Norman v. US Mobilcomm, Inc.

Jeffrey Norman (plaintiff) was a shareholder of US Mobilcomm, Inc. (USM) (defendant). In October 2002, Norman sent USM a letter pursuant to § 220 of Delaware’s General Corporation Law demanding to inspect USM’s books and records. Norman’s stated purpose for the demand was to determine whether USM “acted properly in disposing of assets of the Company, whether the Company acted properly in distributing proceeds from sale transactions and otherwise to assess the propriety of management decisions.” USM produced documents in response to Norman’s demand, but in March 2003, Norman sent USM a letter detailing the claimed deficiencies (deficiency letter) with USM’s production. The parties then engaged in telephone discussions about Norman’s demand and his claim that USM’s production was inadequate. In November 2004, Norman filed suit against USM in Delaware Chancery Court, seeking to enforce his § 220 inspection rights. USM moved to dismiss Norman’s complaint and Norman’s subsequent amended complaint. The vice chancellor denied USM’s motion to dismiss and conducted a trial. At the close of trial, the vice chancellor advised the parties that he was inclined to rule for Norman. Norman and USM then settled. Norman moved for, among other things, at least $45,000 in attorney’s fees. Norman claimed he was entitled to attorney’s fees because USM acted in bad faith by denying him access to documents to which he had a clear right. Specifically, Norman argued, among other things, that his demand stated that one of its purposes was to investigate USM’s valuation of assets and that USM never challenged this purpose because it never responded to his deficiency letter. Norman also argued that his demand stated that another purpose was to investigate whether USM’s directors were committing waste or mismanagement. Per Norman, his pleadings established his clear right to documents for valuation, waste, and mismanagement investigations. USM responded that it challenged all of Norman’s stated purposes and that, in any event, Norman’s demand did not state a valuation-investigation purpose. USM also argued that it had a good-faith basis to challenge any valuation-investigation purpose and to challenge Norman’s waste- and mismanagement-investigation purposes.