Greenlight Capital Offshore Partners, Ltd. v. Brighthouse Financial, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

GREENLIGHT CAPITAL OFFSHORE )
PARTNERS, LTD., )
)
Plaintiff, )
)
v. ) C.A. No. 2022-1067-LWW
)
BRIGHTHOUSE FINANCIAL, INC., )
)
Defendant. )

MEMORANDUM OPINION

Date Submitted: September 1, 2023
Date Decided: November 20, 2023

Martin S. Lessner, Elisabeth S. Bradley & M. Paige Valeski, YOUNG CONAWAY
STARGATT & TAYLOR, LLP, Wilmington, Delaware; Robert Lewin, Michele
Pahmer & Beth Clark, STEPTOE & JOHNSON LLP, New York, New York;
Counsel for Plaintiff Greenlight Capital Offshore Partners, Ltd.

Edward B. Micheletti, Lauren N. Rosenello, Trevor T. Nielsen & Mallory V.
Phillips, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Wilmington,
Delaware; Counsel for Defendant Brighthouse Financial, Inc.

WILL, Vice Chancellor
Plaintiff Greenlight Capital Offshore Partners, Ltd. is a hedge fund that holds

shares in defendant Brighthouse Financial, Inc.—a public holding company that sells

insurance products through private subsidiaries. In 2020 and 2021, Brighthouse’s

stock price jumped after one of its captive insurance subsidiaries issued

extraordinary dividends with the approval of the Delaware Department of Insurance.

The dividends piqued Greenlight’s interest in the captive subsidiary, which

Greenlight’s principal describes as an “opaque cookie jar” it wishes to peer into.

After a failed FOIA request, Greenlight pivoted to a books and records

demand for information about whether Brighthouse’s captive insurance subsidiary

is over-reserved. Greenlight stated that the purpose of its demand is to determine

the value of its Brighthouse shares. Brighthouse rejected the demand on several

grounds, including that Greenlight lacks a true proper purpose and that the

information sought is both proprietary and unnecessary to value its shares. This

Section 220 lawsuit followed.

Although Greenlight proved at trial that it has a proper valuation purpose, it

fell short on substantiating the scope of its demand. Even if the captive subsidiary’s

“cookie jar” were full, the treats inside might remain there. Greenlight only

demonstrated its entitlement to a few crumbs.

1
Greenlight concedes that it has a wealth of public information allowing it to

value its Brighthouse shares. The requested materials might help Greenlight

speculate whether a dividend could potentially issue. But they are (mostly) too

removed from the current value of Greenlight’s Brighthouse shares to support an

inspection. The only information that seems essential to Greenlight’s stated purpose

is any recent board minutes and formal communications with the Department of

Insurance evidencing that a dividend is forthcoming.

I. BACKGROUND

The following facts were stipulated to by the parties or proven by a

preponderance of the evidence at trial.1 The trial record includes the testimony of a

live witness, several deposition transcripts, and 240 joint exhibits.2

A. Brighthouse and Its Subsidiaries

Defendant Brighthouse Financial, Inc. (“Brighthouse”) was, until August

2017, a wholly owned subsidiary of MetLife, Inc.3 In 2016, Brighthouse was

incorporated in Delaware to prepare for the spin-off of MetLife’s United States retail

1
Joint Pre-trial Stipulation and Order (Dkt. 54) (“PTO”).
2
Facts drawn from exhibits jointly submitted by the parties are referred to by the numbers
provided on the parties’ joint exhibit list and cited as “JX __” unless otherwise defined.
Deposition transcripts are cited as “[Name] Dep.” Notice of Lodging (Dkt. 62). Trial
testimony is cited as “Einhorn Tr.” Trial Tr. (Dkt. 63).
3
PTO ¶ 17; see also JX 197 at 3.
2
life insurance business.4 Brighthouse has traded on the NASDAQ since the 2017

MetLife separation.5

Today, Brighthouse is a holding company that provides annuity and life

insurance products through layers of subsidiaries.6 Brighthouse’s largest subsidiary,

