Does an individual who received a void issuance of stock from a Delaware corporation have standing to bring a books and records action under Section 220 of the Delaware General Corporation Law ("DGCL")?

That issue was addressed in the recent decision of Pogue v. Hybrid Energy, Inc.,  C.A. No. 11563-VCG (Del. Ch. Aug. 5., 2016).  In Pogue, the defendant, Hybrid Energy, Inc. ("Hybrid" or the "Company"), defended the action on the grounds that Hybrid's stock issuance to plaintiff James Pogue was void and the stock certificate a nullity.  While chastising Hybrid for taking such a position in the case and making clear the Court was not ruling on other potential causes of action that Pogue could bring, Vice Chancellor Glasscock found that Pogue lacked standing to bring a Section 220 books and records action against Hybrid.

By way of background, Pogue is a former employee of Hybrid. He alleged that the Company purported to issue him 1,000,000 shares of common stock by certificate dated December 29, 2011, at a time when all of the Company's authorized shares—1,500 in toto—were held by another individual.  However, according to Pogue, at all material times the Company treated him as a stockholder: the void issuance was represented on the company's ledger, Pogue was by paid dividends, and Hybrid issued to Pogue a Form 1099-DIV along with a revised stock certificate.

Pogue conceded that the stock transfer was void. However, he argued that because he is listed on the company's stock ledger, that is the sole determinant of stock ownership under Section 220.  The Court disagreed, finding that a stockholder's "inclusion on the stock ledger states a prima facie,  but rebuttable, case that a plaintiff is a statutory stockholder of record; and that, here, the undisputed record rebuts that presumption, precluding Pogue from the relief he seeks."  Accordingly, the Court granted Hybrid's motion for summary judgment and dismissed the case.

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