I've been following this case closely, and I think the Court of Chancery's ruling offers a perfect illustration of Delaware's pragmatic approach to books and records disputes. In a recent decision, the Delaware Court of Chancery addressed the standards for staying a books and records production order pending appeal. Vice Chancellor David's opinion in Bruch v. Switchboard Technology Labs provides important guidance on how the court evaluates such requests.
The underlying dispute involved a stockholder books and records action under Section 220 of the Delaware General Corporation Law. Plaintiffs Zachary Bruch and Joshua Kaufman sought corporate records to investigate potential wrongdoing related to Switchboard's cryptocurrency token allocation process. After trial, the court determined that plaintiffs had established proper purposes to inspect certain documents.
Vice Chancellor David analyzed Switchboard's stay request under the four-factor test established in Kirpat, Inc. v. Delaware Alcoholic Beverage Control Commission, 741 A.2d 356, 357 (Del. 1998). The court found that Switchboard failed to present a serious legal question warranting a full stay, noting that the case involved straightforward application of established "credible basis" standards rather than novel legal issues.
While acknowledging that document production could potentially moot Switchboard's appeal (thus causing some irreparable harm), the court emphasized that this factor alone cannot justify a stay in every books and records case. The court determined that delay would cause only minimal harm to the plaintiffs, and the public interest factor was neutral.
Balancing these considerations, the court granted a limited conditional stay extending through the tenth day after Switchboard files its appeal. If Switchboard moves for a stay before the Delaware Supreme Court within that period, the Court of Chancery's stay will remain in effect until the Supreme Court rules on the motion. The court also required Switchboard to post a modest $1,000 bond.
What I find most interesting about this decision is how it carefully balances competing interests while respecting the summary nature of Section 220 proceedings. Attorneys like myself who regularly advise clients on corporate governance matters appreciate the court's practical approach to these issues.
Key Takeaway: This decision illustrates the Court of Chancery's nuanced approach to stay requests in Section 220 actions. Despite finding that Switchboard did not demonstrate a serious legal question, Vice Chancellor David nevertheless provided a brief conditional stay to preserve appellate rights—highlighting the court's practical approach to balancing finality in summary proceedings against allowing meaningful appellate review.
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