Nodana
Petroleum Corp. v. State, 123 A.2d 243, 246 (Del. 1956)).
84
     Seinfeld, 909 A.2d at 121.
85
     Id. at 118.
86
     Lavin v. W. Corp., 2017 WL 6728702, at *7 (Del. Ch. Dec. 29, 2017).
                                            21
range of fronts, including that the Demand is technically defective under Section

220; that the Fund’s purported purposes are not its actual purposes; that the Fund

lacks credible bases for the Requests; and that the Requests are overbroad or

impermissible in scope. I find that the Demand is effective under Section 220; that

the Fund’s purported purposes are its actual purposes; that the Fund has established

credible bases presenting at least some evidence to infer possible mismanagement

or wrongdoing; and that the Fund is entitled to a limited production.

         A.       The Demand Letter Meets The Technical Requirements Of Section
                  220.
         As a threshold matter, the parties dispute whether the Demand technically

complies with Section 220. “Delaware courts require strict adherence to the section

220 inspection demand procedural requirements.”87 Section 220(b) requires that a

stockholder make its demand “under oath.” Typically, stockholders do so by

notarized affidavit accompanying a demand letter. Mitchell’s notarized affidavit in

this case was, by its own terms, approving a version of the Demand “in substantially

final form.”88 Calgon asserts that this violates Section 220(b)’s requirement that the

demand be under oath because Mitchell’s affidavit does not correspond to the final

form of the letter.89


87
     Cent. Laborers Pension Fund v. News Corp., 45 A.3d 139, 145 (Del. 2012).
88
     JX 1 at 9.
89
     Answering Br. 41-44.
                                            22
       I find that the Demand meets Section 220(b)’s requirement of being under

oath. If there were real, substantive differences between the version Mitchell

reviewed and the final version sent out, then there might have been a violation of

Section 220(b)’s “under oath” requirement. But there are no such differences. The

Fund has explained that the only changes between the version Mitchell reviewed and

the version that was sent were that the final was dated and signed.90 Calgon has not

identified any other material differences. As a result, the Demand’s substance was

still under oath. While the best practice is for the stockholder to review the final

version of a demand letter, including the effective date, the finishing touches in this

case do not rise to the level of violating Section 220’s form and manner

requirements.

       B.     The Fund’s Actual Purpose Motivated The Demand.
       The parties do not contest that the Fund’s professed purposes of investigating

concerns of mismanagement, wrongful conduct, and the related independence of the

Board, are proper under Section 220 in the abstract. They are.91 Instead, they dispute


90
   Opening Br. 16-18; Reply Br. 16-17. In contrast, Calgon relies on News Corp., where
the Delaware Supreme Court found violations of Section 220(b) due a slew of substantive
issues with the demand letter, including (i) naming the wrong entity, (ii) inconsistently
documenting the stockholder’s shares, and (iii) failing to include evidence of the
stockholder’s beneficial ownership as required by Section 220(b). News Corp., 45 A.3d at
145.
91
  See generally Seinfeld, 909 A.2d at 121(“It is well established that a stockholder’s desire
to investigate wrongdoing or mismanagement is a proper purpose.”) (quotations omitted);

                                             23
whether those purposes are actually held by the Fund. Calgon asserts that both the

Demand and this litigation are impermissibly lawyer-driven, with the Fund

providing only rubber-stamped approval as a pretense for Robbins Geller’s

inspection of Calgon’s books and records. The Fund responds that it retains Robbins

Geller to monitor its investments and pursue appropriate legal action through a

portfolio management agreement, and that it permissibly relies on Robbins Geller in

much the same way that a large corporation might rely on its in-house legal team.92

         “The paramount factor in determining whether a stockholder is entitled to

inspection of corporate books and records is the propriety of the stockholder’s

purpose in seeking such inspection.”93 A stockholder’s demand under Section 220

may proceed under a primary proper purpose even if the stockholder has a secondary

or ulterior improper purpose.94 But because a stockholder’s professed purpose may


Beam v. Stewart, 845 A.2d 1040, 1056 (Del. 2004) (noting the availability of Section 220
to investigate facts underlying demand futility for subsequent derivative actions); Sec. First
Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 567 (Del. 1997) (“It is well
established that investigation of mismanagement is a proper purpose for a Section 220
books and records inspection.”); Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 784
(Del. Ch. 2016) (“Another purpose for using Section 220 is to investigate questions of
director disinterestedness and independence.”).
92
     Reply Br. 23-24; Trial Tr. 34-35.
93
     CM & M Gp., Inc. v. Carroll, 453 A.2d 788, 792 (Del. 1982).
94
   See id. (“[O]nce a proper purpose has been established, any secondary purpose or ulterior
motive of the stockholder becomes irrelevant.”); Doerler v. Am. Cash Exch., Inc., 2013
WL 616232, at *5 (Del. Ch. Feb. 19, 2013) (“Any secondary purpose or ulterior motive
that the stockholder may have will not bar a [Section] 220 action unless the ulterior purpose
is also the stockholder’s primary purpose.”); Grimes v. DSC Commc’ns Corp., 724 A.2d

                                             24
not be its actual purpose, “[t]he mere statement of a proper purpose . . . will not

automatically satisfy [Section] 220(b).”95         “A corporate defendant may resist

demand where it shows that the stockholder’s stated proper purpose is not the actual

purpose for the demand.”96 However, “in order to succeed, the defendant must prove

that the plaintiff pursued its claim under false pretenses.”97 “Such a showing is fact

intensive and difficult to establish.”98

           When counsel for a stockholder presses a purpose that is different from the

stockholder’s actual purpose, this Court has concluded that the Section 220 demand

lacks an actual purpose. In Schulman, this Court declined to order a production of

books and records under Section 220 where “an entrepreneurial law firm initiate[d]

the process, draft[ed] a demand to investigate different issues than what motivated

the stockholder to respond to the law firm’s solicitation, and then pursue[d] the

inspection and litigate[d] with only minor and non-substantive involvement from the

ostensible stockholder principal.”99 The individual stockholder in Schulman was


561, 565 (Del. Ch. 1998) (“Proper purpose has been construed to mean that a shareholder’s
primary purpose must be proper, irrespective of whether any secondary purpose is
proper.”).
95
     Pershing Square, L.P. v. Ceridian Corp., 923 A.2d 810, 817 (Del. Ch. 2007).
96
     Id.
97
     Id.
98
     Id.
99
  Schulman, 2017 WL 5289553, at *3. Calgon reads this language from Schulman as
imposing a “three-part test to weed out [improper] demands.” Answering Br. 23. I

