SHAMROCK ASSOCIATES v. THE DORSEY CORPORATION, 7678 (Del.Ch. 1984)

GROVER C. BROWN, Chancellor.

Gentlemen:

Plaintiff seeks a list of shareholders of the defendant corporation pursuant to 8 Del.C. § 220. It is admitted that the plaintiff, a New Jersey limited partnership formed for the purpose of investing and trading in securities, is the owner of record of 10,000 shares of the defendant corporation's stock. It is further admitted that by a properly executed demand letter dated June 26, 1984 the plaintiff demanded a list of share-holders of the defendant together with an indication as to the amount of their respective holdings, a magnetic computer tape to facilitate mailing purposes, an ongoing update of the shareholder list and a breakdown as to those shares of the defendant held beneficially for others through central certificate depository systems. It is further established that the defendant has refused to provide the list. This is the Court's decision after a summary hearing.

A threshold question has been presented by the decision of the plaintiff to call no witnesses at the hearing but rather to offer the deposition testimony of one David Blanchard, one of its general partners. Blanchard is the person who signed the demand letter on behalf of the plaintiff. He is a resident of New Jersey and his deposition was taken in New York by the defendant during the course of discovery in this action. Plaintiff concedes that it can and will produce Blanchard to testify if so required by the Court. However, it takes the position that this is unnecessary since it says that Blanchard, if called, would only testify to that which is in his deposition anyway, and since the defendant has been allowed full latitude in deposing Blanchard in preparation for its defense of the case, plaintiff perceives it to be a waste of everyone's time to require Blanchard to appear and go through the ritual again.

Plaintiff offers the deposition in evidence as part of its case in chief pursuant to Chancery Rule 32(a)(3)(B). In brief, this rule provides that the deposition of a witness, whether or not a party, may be used by any party for any purpose at trial provided that the party against whom it is offered was present or represented at the deposition and provided further that the Court finds that the witness is out of the State, unless it appears that the absence of the witness was procurred by the party offering the deposition. Plaintiff points out that Blanchard is a non-resident, a status which it did not procure in connection with this proceeding. It points out further that defendant was present and represented at the deposition which it noticed. Thus, plaintiff takes the position that the conditions of Rule 32(a)(3)(B) have been met.

Defendant argues, however, that Blanchard's deposition is hearsay since it constitutes statements other than those made by the declarant while testifying at trial which are being offered in evidence to prove the truth of the matter asserted. See Rule 801(c) of the Delaware Rules of Evidence (hereafter "D.R.E."). To be admissible, defendant argues, the deposition testimony must fit within one of the exceptions to the hearsay rule. It suggests that the only exception arguably applicable to this situation is found at D.R.E. 804(a) (5) which permits an offer of hearsay when the witness "is absent from the hearing and the proponent of the statement has been unable to procure his attendance by process or other means."

Defendant thus argues that the fact that Blanchard is beyond the reach of service of process is not determinative. Rather, it argues that the burden is cast upon the plaintiff to demonstrate that his presence also cannot be obtained through "other means" which, sensibly construed, should be equated with other "reasonable" means in defendant's view. Certainly one reasonable means is by a request to the witness to appear voluntarily, at least where such a request has a likelihood of success. Creamer v. General Teamsters Local Union 326, 560 F. Supp. 495 (D. Del. 1983). Defendant points to plaintiff's conceded ability and willingness to have Blanchard here if the Court chooses not to admit the deposition. Therefore, defendant concludes that Blanchard is available to testify if the plaintiff asks him. Consequently, it argues that Blanchard is not unavailable within the contemplation of D.R.E. 804(a)(5) and that, accordingly, his deposition is inadmissible.

Moreover, defendant points out that to the extent that D.R.E. 804(a)(5) may be said to conflict with Chancery Rule 32(a)(3)(B) the prefatory note to the Delaware Rules of Evidence provides that the "Rules of Evidence supercede the Delaware Court Rules of Procedure, if any inconsistency exists." See also, D.R.E. 804(b)(1) which deals with the admissibility of deposition testimony in a manner similar to that of Chancery Rule 32(a)(3)(B).

