## Facts

- Thomas & Betts Corporation, a public company, became a minority stockholder of Leviton Manufacturing Co., a closely held Delaware corporation.
- Leviton’s president and CEO, Harold Leviton, was the controlling stockholder through a voting trust controlling about 76.45% of Leviton’s Class A stock.
- Thomas & Betts had long sought a business combination with Leviton, including a possible acquisition; discussions did not produce an agreement, and Leviton did not express interest in a change-of-control transaction.
- As part of its acquisition strategy, Thomas & Betts privately negotiated to buy a large Leviton stock block from a Leviton-family stockholder and spouse (about 29.1%) for $50 million, with a potential additional $20 million contingent on completion.
- After learning of the purchase, Harold Leviton attempted to repurchase those shares.
- Thomas & Betts made a written demand under 8 Del. C. § 220 to inspect Leviton’s books and records and simultaneously made a “final offer” to buy the remaining shares for $250 million.
- Leviton rejected both the acquisition offer and the inspection demand.
- Thomas & Betts filed a § 220 action in the Court of Chancery to compel inspection.
- The Court of Chancery granted inspection only in a limited manner, restricting production largely to materials supporting valuation and denying broader categories of requested documents.
- Thomas & Betts appealed, challenging the limited scope of inspection and the trial court’s suggestion that a hostile bidder bears a heightened evidentiary burden to show a proper purpose.

## Issues

1. In a stockholder action under 8 Del. C. § 220, what burden and standard of proof applies to establishing a “proper purpose,” including whether a hostile acquirer bears a heightened burden?
2. Must the stockholder prove a proper purpose, by a preponderance of the evidence, as to each category of documents requested, and was the inspection properly limited to valuation-related records?

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery’s order granting inspection in part and denying it in part.
- The court clarified that a § 220 plaintiff bears the normal civil burden—proof by a preponderance of the evidence—to establish a proper purpose; there is no “greater-than-normal” burden for hostile or strategic acquirers.
- The court held the trial court’s reference to a heightened burden was an overstatement but treated it as harmless error because the outcome rested on evidentiary sufficiency and credibility assessments.
- The court upheld limiting inspection to records essential and sufficient for valuation because Thomas & Betts did not prove a proper purpose supporting the full scope of materials requested.
- The court deferred to the Court of Chancery’s fact-finding and credibility determinations regarding Thomas & Betts’ asserted purposes and motives.

## Legal Principles

- A stockholder seeking inspection under 8 Del. C. § 220 must prove, by a preponderance of the evidence, a proper purpose reasonably related to the person’s interest as a stockholder.
- The burden is the normal civil standard; it is not heightened because the stockholder is a hostile bidder or has strategic acquisition objectives.
- The stockholder must establish a proper purpose entitling inspection of each item sought; a generalized purpose does not justify broad, discovery-like access.
- Even where valuation is a proper purpose, inspection may be confined to documents that are essential and sufficient for valuation.
- Appellate review in § 220 actions gives substantial weight to the Court of Chancery’s factual and credibility assessments when determining whether the stated purpose is genuine and supported by credible evidence.

## Conclusion

The Delaware Supreme Court affirmed a limited, valuation-focused inspection under § 220, while clarifying that stockholders—including hostile acquirers—must prove a proper purpose by a preponderance of the evidence and must tie that purpose to each requested category of documents.


Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026 (Del. 1996)