                                             25
unhappy with the company’s financial results and wished to pursue inspection under

Section 220 to investigate that concern. But the demand drafted and pursued by

counsel sought to investigate alleged mismanagement and wrongdoing relating to an

accelerated compensation award. The stockholder testified that he was not aware of

any facts supporting his counsel’s different concern.100 That misalignment of goals

between the stockholder and his counsel was a key factor in the Court’s

determination that there was no proper purpose for the demand.101

            Here, Mitchell testified at deposition that (i) Robbins Geller determined the

Demand’s Requests, (ii) Robbins Geller’s attorneys are the most knowledgeable

persons about the purposes in the Demand, and (iii) the Fund did not independently

confirm the allegations in the Demand.102 Calgon concludes from these and other

facts that “there can be no doubt that [the Fund] does not have a proper purpose for

the inspection and its actual purpose is to allow its counsel to use [the Fund]’s status




disagree. Schulman was a fact-intensive analysis that relied on the record before the Court
for its conclusion. See Schulman, 2017 WL 5289553, at *3 (concluding that “[o]n the
record presented in this case, the Company proved that [the stockholder’s] purported
purposes were not his actual purposes”). While the presence of the same facts in another
case may lead to the same result, other facts may compel a different ruling. I do not read
Schulman as announcing a rigid test for when a purpose will be improper under Section
220.
100
      Id.
101
      Id.
102
      See Answering Br. 24-25; Mitchell Dep. I at 59, 66, 94, 143-44.


                                              26
as a stockholder for its own purpose of generating litigation.”103 But Mitchell’s

testimony also reveals that the Fund did not hold a purpose distinguished from those

professed in the Demand, and that the Fund relied on Robbins Geller to monitor

Calgon for potential losses to the Fund’s portfolio and as a means to recover those

losses.104

         Section 220 litigation can be complicated, and “[a] stockholder obviously can

use counsel to seek books and records.”105 In Schulman, this Court recognized that

“given the complexity of Delaware’s sprawling Section 220 jurisprudence, a

stockholder is well-advised to secure counsel’s assistance.”106 Advice from counsel

comes in many forms. Individual stockholders and smaller institutions cannot be

expected to have an independent, in-house team to cultivate purely homegrown legal

analyses of their investments. Stockholders are entitled to hire counsel to review

and monitor their portfolios for potential mismanagement or wrongdoing. They are




103
      See Answering Br. 24-25.
104
      Mitchell Dep. I at 38-40, 48-49.
105
    Schulman, 2017 WL 5289553, at *3. Section 220 explicitly contemplates counsel
assisting stockholders. See 8 Del. C. § 220(b) (“Any stockholder, in person or by attorney
or other agent, shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose, and to make
copies and extracts from” certain books and records).
106
      Schulman, 2017 WL 5289553, at *3.


                                            27
also entitled to rely on that counsel to raise concerns, to advise them on how to

remedy those concerns, and to pursue appropriate remedies.

         While the facts of this case draw close to the edge of permissibility under

Schulman,107 they do not cross it. Unlike in Schulman, the Fund’s counsel did not

come to it with a pre-packaged demand letter. Robbins Geller was retained far in

advance and tasked with monitoring the Fund’s portfolio for precisely the sort of

conduct alleged in the Demand.108 Further, and again unlike in Schulman, the Fund’s

testimony regarding its purposes aligns with those professed in the Demand and does

not mirror the situation in Schulman where counsel usurped the process for a

different purpose.109

         Finally, Calgon points to Mitchell’s inability to describe the details of the

Fund’s purpose and the Demand’s Requests at his Rule 30(b)(6) deposition.110



107
      See Report.
108
    See Schulman, 2017 WL 5289553, at *3 (denying Section 220 demand where facts
indicated that “[t]his [was] not a situation in which the stockholder client initiated the
process, then counsel drafted a demand,” and “[t]he event that prompted [the stockholder]
to seek books and records different substantially from what [counsel] chose to explore”).
In contrast, the stockholder in Schulman contacted his counsel after seeing their press
release announcing the counsels’ investigation into the relevant company and transactions.
Id.
109
    See id. (denying Section 220 demand where facts indicated that “[t]he event that
prompted [the plaintiff] to seek books and records differed substantially from what
[counsel] chose to explore”).
110
      See Answering Br. 12-14, 24-26.


                                           28
Although Mitchell’s testimony was somewhat hollow on these topics, he did testify

that the Fund’s purposes aligned with those in the Demand, and that the Fund was

relying on the advice of counsel regarding its Requests.111 That the Fund did not

originally conceive of the purposes for the Demand and could not independently

articulate the legal nuances of the Demand and its Requests at deposition is not,

without more, sufficient to show that the Fund lacks a purpose.112 To hold otherwise

would largely leave Section 220 open only to sophisticated stockholders with the

financial or legal training necessary to independently spot relevant corporate

governance and similar issues.

         For all of these reasons, Calgon has failed to make the “fact intensive and

difficult to establish” showing that the Fund pursued the Demand under false

pretenses.113




111
      See, e.g., Mitchell Dep. I at 38-40, 69-70, 85-86.
112
   See Schnatter v. Papa John’s Int’l, Inc., 2019 WL 194634, at *14 (Del. Ch. Jan. 15,
2019) (“The record here does not support the conclusion that [the plaintiff] was so
disengaged from the process that the actual purpose for the Demand was to benefit his
counsel.”).
113
      Pershing Square, 923 A.2d at 817.