The foregoing admittedly presents a nice question, particularly in light of the liberality with which depositions have been utilized under Rule 32 over the years so as to expedite the trial process in this Court. As defendant indicates, the point may well be one of first impression in this Court. For this reason I choose not to address it in the present setting. This is because to do so is unnecessary to the decision to be reached in this case in the view that I take of the undisputed facts, and because the manner in which the issue has been joined here (with Blanchard obviously being available had plaintiff chosen to call him) seems to transmute into an effort to seek what amounts to an advisory ruling. If a ruling has to be made on this point, I prefer that it be in the context of a true issue as opposed to one developed by the strategy of trial counsel without any apparent need to do so.

Turning to that which I think is determinative of the case, I find that the plaintiff's demand letter does not set forth a proper purpose such as would trigger the statutory obligation of the defendant corporation to provide it with a list of shareholders. In its entirety, the purpose of the plaintiff's request for a stocklist, as set forth in its June 26 demand letter reads as follows:

"The purpose of this demand is to permit [Shamrock Associates] to communicate with other stockholders of the Dorsey Corporation on matters related to their interest as stockholders including, without limitation, with regard to the Board of Directors and individual members thereof and possible solicitation of other stockholders of the Dorsey Corporation as is necessary and appropriate to effect a change in the composition of the Board of Directors."

This statement of purpose is certainly no stronger than those statements of purpose found to be insufficient in Northwest Industries, Inc. v. B.F. Goodrich Company, Del. Supr., 260 A.2d 428 (1969); Weisman v. Western Pacific Industries, Inc., Del. Ch., 344 A.2d 267 (1975); and Hatleigh v. Lane Bryant, Inc., Del. Ch., C.A. No. 6259, Oct. 20, 1980 (Hartnett, V.C.). Plaintiff's demand merely indicates that it would like to be afforded the means to communicate with other shareholders, perhaps about any number of unspecified things and quite possibly about the board of directors of the defendant (the reason for which is also unspecified) and that it might also wish to consider at some indefinite future time the possible solicitation of other shareholders in order to effect a change in the defendant's board of directors.

Neither the demand letter nor the complaint make reference to any impending event for which the present access to a stocklist is reasonably needed. There is no hint of an annual or special meeting, no reference to a tender offer, a planned proxy solicitation or proposed business combination, no reference to any action about to be taken by the defendant's board, and no reference to any particular conduct or activity by either the board or the corporation itself. In Northwest Industries, Inc. v. B.F. Goodrich Company, supra, the Supreme Court stated as follows at 260 A.2d 429:

"Accordingly, in our view, § 220 required [the shareholder] to state in its demand the substance of its intended communication sufficiently to enable [the corporation], and the courts if necessary, to determine whether there was a reasonable relationship between its purpose, i.e., the intended communication, and [the shareholder's] interest as a stockholder of [the corporation]."

Thus, in the present context of this matter it is necessary for this Court to determine whether there was a reasonable relationship between plaintiff's purpose in intending to communicate with other shareholders and its interest as a shareholder of the corporation. In the apparent vacuum in which the demand has been made — at least as the demand appears on its face — I cannot find it to contain sufficient substance to enable me to arrive at such a determination.

Under § 220(c) this Court is vested with exclusive jurisdiction to determine whether a shareholder seeking to inspect a stocklist has complied with the provisions of § 220 respecting the form and manner of making a demand. I find that the plaintiff has failed in this respect here in that its demand, due to its vague and indefinite nature, does not reflect a proper purpose on its face.

Since the deposition testimony of Mr. Blanchard was being offered only to expand upon and support the stated purpose of the demand itself, it follows that there is no need to reach the question of its admissibility.

Accordingly, judgment will be entered in favor of the defendant. Counsel for defendant may submit an appropriate form of order.