## Facts

- A Verizon stockholder, whose shares were held in street name through a broker, made a written demand to inspect Verizon’s books and records under DGCL § 220.
- The demand sought documents relating to compensation of Verizon’s three highest officers for 2000–2002 to investigate alleged mismanagement and corporate waste.
- The stockholder asserted the officers received compensation exceeding what their employment agreements allowed and estimated overpayment at roughly $205 million over three years.
- In deposition testimony, the stockholder conceded he lacked factual support for mismanagement or waste, acknowledged the executives did not perform duplicative work, and admitted his compensation estimate might be incorrect.
- The Court of Chancery granted summary judgment for Verizon, finding the stockholder failed to provide evidence supporting a proper purpose for inspection.
- The stockholder appealed, arguing the evidentiary requirement imposed an unfair barrier for minority stockholders of public companies.

## Issues

1. Whether a stockholder seeking books-and-records inspection under DGCL § 220 to investigate mismanagement or waste must present some evidence establishing a credible basis to infer possible wrongdoing.
2. Whether the stockholder’s showing—based largely on the magnitude of disclosed executive compensation and unsupported allegations—satisfied that burden.

## Decision

- The Delaware Supreme Court affirmed summary judgment for Verizon.
- The Court held that a § 220 requester must present some evidence establishing a credible basis from which the court may infer possible mismanagement, waste, or wrongdoing.
- The Court rejected the argument that the credible-basis requirement is an insurmountable barrier, describing it as the lowest evidentiary burden in Delaware law but more than suspicion or curiosity.
- The Court held the stockholder failed to meet the standard because he offered conjecture, not evidence, and his reliance on publicly disclosed compensation figures did not itself support an inference of wrongdoing.

## Legal Principles

- DGCL § 220 inspection to investigate wrongdoing requires a “proper purpose” supported by some evidence establishing a “credible basis” to infer possible mismanagement, waste, or wrongdoing.
- The credible-basis standard, though minimal, excludes demands grounded only in suspicion, curiosity, or dissatisfaction and is intended to prevent indiscriminate fishing expeditions.
- Public disclosure of high executive compensation, without additional indicia of breach of duty, contractual deviation, or other misconduct, does not alone supply a credible basis for inspection.

## Conclusion

The court upheld denial of books-and-records inspection because the stockholder failed to produce any evidence supporting a credible basis to infer corporate waste or mismanagement; generalized objections to the size of executive pay, even if large and publicly reported, were insufficient under DGCL § 220.


Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117 (Del. 2006)