                                               29
         C.     The Fund Established Credible Bases Sufficient To Infer Possible
                Mismanagement Or Wrongdoing.
         Calgon argues that the Fund has not demonstrated the credible bases necessary

to proceed with its Section 220 Demand.114 “The credible basis standard is the

lowest burden of proof known in our law; it merely requires that the plaintiff present

some evidence of wrongdoing.”115 A stockholder need only provide sufficient

evidence to infer possible mismanagement or wrongdoing,116 not “specific, tangible

evidence” of a particular claim.117 “The only way to reduce the burden of proof

further would be to eliminate any requirement that a stockholder show some

evidence of possible wrongdoing.”118

         The Fund has provided “some evidence” from which I can “infer . . .

legitimate issues of possible waste, mismanagement, or wrongdoing that warrant[]

further investigation.”119 Using the Proxy and other publicly available information,



114
      Answering Br. 26-40.
115
      Lavin, 2017 WL 6728702, at *7 (quotations omitted).
116
      See Yahoo! Inc., 132 A.3d at 786.
117
   Oklahoma Firefighters Pension & Ret. Sys. v. Citigroup Inc., 2014 WL 5351345, at *6
(Del. Ch. Sept. 30, 2014), approved and adopted 2015 WL 1884453 (Del. Ch. April 24,
2015); see also In re UnitedHealth Grp., Inc. Section 220 Litig., 2018 WL 1110849, at *7
n.95 (Del. Ch. Feb. 28, 2018), aff’d sub nom. UnitedHealth Grp. Inc. v. Amalgamated Bank
as Tr. for Longview Largecap 500 Index Fund, 2018 WL 5309957 (Del. Oct. 26, 2018).
118
      Seinfeld, 909 A.2d at 123 (emphasis in original).
119
   Id. at 118. To avoid doubt, my findings on the Fund’s credible bases are not rulings
that the underlying claims are viable, or even that they would clear dispositive motion

                                              30
the Fund tells a story of Calgon repeatedly rebuffing Kuraray until Calgon’s

management and Board were enticed with promises of retention, compensation, or

other rewards.120 The Fund similarly provides some evidence to cast an inference of

doubt, at this early stage, on at least certain players in the Acquisition process.121

Calgon proceeded with a largely single-bidder sale, which may be within the ambit

of reasonable Board determinations for a merger,122 but which the Fund sufficiently

portrays as infected and spurred by self-interest and conflicts among the decision-

makers and their advisors.123 Central to the Fund’s narrative are concerns that

Calgon’s directors and management set up an artificially restrictive deal process to

lock in personal benefits, and accordingly failed to apprise themselves of the facts

necessary for a fair and competitive sales process.124 The Fund has put forward




practice in subsequent plenary litigation. See Lavin, 2017 WL 6728702, at *7 (“The
‘credible basis’ standard is the lowest burden of proof known in our law[.]”).
120
      JX 1 at 4-7; Compl. ¶¶ 7-14.
121
      JX 1 at 4-7; Compl. ¶¶ 7-14.
122
   See C & J Energy Servs., Inc. v. City of Miami Gen. Emps.’ & Sanitation Emps.’ Ret.
Tr., 107 A.3d 1049, 1067-68 (Del. 2014) (holding that a permissible “market check does
not have to involve an active solicitation, so long as interested bidders have a fair
opportunity to present a higher-value alternative, and the board has the flexibility to eschew
the original transaction and accept the higher-value deal”).
123
      JX 1 at 4-7; Compl. ¶¶ 7-14.
124
      JX 1 at 4-7; Compl. ¶¶ 12-13.


                                             31
credible bases for an inspection of potential mismanagement or wrongdoing, as well

as concerns about the Board’s independence.

         The Fund also sees wrongdoing in the nature, length, and timing of Calgon’s

disclosed projections.125 The Proxy discloses that Calgon’s central projections

considered by the Board and provided to Morgan Stanley during the Acquisition

process were from fiscal years 2017 through 2021, and that those projections were

adjusted in July 2017 while the Acquisition was being negotiated.126 The Fund

asserts that the projections may have been adjusted by the allegedly conflicted

management to encourage Kuraray’s acquisition, and further argues that Calgon

should have extended its projections beyond 2021 because the company expected a

purportedly lucrative project, the so-called Ballast Water Treatment Initiative, to

begin in 2019.127 In a 2017 investor presentation, Calgon estimated the Initiative to

be an $18 to $28 billion opportunity for the industry and claimed that it was “[w]ell

[p]ositioned to [b]enefit” from that market as a supplier in the program. 128 The

Initiative was expected to have a five-year implementation window, suggesting that




125
      JX 1 at 6; Compl. ¶ 15.
126
      Proxy at 34-35, 48-52.
127
      JX 1 at 6; Compl. ¶ 15; Opening Br. 12-15; Reply Br. 13-14.
128
      JX 8 at 18, 27.


                                             32
Calgon might reap significant financial benefits from 2019 through 2024.129 Calgon

counters that the adjustment was merely a result of announcements delaying the

implementation of the Ballast Water Treatment Initiative from 2017 to 2019, and

that Calgon’s expected role in the Initiative was not yet final.130 Calgon also points

out that the Fund implies a request for far more than the standard five-year projection

range for financials.131

            “[F]ive-year forecasts are routine in fairness opinions supporting mergers.”132

Were this a plenary disclosure claim, the Fund’s argument might amount to little

more than a “naked assertion [] that the methodology it champions would be

superior.”133 But on the low credible basis standard, I conclude that the Fund has

provided sufficient evidence to investigate the justification and motivation for the

length of Calgon’s disclosed projections and the July 2017 adjustment thereto.134




129
      Opening Br. 14.
130
    See Answering Br. 35. The parties dispute the Ballast Water Treatment Initiative’s
potential scope and timing, but Calgon does not dispute that it was expected to be a boon
for the company.
131
      Id. 34.
132
   Ehlen v. Conceptus, Inc., 2013 WL 2285577, at *3 (Del. Ch. May 24, 2013); see also
Glob. GT LP v. Golden Telecom, Inc., 993 A.2d 497, 511 (Del. Ch. 2010) (“In a DCF
analysis, future cash flows are projected for each year during a set period, typically five
years.”), aff’d, 11 A.3d 214 (Del. 2010).
133
      Ehlen, 2013 WL 2285577, at *3.
134
      Id.


