## Facts

- A Michigan public pension fund, as an Axcelis stockholder, demanded inspection of Axcelis’s books and records under 8 Del. C. § 220.
- Axcelis’s board adopted a “plurality-plus” voting policy by board resolution (not in the charter or bylaws) requiring a director who received more “withheld” than “for” votes in an uncontested election to tender a resignation, subject to board discretion to accept or reject.
- At the 2008 annual meeting, three directors received more “withheld” than “for” votes; each tendered a resignation, and the board declined to accept them.
- Around the same period, a prospective acquirer made unsolicited proposals to acquire Axcelis; the board rejected the proposals as inadequate and declined to extend due diligence, after which no final bid was made.
- Axcelis later experienced financial distress, including missed debt payments and a significant stock price decline.
- Westland’s demand sought seven categories of records to investigate possible mismanagement and fiduciary breaches tied to (1) the rejected acquisition proposals and (2) the refusal to accept director resignations.
- Axcelis denied the demand; Westland filed a § 220 action in the Delaware Court of Chancery.

## Issues

1. Whether Westland established a “proper purpose” for inspection under § 220 by presenting a credible basis to infer possible mismanagement or wrongdoing regarding the acquisition discussions and the refusal to accept director resignations.
2. Whether Blasius and Unocal burden-shifting or presumptions should apply in a § 220 books-and-records proceeding when alleged entrenchment is the investigative theory.
3. Whether refusal to accept resignations tendered under a board-adopted plurality-plus policy, standing alone, supplies a credible basis to infer wrongdoing sufficient to justify § 220 inspection.

## Decision

- The Delaware Supreme Court affirmed dismissal of the § 220 complaint.
- The Court held Westland failed to provide “some evidence” supporting a credible basis to infer mismanagement or wrongdoing.
- The Court declined to apply Blasius or Unocal burden shifting in the § 220 context, reaffirming that the stockholder bears the burden to meet the credible-basis standard.
- The Court concluded that later financial deterioration did not, without more, support an inference that earlier board decisions in acquisition discussions reflected disloyalty or actionable misconduct.
- The Court held that the board’s refusal to accept the tendered resignations, without additional evidence suggesting bad faith or entrenchment, did not satisfy the credible-basis threshold.

## Legal Principles

- A § 220 plaintiff must prove a proper purpose; when investigating mismanagement, the plaintiff must present a “credible basis” to infer possible wrongdoing.
- The credible-basis standard is a low evidentiary threshold but requires “some evidence” beyond suspicion, curiosity, or hindsight disagreement with business decisions.
- Books-and-records actions are limited, summary proceedings; they are not the forum to litigate merits-based fiduciary standards applicable in plenary actions.
- Blasius and Unocal are substantive standards of review for fiduciary-duty claims and do not shift burdens or create presumptions in § 220 proceedings.
- A board’s refusal to accept resignations under a plurality-plus policy may support an investigative purpose, but inspection requires additional record evidence suggesting improper motive, bad faith, or other actionable conduct.

## Conclusion

The court affirmed dismissal because the stockholder did not present evidence creating a credible basis to suspect wrongdoing, and it refused to import Blasius or Unocal burden shifting into § 220; plurality-plus resignation rejections may justify investigation only when supported by additional indicia of potential misconduct.


City of Westland Police & Fire Ret. Sys. v. Axcelis Techs., Inc., 1 A.3d 281 (Del. 2010)