## Facts

- West Corporation, controlled by Gary and Mary West, announced a going-private leveraged recapitalization structured as a squeeze-out merger.
- Minority stockholders were to receive $48.75 per share in cash; the controlling stockholders would receive a different mix of cash and rollover equity valued at a lower per-share amount.
- Polygon Global Opportunities Master Fund, an event-driven hedge fund, bought West shares only after the transaction was publicly announced.
- Polygon made multiple demands under 8 Del. C. § 220 to inspect West’s books and records.
- Polygon asserted three purposes: (1) valuing its shares to decide whether to seek statutory appraisal, (2) investigating potential fiduciary duty breaches relating to the transaction, and (3) communicating with other stockholders about the transaction.
- West refused inspection, contending Polygon had not shown a proper purpose and that the requested materials were not warranted.
- Polygon filed a § 220 action to compel inspection; the case proceeded to a merits determination on a paper record with limited testimony.

## Issues

1. Whether a stockholder who bought after announcement of a going-private transaction showed a proper purpose to inspect records to value shares for deciding whether to pursue appraisal.
2. Whether a stockholder who purchased after the alleged misconduct occurred showed a proper purpose to investigate alleged fiduciary breaches connected to that prior conduct.
3. Whether a stockholder established a proper purpose to communicate with other stockholders when the demand did not actually request a stockholder list or records tied to communications.

## Decision

- The Court of Chancery dismissed the complaint and denied inspection.
- The court held Polygon failed to establish a proper purpose under § 220 for any asserted rationale.
- For appraisal/valuation, the court found Polygon already possessed sufficient public and transactional information to decide whether appraisal was warranted.
- For investigating wrongdoing, the court found Polygon sought to investigate alleged pre-purchase conduct and lacked a basis to take concrete action (including litigation standing) using the requested records.
- For stockholder communications, the court found the demand was not directed to obtaining a stockholder list or comparable materials, defeating the asserted communications purpose.

## Legal Principles

- A § 220 plaintiff must prove a “proper purpose,” meaning a purpose reasonably related to the person’s interest as a stockholder.
- Even with a proper purpose, inspection is limited to books and records that are necessary, essential, and sufficient to accomplish the stated purpose; § 220 is not a substitute for discovery.
- A request to investigate wrongdoing must be connected to a realistic ability to take concrete action based on the information sought; inability to sue (including for lack of standing) weighs against proper purpose.
- A communications purpose requires a demand tailored to records that facilitate stockholder communications (such as a stockholder list), not an unrelated request for internal transaction materials.

## Conclusion

The court refused to compel inspection because Polygon, a post-announcement purchaser, did not demonstrate a proper purpose for appraisal-related valuation, investigation of alleged pre-purchase fiduciary breaches, or stockholder communications, and § 220 could not be used as a backdoor discovery tool.


Polygon Glob. Opportunities Master Fund v. W. Corp., 2006 WL 2947486 (Del. Ch. 2006)