                                              33
         Other of the Fund’s concerns are not supported by credible bases to infer

mismanagement or wrongdoing.               The Fund alleges that Morgan Stanley was

conflicted in its duties due to a contingent fee agreement that provided for a $2

million announcement fee and a second contingent fee equal to 1.44% of the ultimate

consummated transaction value (approximately $17 million, as disclosed by the

Proxy).135      “Contingent fees are undoubtedly routine; they reduce the target’s

expense if a deal is not completed; perhaps, they properly incentivize the financial

advisor to focus on the appropriate outcome.”136          Although “[c]ontingent fee

arrangements obviously can be problematic because they may incentivize advisors

to prioritize the closing of the transaction over getting the best deal possible for

stockholders,”137 this Court has held that:




135
      D.I. 82 at Ex. 1; Proxy at 62; JX 1 at 5-6.
136
   In re Atheros Commc’ns, Inc., 2011 WL 864928, at *8 (Del. Ch. Mar. 4, 2011); see also
In re Alloy, Inc., 2011 WL 4863716, at *11 (Del. Ch. Oct. 13, 2011) (“Although this Court
has held that stockholders may have sufficient concerns about contingent fee arrangements
to warrant disclosure of such arrangements, that need to disclose does not imply that
contingent fees necessarily produce specious fairness opinions.”).
137
   IRA Tr. FBO Bobbie Ahmed v. Crane, 2017 WL 7053964, at *20 (Del. Ch. Dec. 11,
2017).


                                                34
       [A] sales process is not unreasonable under Revlon merely because a
       special committee is advised by a financial advisor who might receive
       a large contingent success fee, even if the special committee is
       considering only one bidder. Rather, the Court can take that fact into
       consideration in determining whether the financial advisor failed to
       assist the committee in maximizing stockholder value or whether the
       committee failed to oversee adequately the advisor’s work.138

Put more succinctly, “contingent fees charged by investment bankers do not create

inherent conflicts.”139 I conclude that Morgan Stanley’s compensation structure,

standing alone, does not support a credible basis from which to infer wrongdoing.

The Fund has not stated a credible basis to support an investigation into Morgan

Stanley’s incentives or contingency structure.140

       Additionally, the Fund asserted more general disclosure concerns in the

Demand and Complaint, although it is unclear to me whether these have been

abandoned.141 The Fund does not point to any potentially missing or suspect



138
   In re Smurfit-Stone Container Corp. S’holder Litig., 2011 WL 2028076, at *23 (Del.
Ch. May 20, 2011), as revised (Del. Ch. May 24, 2011).
139
   In re Saba Software, Inc. S’holder Litig., 2017 WL 1201108, at *21 (Del. Ch. Mar. 31,
2017) (summarizing In re Smurfit-Stone Container Corp.), as revised (Del. Ch. Apr. 11,
2017); see also Se. Pa. Transp. Auth. v. Volgenau, 2013 WL 4009193, at *16 (Del. Ch.
Aug. 5, 2013) (finding that financial advisor’s fees did not taint incentives when 84% of
the expected compensation was contingent in nature), aff’d, 91 A.3d 562 (Del. 2014).
140
   That is especially true in light of the fact that the Demand requests a copy Morgan
Stanley’s engagement letter and Calgon filed a copy after trial. D.I. 82.
141
    JX 1 at 6; Compl. ¶ 17. The Fund did not argue these claims in any specific manner in
its Opening or Reply Brief, or at trial, and Calgon insists that the Fund has abandoned them.
See Answering Br. 2, 39; Trial Tr. 147.


                                             35
information beyond the length of Calgon’s projections, addressed above. I conclude

the Fund has not established a credible basis to infer mismanagement or wrongdoing

in the context of Calgon’s general Proxy disclosures.

         Many of Calgon’s arguments against the Fund’s proffered credible bases are

merits contentions that are best reserved for any potential plenary litigation that may

follow the Demand.142 For instance, Calgon argues that (i) the analyst reports the

Fund cites as evidence of an inadequate deal price are contradicted by other analyst

reports,143 (ii) the Fund’s assertion of wrongdoing based on Calgon’s largely single-

bidder process and allegedly self-interested sales process is defeated by the

Delaware Supreme Court’s C & J Energy Services decision,144 (iii) the Merger

Agreement’s deal protection provisions are “not evidence of wrongdoing,”145 (iv)

the Fund’s concerns with management’s employment and compensation

arrangements are underdeveloped and refuted by the Board purportedly policing




142
   “A company engages in a merits defense when it seeks to rebut the plaintiff’s allegations
as to purpose by arguing that the alleged conduct never occurred or was proper.” Norman
v. US MobilComm, Inc., 2006 WL 1229115, at *5 (Del. Ch. Apr. 28, 2006).
143
      Answering Br. 27-28.
144
      Id. 28-31; see C & J Energy Servs., Inc., 107 A.3d at 1067-68.
145
      Answering Br. 32.


                                              36
those arrangements,146 and (v) the Outside Directors’ receipt of cash for accelerated

equity awards aligned their interests with stockholders.147

         The Fund’s credible bases are not defeated by Calgon’s merits contentions.148

“This Court has repeatedly stated that a Section 220 proceeding does not warrant a

trial on the merits of underlying claims.”149 “[A] stockholder need not prove actual



