Donald Walker v. Cabo Verde Capital, Inc.
CA 11696-MZ
| Del. Ch. | Jun 8, 2017Background
- Walker, a shareholder, sent a demand under 8 Del. C. § 220 on October 29, 2015 to Cabo Verde Capital when it was a Delaware corporation ("Cabo Delaware").
- A certificate of merger filed November 6, 2015 merged Cabo Delaware into a Nevada corporation ("Cabo Nevada"), with Cabo Nevada the surviving entity; Cabo Delaware ceased to exist as of that date.
- Walker filed a pro se Section 220 complaint on November 10, 2015 (after the merger) to compel inspection of corporate books to value his stock.
- Walker attempted earlier service on the former registered agent (unsuccessful) and later served the company via the Delaware Secretary of State on May 5, 2017.
- Cabo Nevada moved to dismiss for lack of standing, arguing Walker was not a stockholder when he filed his complaint due to the merger; the Master assumed the merger valid for purposes of the Section 220 proceeding.
- Relying on controlling Delaware precedent, the Master concluded a plaintiff must be a stockholder at the time of filing and recommended granting the motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a plaintiff who made a proper §220 demand but ceased to be a stockholder due to an intervening merger has standing to file a §220 action after the merger | Walker argued the merger was invalid (so he remained a shareholder) and therefore he had standing; he also relied on his pre-merger demand | Cabo Nevada argued Walker lacked standing because the merger extinguished his stock before he filed, so he was not a stockholder when the complaint was filed | The court held a §220 plaintiff must be a stockholder at the time of filing; because Walker was not, he lacked standing and dismissal was recommended |
Key Cases Cited
- IBM Corp. v. Comdisco, Inc., 602 A.2d 74 (Del. Ch. 1991) (jurisdictional standing principles discussed)
- Dover Historical Soc’y v. City of Dover Planning Comm’n, 838 A.2d 1103 (Del. 2003) (party invoking court’s jurisdiction bears burden of establishing standing)
- In re Baxter Int’l, Inc. S’holders Litig., 654 A.2d 1268 (Del. Ch. 1995) (court may take judicial notice of Secretary of State filings at motion-to-dismiss stage)