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Melzer v. CNET Networks, Inc.

Chancery Court of Delaware
934 A.2d 912 (2007)


Facts

Martin Melzer and other shareholders (plaintiffs) of CNET Networks, Inc. (CNET) (defendant) filed a derivative suit against CNET in federal district court, alleging federal and state securities-law claims against CNET directors related to backdating stock options. CNET successfully moved to dismiss the complaint for failure to make a demand of the CNET board. The district court granted the shareholders leave to amend their complaint to re-plead demand futility, and issued a stay of the case pending a demand to inspect CNET’s books and records. In the stay order, the district judge requested that CNET cooperate and expedite the books-and-records inspection. The shareholders sent a demand letter to CNET for the books and records, but CNET did not comply. The shareholders filed a motion to compel inspection, and on the eve of trial, CNET agreed to allow the shareholders to review some of the documents. The shareholders and CNET disagreed on the scope of the review. In order to prove the futility of making a demand on the board of CNET, the shareholders sought documents that predated their purchase of CNET stock.

Rule of Law

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Issue

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Holding and Reasoning (Chandler, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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