146
      Id. 36-37.
147
      Id. 38-39.
148
    Even if these arguments applied at this early stage, they would not defeat the Fund’s
showing of a credible basis. Calgon argues that C & J Energy Services stymies the Fund’s
attempt to find wrongdoing in a single-bidder process. The Fund acknowledges that “the
decision to sell a company through a single-bidder process . . . [is] not inherently
wrongful,” but contends that it has provided some evidence that Calgon’s fiduciaries and
advisors made debatable, conflicted choices relating to that process. Reply Br. 5-6; see
generally RBC Capital Markets, LLC v. Jervis, 129 A.3d 816, 855 (Del. 2015) (holding
that “where undisclosed conflicts of interest exist, [] decisions must be viewed more
skeptically” under Revlon); In re PLX Tech. Inc. S’holders Litig., 2018 WL 5018535, at
*44 (Del. Ch. Oct. 16, 2018) (“Where undisclosed conflicts of interest exist, however, even
otherwise reasonable choices must be viewed more skeptically.”) (quotations omitted).
Similarly, while directors’ receipt of accelerated equity awards often aligns their interests
with stockholders, in some circumstances “[t]he timing of [] equity awards [may] bolster[]
Plaintiff’s self-interest theory.” In re Saba Software, Inc., 2017 WL 1201108, at *21.
Calgon’s arguments do not defeat the Fund’s presentation of “some evidence” towards its
proper purposes. Seinfeld, 909 A.2d at 123.
149
    In re UnitedHealth Grp., Inc., 2018 WL 1110849, at *7; see also Lavin, 2017 WL
6728702, at *9 (“Thus, when a stockholder demands inspection as a means to investigate
wrongdoing in contemplation of a class or derivative action, Delaware courts generally do
not evaluate the viability of the demand based on the likelihood that the stockholder will
succeed in a plenary action.”); Marmon v. Arbinet-Thexchange, Inc., 2004 WL 936512, at
*6 (Del. Ch. Apr. 28, 2004) (permitting merits defenses “would turn on its head both
[Section] 220 and the case law upholding a books and records inspection for the purpose
of investigating mismanagement”); Khanna v. Covad Commc’ns Grp., Inc., 2004 WL
187274, at *6 (Del. Ch. Jan. 23, 2004) (litigating the underlying merits of potential claims
that a stockholder seeks to investigate under Section 220 “would defeat the purposes of

                                             37
wrongdoing as a Section 220 action is not a full trial on the merits.”150 Stockholders

may meet the credible basis standard notwithstanding skepticism of the underlying

claims. Even if certain of Calgon’s merits arguments turn out to be correct in

subsequent plenary litigation, they cannot bar the Fund from asserting its rights to

inspect books and records under Section 220.

       For the foregoing reasons, I conclude that the Fund has provided some

evidence from which I can infer legitimate issues of possible mismanagement or

wrongdoing.

       D.     The Fund’s Proper Purposes Support An Investigation Into
              Actionable Corporate Wrongdoing At This Stage.
       Having ruled that the Fund’s Demand meets the form and manner

requirements of Section 220, that the Fund’s proffered purposes are its actual

purposes, and that the Fund established credible bases to infer possible

mismanagement or wrongdoing, I turn now to Calgon’s argument that any

subsequent plenary action would be precluded by its exculpatory provision under

8 Del. C. § 102(b)(7).151 As this Court held in Southeastern Pennsylvania


this summary proceeding and the underlying policy guidance that potential plaintiffs use
the procedures of Section 220 to determine if a case exists for the shareholder to pursue”).
150
  Caspian Select Credit Master Fund Ltd. v. Key Plastics Corp., 2014 WL 686308, at *4
(Del. Ch. Feb. 24, 2014).
151
   Calgon represents that it has a Section 102(b)(7) provision. See Trial Tr. 148; JX 2 at
5. Corporations may exculpate directors from certain monetary damages for breaches of
the duty of care under Section 102(b)(7). See Emerald Partners v. Berlin, 787 A.2d 85, 91

                                            38
Transportation Authority v. AbbVie Inc., later affirmed by the Supreme Court, a

stockholder must offer some evidence of “actionable corporate wrongdoing” to

support a Section 220 demand in the context of an exculpatory provision.152 This

Court explained in AbbVie I that:

         Because a Section 102(b)(7) exculpatory provision serves as a bar to
         stockholders recovering for certain director liability in litigation, a
         stockholder seeking to use Section 220 to investigate corporate
         wrongdoing solely to evaluate whether to bring derivative litigation has
         stated a proper purpose only insofar as the investigation targets non-
         exculpated corporate wrongdoing.153

         Calgon argues that the Court must deny the Demand because the Fund has not

provided sufficient grounds for a non-exculpated claim in future litigation.154

Although the Fund must provide some evidence of non-exculpated claims to

demonstrate actionable corporate wrongdoing under Section 220,155 the AbbVie I

Court “stress[ed] that this burden . . . remains among the lightest burdens recognized




(Del. 2001) (“Since its enactment, Delaware courts have consistently held that the adoption
of a charter provision, in accordance with Section 102(b)(7), bars the recovery of monetary
damages from directors for a successful shareholder claim that is based exclusively upon
establishing a violation of the duty of care.”).
152
   Se. Pa. Transp. Auth. v. AbbVie Inc., 2015 WL 1753033, at *13 (Del. Ch. Apr. 15, 2015)
(AbbVie I), aff’d 132 A.3d 1 (Del. 2016) (together, “AbbVie”).
153
      AbbVie I, 2015 WL 1753033, at *13.
154
      Answering Br. 40-41.
155
    The parties do not contest that the Fund is pursuing the Demand to explore potential
litigation.


                                            39
in our jurisprudence.”156 I have already ruled that the Fund established credible bases

to investigate wrongdoing as asserted in its Demand. The Fund’s claims include

suspected breaches of the duty of loyalty,157 which cannot be exculpated.158

Moreover, a number of the potential defendants for those claims are officers, not

directors. This Court has declined to apply AbbVie where there existed “the

possibility of a claim against [a potential defendant] in her capacity as an officer”

because “Section 102(b)(7) does not authorize exculpation for officers.”159 Calgon

does not address this point, although the Fund raised it in its Opening Brief.160




156
      AbbVie I, 2015 WL 1753033, at *13.
157
   See, e.g., JX 1 at 4 (“Similarly, it appears that the [] Acquisition was driven by the self-
interests of the Company’s directors and/or officers, and that the Company’s disclosures to
stockholders about the [] Acquisition are materially incomplete and/or misleading.”);
Opening Br. 29. I note that, at this stage, the independence or disinterestedness of the
Outside Directors has not yet been established. In fact, it is the subject of one of the
Requests and a stated purpose for investigation in the Demand.
158
    8 Del. C. § 102(b)(7) (providing that the exculpatory provision “shall not eliminate or
limit the liability of a director: (i) For any breach of the director’s duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under § 174 of this title; or (iv)
for any transaction from which the director derived an improper personal benefit”).
159
   Yahoo! Inc., 132 A.3d at 787; see also Gantler v. Stephens, 965 A.2d 695, 709 n.37
(Del. 2009) (“Although legislatively possible, there currently is no statutory provision
authorizing comparable exculpation of corporate officers.”).
160
      See Opening Br. 28-29.