Brighthouse Life Insurance Company (“BLIC”), is a subsidiary of Brighthouse

Holdings, LLC—a private, wholly owned subsidiary of Brighthouse.7 BLIC owns

Brighthouse Reinsurance Company of Delaware (“BRCD”)—a special purpose

financial captive insurance company licensed under 18 Del. C. § 69.8

Insurance companies like BLIC are required to hold reserves for their

expected obligations under issued policies.9 As a captive insurer, BRCD provides

reinsurance to BLIC and its affiliate for such reserves.10 BRCD “assist[s]

Brighthouse in managing its capital and risk exposures and support[s] its term life

and certain universal life products through the use of affiliated reinsurance

arrangements and related reserve financing.”11 Brighthouse relies on “dividends or

4
PTO ¶¶ 17-18.
5
Id. ¶ 19.
6
Id. ¶ 20. Brighthouse has over 20 separate subsidiaries. Id. ¶ 29.
7
Id. ¶ 20; see also JX 197 at 62.
8
PTO ¶¶ 21-22; see also JX 205 (“Stern Report”) at App. A.
9
PTO ¶ 28.
10
Id.
11
Id. ¶ 23.
3
other capital inflows from subsidiaries, including BRCD, to meet its obligations and

to pay dividends on its common stock.”12

B. Brighthouse’s Financial Reporting
Brighthouse regularly files quarterly and annual disclosures with the

Securities and Exchange Commission (SEC) that include financial statements

prepared in accordance with Generally Accepted Accounting Principles (GAAP).13

Brighthouse’s financial statements are filed on a consolidated basis and reflect the

value of its subsidiaries, including BRCD.14 Brighthouse also releases annual

reports to stockholders.15

BLIC similarly files quarterly and annual financial statements with the SEC,

which are prepared in accordance with GAAP. BLIC’s public filings disclose

information about its subsidiaries, including (indirectly) BRCD.16 Because it is

regulated by state insurance agencies, BLIC also files financial statements with the

Delaware Department of Insurance (the “Department”) that are prepared in

accordance with statutory accounting principles.17 BLIC’s statutory financial

12
Id. ¶ 24.
13
Id. ¶ 29.
14
Id.; see also JX 209 (“Einhorn Dep.”) 66-69; JX 214 (Hoyt expert report) ¶¶ 30, 33.
15
See, e.g., JX 15; JX 46; JX 67; JX 117; JX 183; JX 197.
16
PTO ¶ 31; see, e.g., JX 238 at 126.
17
PTO ¶ 31. Another Brighthouse subsidiary, New England Life Insurance Company
(NELICO), files financial statements with the Massachusetts Division of Insurance. These
4
statements contain information about BRCD, such as BRCD’s economic and

statutory reserves.18 These filings are available on Brighthouse’s investor relations

website.19

BRCD also files quarterly and audited annual statutory financial statements

with the Department.20 In addition, BRCD files an annual actuarial report and

opinion with the Department.21 Unlike BLIC’s filings, BRCD’s submissions to the

Department are not publicly available.22

C. Brighthouse’s Stock Buybacks and Dividends

Delaware captive insurance companies must provide cash flow information to

the Department, which uses it to assess and approve reserves and dividends.23 In the

event of excess capital, the Department may allow captive insurance companies like

statements are public and include information about BRCD, since BRCD provides
reinsurance to NELICO. Id. ¶ 32.
18
E.g., JX 185 at 293, 295; JX 188 at 224-25; JX 183 at 12; JX 184 at 94, 97.
19
PTO ¶ 31; see also Brighthouse Financial, Inc., Statutory Filings,
https://investor.brighthousefinancial.com/statutory-filings (last visited Nov. 18, 2023);
JX 59; JX 90.
20
PTO ¶ 35.
21
JX 112.
22
PTO ¶ 37.
23
Einhorn Tr. 46.
5
BRCD to release capital and pay dividends.24 In each of 2020 and 2021, the

Department permitted BRCD to release a $600 million dividend.25

Brighthouse first began informing investors of the possibility that BRCD

might release reserves in late 2018. During a November 6, 2018 earnings call, for

example, Brighthouse’s Chief Executive Officer said there was a “possibility” that

BRCD might “free up” reserves subject to “regulatory approval” and “over time.”26