                                              40
Because none of the Fund’s purposes or Requests bear exclusively on exculpated

claims, AbbVie does not preclude any purpose or Request.161

            Calgon also asserts, albeit in a single footnote, an argument that the Supreme

Court’s Corwin doctrine162 cleansed any of the Fund’s potential claims because a

majority of Calgon’s stockholders approved the Acquisition and the Fund has,

according to Calgon, abandoned its disclosure claims.163 Calgon acknowledges this

point is contrary to current Delaware law under Lavin v. West Corp.,164 but asserts,

to “preserve[] . . . for appeal,” that (i) Lavin is inconsistent with AbbVie, and (ii) this

case is distinguishable from Lavin because that case involved disclosure claims.165

For the reasons addressed exhaustively in Lavin, I agree that Corwin is a merits

defense that may not bar Section 220 claims.166 I also do not read Lavin to turn on



161
    See Yahoo! Inc., 132 A.3d at 787 (where the stockholder’s claims involved
non-exculpated claims and parties, “[i]t would be premature on the facts presented to allow
[the company] to rely on its exculpatory provision to foreclose [the stockholder] from
investigating further”).
162
    See Corwin v. KKR Financial Holdings LLC, 125 A.3d 304 (Del. 2015). Corwin
provides that “when a transaction not subject to the entire fairness standard is approved by
a fully informed, uncoerced vote of the disinterested stockholders, the business judgment
rule applies.” Id. at 309.
163
      Answering Br. 41 n.28.
164
    This Court recently held in Lavin that the Corwin doctrine does not bar Section 220
claims. Lavin, 2017 WL 6728702, at *7-10.
165
      Id.
166
    The Lavin Court was, of course, aware of AbbVie when it ruled, and cited AbbVie I
directly. Lavin, 2017 WL 6728702, at *9 n.75.


                                              41
whether a Section 220 demand includes an investigation of disclosure claims as a

professed purpose. But, in any case, the Fund has shown a credible basis to

investigate the disclosure of Calgon’s projections. Corwin does not bar the Fund’s

Demand.167

         Relatedly, Calgon asserts that the Fund lacks a proper purpose because it

ultimately voted a number of shares in favor of the Merger, and that the Fund thus

acquiesced to the Merger and cannot challenge it in later plenary litigation. 168 In

support of this argument, Calgon cites Bershad v. Curtiss-Wright Corp., which held

that “[a]n informed minority shareholder . . . who either votes in favor of a merger

or accepts the benefits of the transaction cannot thereafter attack the fairness of the

merger price.”169 Calgon devotes only a few sentences to this argument, and neither




167
      As the Court stated in Lavin, in so ruling:
         I do not mean to diminish the pleading stage business judgment deference
         that must be afforded fiduciaries whose decisions are approved by properly
         informed disinterested stockholders freely exercising their right to vote their
         shares. Nor do I intend to suggest that the fiduciaries [the Fund] may choose
         to name in a plenary action will not prevail should they invoke Corwin in a
         motion to dismiss [the Fund]’s complaint.
Id. at *10.
168
   See Answering Br. 21-22. The parties clash on the specifics of these facts, including
whether the Fund’s advisor voted the shares and, if so, whether that makes a difference.
See id.; Reply Br. 10-11.
169
      535 A.2d 840, 842 (Del. 1987).


                                                42
party provided authority addressing whether acquiescence under Bershad is fairly

considered in a summary Section 220 proceeding.

       It is unclear to me whether a party may properly assert acquiescence as a

defense to a Section 220 demand. But even if Calgon could properly assert that

defense, I find that Bershad does not undercut the Fund’s evidence of actionable

corporate wrongdoing. In order for Calgon’s acquiescence defense to preclude the

Demand, it would have to show that the Fund’s litigation prospects are “simply not

justiciable” or otherwise “not viable as a matter of law” on the limited merits review

and summary record under Section 220.170 But Bershad applies only to informed

stockholders.171 As I have already found that the Fund states a proper purpose to

investigate Calgon’s disclosures related to projections, Bershad’s application would

require a premature merits ruling on that claim. I decline to wade through the merits

in this summary statutory action.

       For these reasons, the Fund has presented sufficient evidence of actionable

corporate wrongdoing for purposes of Section 220.




170
   Lavin, 2017 WL 6728702, at *9 (quotations omitted) (collecting cases regarding the
viability of underlying claims to a Section 220 demand).
171
   Bershad, 535 A.2d at 848 (“However, when an informed minority shareholder either
votes in favor of the merger, or like Bershad, accepts the benefits of the transaction, he or
she cannot thereafter attack its fairness.”).


                                             43
         E.     The Fund Is Entitled To Those Books And Records That Are
                Necessary And Essential To Its Purposes.
         “The scope of inspection is limited to only those books and records that are

‘necessary and essential to accomplish the stated, proper purpose.’”172 “Documents

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

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

another source.’”173 “The plaintiff bears the burden of proving that each category of

books and records is essential to accomplishment of the stockholder’s articulated

purpose for the inspection.”174 To carry its burden, the Fund must “make specific

and discrete identification, with rifled precision, of the documents sought.”175 “The

inspection should stop at the quantum of information . . . ‘sufficient’ to accomplish

the plaintiff’s stated purpose. If the books and records are not ‘essential’ for the

stockholder’s purpose, then the stockholder already has ‘sufficient’ information and




172
  Mudrick Capital Mgmt., L.P., 2018 WL 3625680, at *7 (quoting Saito v. McKesson
HBOC, Inc., 806 A.2d 113, 116 (Del. 2002)).
173
   Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr. Fund IBEW, 95 A.3d 1264,
1271 (Del. 2014) (quoting Espinoza v. Hewlett–Packard Co., 32 A.3d 365, 371-72 (Del.
2011)).
174
      Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1035 (Del. 1996).
175
    Brehm v. Eisner, 746 A.2d 244, 266 (Del. 2000); see also Wal-Mart Stores, Inc., 95
A.3d at 1283 (“The term ‘rifled precision’ requires the Court of Chancery to make a
qualitative analysis of documents demanded. ‘Rifled precision’ is not a quantitative
limitation on the stockholder’s right to obtain all documents that are necessary and essential
to a proper purpose.”).


                                             44
the inspection can be denied as seeking materials beyond what is ‘needed to perform

the task.’”176

       Many of the Fund’s Requests are overbroad, as they seek documents that are

not necessary or essential to its purposes, or are not in pursuit of an investigation for

which the Fund has established a credible basis.177 However, the Fund is entitled to

a production responsive to Request Nos. 2,178 3, 5, 6, 7, 8, 9, 10, and 11, as tailored

by the parties following the Demand, including in the pre-trial briefing.179




176
   Yahoo! Inc., 132 A.3d at 788 (quoting Thomas & Betts Corp., 681 A.2d at 1035;
Carapico v. Philadelphia Stock Exch., Inc., 791 A.2d 787, 793 (Del. Ch. 2000)).
177
    Request No. 1 seeks all materials involved in drafting the Proxy, including all
correspondence described therein. That broad range is not necessary and essential to the
Fund’s limited inspection. See Lavin, 2017 WL 6728702, at *14 n.104 (rejecting similar
request as overbroad). Request No. 4 seeks all materials Calgon provided to its advisors.
The Fund has not provided a credible basis to infer possible wrongdoing related to the
advisors’ conduct, and this Request is not crafted with “rifled precision” to investigate
those credible bases the Fund has provided. See Brehm, 746 A.2d at 266. I also deny
inspection under Request No. 12, which seeks engagement letters between Calgon and
Morgan Stanley, for those same reasons, and because Calgon already provided the
engagement letter related to the Acquisition. See D.I. 82 at Ex. 1. Request No. 13 seeks
books and records provided to satisfy other Section 220 demands or litigation regarding
the Acquisition. That, too, is overbroad and fails to confine itself to necessary and essential
documents. See Lavin, 2017 WL 6728702, at *14 n.104 (rejecting similar request as
overbroad).
178
   See also Yahoo! Inc., 132 A.3d at 790 (“The starting point—and often the ending
point—for a sufficient inspection will be board level documents evidencing the directors’
decisions and deliberations, as well as the materials that the directors received and
considered.”).
179
   See, e.g., Reply Br. 29-30 (limiting Request No. 7 to “documents created or distributed
on or after August 1, 2016”).


                                              45
         I impose the following limitations to further focus Calgon’s production. The

Requests’ definition of “strategic alternatives,” which threatens to unjustifiably

expand the production’s scope, shall be read to relate only to alternative acquisition

proposals for Calgon. Requests dealing with Calgon’s financials, business plans,

valuations, or projections shall be limited to the issues of (i) Calgon’s projection

adjustments during the sale process, and (ii) the consideration of forecasts or

projections relating to the Ballast Water Treatment Initiative180 that expanded

beyond the time period ultimately disclosed in the Proxy.

         Request No. 10 is facially the broadest Request that I approve. It seeks

communications between Calgon’s management, on the one hand, and Morgan

Stanley, Kuraray, or Goldman Sachs (Kuraray’s financial advisor) on the other,

including email communications.181 This Request presents two issues: its request

for personal electronic communications, and its breadth.




180
      See Compl. ¶ 15; supra text accompanying notes 127-130.
181
    Request No. 10 reads: “All books and records reflecting communications between
Randall S. Dearth, Stevan R. Schott, James A. Coccagno, Robert Fortwangler, or Chad
Whalen, on the one hand, and any officer, director, employee or agent of Morgan Stanley,
Goldman Sachs [], Kuraray, or any other potential acquiror of the Company or any part
thereof, on the other hand, including notes, calendar entries and electronic communications
regarding the [] Acquisition or any other potential strategic alternatives involving Calgon
Carbon,” and the Fund notes that “[t]o be clear, this includes e-mails of directors or officers,
whether or not stored on the Company’s servers.”


                                              46
          I address the electronic communications first. “This court has the power to

order production of documents prepared by officers and employees as part of a

Section 220 inspection.”182 “A corporate record retains its character regardless of

the medium used to create it.”183           Those mediums include email and similar

communication methods. “The reality of today’s world is that people communicate

in many more ways than ever before, aided by technological advances that are

convenient and efficient to use.”184 “Not surprisingly, Delaware precedents have

ordered the production of electronic documents and emails in Section 220

actions.”185

          Corporate records are not always confined to the company’s premises, domain

name, and servers. Where directors and officers conducted company business

outside of company email addresses, this Court has ordered production from their

responsive personal accounts and devices.186 “[W]hen considering requests for



182
      Yahoo! Inc., 132 A.3d at 791.
183
      Id. at 793.
184
      Papa John’s Int’l, Inc., 2019 WL 194634, at *16.
185
      Yahoo! Inc., 132 A.3d at 792-93 (collecting cases).
186
   See Wal-Mart Stores, Inc., 95 A.3d at 1272-74 (affirming production of documents from
officers and employees); Papa John’s Int’l, Inc., 2019 WL 194634, at *15-16 (permitting
production of directors’ personal emails and text messages); Yahoo! Inc., 132 A.3d at
791-93 (permitting production of CEO’s personal emails); but see In re Lululemon
Athletica Inc. 220 Litig., 2015 WL 1957196, at *5-7 (Del. Ch. Apr. 30, 2015) (declining to
permit production of directors’ personal emails).


                                              47
information from personal accounts and devices in Section 220 proceedings, the

court should apply its discretion on a case-by-case basis to balance the need for the

information sought against the burdens of production and the availability of the

information from other sources, as the statute contemplates.”187 The core inquiry

remains the same: whether the record is necessary and essential to the stockholder’s

investigation.188

         In this case, the Fund seeks electronic communications, including emails, to

investigate the discussions between Calgon’s management and third parties to

determine if management prioritized their own retention and compensation over the

interests of Calgon’s stockholders. Such communications may go to the very heart

of the Fund’s proper purpose for this Request. The nature of those communications

means that the Fund is unlikely to uncover any meaningful answers in more

traditional, formal books and records, like minutes or letters between the companies.