In 2019, Brighthouse told investors that BRCD was “robustly capitalized” and that

Brighthouse was engaged in discussions with the Department to determine whether

excess capital could be released.27

After the market closed on February 10, 2020, Brighthouse announced that it

had received Department approval for BRCD to issue an extraordinary $600 million

dividend.28 In the same press release, Brighthouse announced that it had repurchased

approximately $128 million of its common stock during the fourth quarter of 2019

24
JX 197 at 43.
25
PTO ¶ 86; see also JXs 31-32.
26
JX 220 at 8 (“[T]here is certainly a possibility, it’ll happen over time because it needs
regulatory approval, et cetera. So again, like we’ve said many times, there could be
potential opportunities, it’s just one of the arrows in the quiver. It’s not something that’s
going to happen tomorrow. But over time, yes, there could be some capital potentially
freed up . . . .”); see also JX 13 at 9.
27
JX 16 at 10; JX 19 at 9; see also JX 22 at 15 (Brighthouse’s CEO stating that he
“remain[ed] very comfortable that [the Company] ha[d] excess capital in BRCD” but did
not “want to front run the regulators”).
28
JX 31 at 4.
6
and was authorized to repurchase another $500 million of common stock.29

Brighthouse’s stock closed at $46.60 on February 11—up from $42.11 the day

before.30

Brighthouse maintained its position on BRCD’s strong capitalization in

earnings calls through the rest of 2020.31

In July 2021, Brighthouse announced the receipt of regulatory approval for a

second $600 million dividend from BRCD to BLIC.32 In the same press release,

Brighthouse announced that it had repurchased another $246 million shares and

received “new repurchase authorization” for up to an additional $1 billion of its

common stock.33 Brighthouse’s shares closed at $44.01 on August 5 (up from

$41.47 the prior day) and $47.11 on August 6 (the first trading day after the

announcement).34

On November 8, 2022, Brighthouse stated that it “would not be looking at

BRCD as a source of capital coming to th[e] company going forward, at least in the

29
Id.
30
PTO ¶¶ 67-68.
31
JX 50 at 8; see JX 56 at 14.
32
JX 72 at 4.
33
Id.
34
PTO ¶¶ 101-02.
7
immediate future.”35 Brighthouse did not pay any extraordinary dividend in 2022 or

2023 to date.36

D. Greenlight and its FOIA Request
After the approval of the second $600 million dividend was announced,

plaintiff Greenlight Offshore Capital Partners, Ltd. (“Greenlight”) developed an

interest in BRCD’s reserves.37 Greenlight is an investment fund formed under

British Virgin Islands law and the record owner of 1,000 shares of Brighthouse

common stock.38 It beneficially owns over 1,000,000 additional Brighthouse

shares.39 Greenlight Capital, Inc. is an investment advisor to Greenlight that

formulates Greenlight’s overall investment strategy and manages its trading

activities.40 As an advisor to Greenlight and its affiliated entities, Greenlight Capital

manages more than 3,000,000 shares of Brighthouse stock.41

David Einhorn is the President and co-founder of Greenlight.42 He has

ultimate decision-making authority over the Greenlight entities’ investment

35
JX 170 at 11.
36
JX 197 at 178.
37
JX 92 at 4.
38
PTO ¶¶ 8-9.
39
Id. ¶ 9.
40
Id. ¶ 10.
41
Id. ¶ 11. At times, Greenlight and Greenlight Capital are collectively referred to as
“Greenlight” in this decision and in the parties’ briefing.
42
Id. ¶ 13.
8
portfolios, including Greenlight’s investment in Brighthouse.43 Einhorn is also the

primary Greenlight analyst for the entities’ investments in Brighthouse.44

On September 22, 2021, Einhorn attended an industry meeting hosted by

Goldman Sachs where he “pitched” Brighthouse.45 One of the meeting attendees

suggested that Einhorn pursue a Freedom of Information Act (FOIA) request or a

books and records demand to obtain more information about BRCD from

Brighthouse.46 Einhorn took the advice, wishing to “consider activism and get

larger.”47

Two weeks later, on October 7, Greenlight submitted a FOIA request to the

Department.48 Greenlight requested various financial statements for BRCD and

“documents related to all requests for, approval of and payment of any and all

dividends by BRCD since January 1, 2017.”49 The request was denied on December

9.50 Greenlight unsuccessfully appealed the Department’s decision.51

43
Id.
44
Id. ¶ 15.
45
JX 83; Einhorn Dep. 197.
46
Einhorn Dep. 197-200; see JX 83.
47
JX 83; see Einhorn Dep. 196-97, 199-200.
48
JX 91.
49
Id.
50
JX 97.
51
JX 107; JX 119.
9
E. Greenlight’s Section 220 Demand