I find that those communications are necessary and essential, including personal

electronic communications to the limited extent they are not duplicative of sources

from company emails and devices.189



187
      Papa John’s Int’l, Inc., 2019 WL 194634, at *16.
188
    See Yahoo! Inc., 132 A.3d at 793 (“As with other categories of documents subject to
production under Section 220, what matters is whether the record is essential and sufficient
to satisfy the stockholder’s proper purpose, not its source.”).
189
      The parties have not briefed the custodial sources for these potential documents.
                                              48
         As for the breadth of Request No. 10, I take guidance from Lavin, which

approved a narrowed version of a similar request. There, the stockholder requested:

         All books and records reflecting communications between [six officers
         and directors], on the one hand, and any officer, director, employee or
         agent of [the Company’s financial advisor], [the acquiror’s financial
         advisor], [the acquiror], or any other potential acquiror of the Company
         or any part thereof, on the other hand, including notes, calendar entries
         and electronic communications regarding the Proposed Acquisition or
         any other potential strategic alternatives involving [the Company].190

The Court found that the request “landed with the precision of buckshot” and instead

approved only:

         [B]ooks and records reflecting communications related to a potential
         sale of one or more of West’s segments between [five officers and
         directors], on the one hand, and any officer, director, employee or agent
         of [the company’s financial advisor] or any potential acquirer of any
         part of the Company, on the other hand, from January 1, 2016 to July
         26, 2017, including (but not limited to) emails, memoranda and notes.191

         I similarly find that only a subset of the documents sought by Request No. 10

are necessary and essential for the Fund to investigate their concerns of improper

retention and compensation discussions between management and Kuraray. The

following is necessary and sufficient on this record to investigate the Fund’s

concerns: documents reflecting communications between Dearth, Schott, Coccagno,

Fortwangler, Whalen, on the one hand, and any officer, director, employee, or agent


190
   Verified Complaint, Lavin v. West Corp., C.A. No. 2017-0547, at ¶ 22(10) (Del. Ch.
July 27, 2017).
191
      See Lavin, 2017 WL 6728702, at *14.
                                            49
of Kuraray or other potential acquirers, on the other hand, regarding the retention or

compensation of Calgon officers and management related to the Acquisition or any

strategic alternative.

         Finally, the parties’ ultimate order implementing the production shall (i)

impose reasonable start and end dates, to the extent not already provided, to bookend

the collection scope for the Requests,192 and (ii) be subject to appropriate

confidentiality and incorporation-by-reference conditions.193

         F.     The Fund’s Request For A Ruling On Privileged Documents Is Not
                Ripe.
         The Fund also requests a ruling that “Calgon may not, under Delaware law,

withhold documents on the basis of” a preemptively asserted attorney-client

privilege, under the doctrine laid out in Garner v. Wolfinbarger.194 The Delaware

Supreme Court has adopted the so-called Garner exception to the attorney-client




192
   The date of the Acquisition appears to be a natural end-date, although the parties may
agree on an earlier or later date if it appears appropriate for a Request.
193
    Pre-trial Stip. ¶ IV(B) (“To the extent that any inspection is granted, Calgon seeks to
require that any production be subject to a confidentiality agreement and an incorporation-
by-reference condition.”); see generally City of Cambridge Ret. Sys. v. Universal Health
Servs., Inc., 2017 WL 4548460, at *3 (Del. Ch. Oct. 12, 2017) (finding incorporation-by-
reference provisions permissible under Section 220); Disney v. Walt Disney Co., 857 A.2d
444, 448 (Del. Ch. 2004) (“[I]t is often the case that the Court of Chancery will condition
its judgment in Section 220 cases on the entry of a reasonable confidentiality order[.]”).
194
      Opening Br. 45-48; 430 F.2d 1093 (5th Cir. 1970).


                                             50
privilege in both plenary proceedings and Section 220 actions.195 The Garner

doctrine “allows stockholders of a corporation to invade the corporation’s attorney-

client privilege in order to prove fiduciary breaches by those in control of the

corporation upon showing good cause.”196 Delaware courts applying Garner in the

Section 220 context consider:

          (i) the number of shares owned by the shareholder and the percentage
          of stock they represent; (ii) the assertion of a colorable claim; (iii) the
          necessity of the information and its unavailability from other sources;
          (iv) whether the stockholder has identified the information sought and
          is not merely fishing for information; and (v) whether the
          communication is advice concerning the litigation itself.197




195
      Wal-Mart Stores, Inc., 95 A.3d at 1278.
196
      Id. at 1276.
197
   Grimes, 724 A.2d at 568. As adopted by the Supreme Court, Garner also identified the
following generally relevant factors:
          [1] the number of shareholders and the percentage of stock they represent;
          [2] the bona fides of the shareholders; [3] the nature of the shareholders’
          claim and whether it is obviously colorable; [4] the apparent necessity or
          desirability of the shareholders having the information and the availability of
          it from other sources; [5] whether, if the shareholders’ claim is of wrongful
          action by the corporation, it is of action criminal, or illegal but not criminal,
          or of doubtful legality; [6] whether the communication is of advice
          concerning the litigation itself; [7] the extent to which the communication is
          identified versus the extent to which the shareholders are blindly fishing; and
          [8] the risk of revelation of trade secrets or other information in whose
          confidentiality the corporation has an interest for independent reasons.
Wal-Mart Stores, Inc., 95 A.3d at 1276 n.32 (quoting Garner, 430 F.2d at 1104).


                                                 51
         The Fund’s request for a Garner ruling is not ripe.198 Calgon has not yet

produced any documents, nor has it identified a set of privileged documents against

which to apply the Garner doctrine. The Fund clarified in briefing that it does not

oppose revisiting this issue following Calgon’s identification of privileged

documents responsive to the Demand, if any.199 Accordingly, I deny the Fund’s

request for a ruling on this ground without prejudice.

III.     CONCLUSION
         Calgon shall provide the books and records contemplated by this opinion and

subject to its terms, including the requirement to log any privileged materials. The

parties shall submit an order consistent with this opinion within five business days.

Each party shall bear its own costs, except as laid out in the Report.




198
   Yahoo! Inc., 132 A.3d at 796 (in the context of applying Garner to a Section 220
proceeding, determining that the company must identify privileged materials, but, at that
time, it was “premature for this court do anything other than require [the company] to log
documents”).
199
      See Reply Br. 31.
                                           52