On June 3, 2022, shortly after its FOIA appeal was denied, Greenlight served

a demand on Brighthouse pursuant to 8 Del. C. § 220.52 Greenlight’s stated purpose

for the demand was “to more accurately determine the value” of its Brighthouse

shares.53 It sought, “[i]n particular[,] . . . to determine the true financial impact of

BRCD . . . on the value of” the shares.54

The demand requested ten categories of documents from Brighthouse:

1. Annual financial statements of BRCD for calendar years 2019,
2020, and 2021;

2. Quarterly financial statements of BRCD for the quarter ending
March 31, 2022;

3. Audit opinions on any financial statements referenced in
paragraphs [1 or 2] above, and on the financial condition of
BRCD for the period 2019-present;

4. Actuarial opinions or reports concerning the reserves held by
BRCD for the period 2019-present;

5. Reinsurance Agreements or Treaties between/among BLIC and
BRCD in effect during the period 2019-present;
6. BRCD Board of Director materials or analyses presented to the
Board of Directors regarding the payment of dividends by BRCD
from 2019-present;

52
JX 126 (“Demand”).
53
Id. at 2.
54
Id.; see also PTO ¶ 129.
10
7. Documents to/from the [Department] in connection with any
request for approval of any dividend payment by BRCD between
2019-present;

8. Cash flow analyses and projections from 2019 through the
present supporting the declaration of dividends by BRCD;
9. Board of Director minutes of [Brighthouse], BRCD and BLIC
from 2019-present concerning: i. the payment of dividends by
BRCD, including the dividend payments made by BRCD on or
about February 20, 2020 and August 13, 2021; and ii. the status
of BRCD’s reserves and whether it is or was determined to be
over-reserved; and
10. Correspondence from any auditor or actuary opining as to BRCD
being over-reserved for the period 2019 through the present.55

In a June 10 letter, Brighthouse refused to provide these materials.56

Brighthouse suggested that Greenlight’s stated valuation purpose was not its actual

purpose. It also questioned whether a desire to value an indirect subsidiary of a

publicly traded company states a proper purpose under Section 220. Brighthouse

observed that Greenlight has all necessary and essential information to value its

shares due to Brighthouse’s public filings.57 Finally, Brighthouse stated that the ten

categories of requests were overbroad, and that certain information was confidential

55
PTO ¶ 127; see also Demand at 6.
56
JX 127.
57
Id. at 3-4.
11
and proprietary.58 Brighthouse offered to meet and confer with Greenlight to discuss

the demand.59

Greenlight and Brighthouse proceeded to negotiate a confidentiality

agreement, which was executed on October 17.60 Brighthouse nonetheless declined

to grant Greenlight access to non-public information.61 A sticking point was whether

Greenlight would be prohibited from trading after receiving confidential materials.62

Greenlight or its affiliated entities have continued to trade in Brighthouse stock since

serving the demand.63

F. This Litigation

On November 22, 2022, Greenhouse filed a Verified Complaint for Inspection

of Books and Records Pursuant to 8 Del. C. § 220, raising the same valuation

purpose and seeking the same ten categories of documents identified in its demand.64

Brighthouse answered the complaint on December 21 and advanced several

affirmative defenses.65 Brighthouse maintained that Greenlight lacked a proper

58
Id. at 4-5.
59
Id. at 5.
60
JX 162; see also JXs 130-37, 141-42.
61
JX 181 at 1.
62
Compare JX 130 § 4(e) with JX 162 § 4.
63
JX 192 at 3.
64
Dkt. 1.
65
Dkt. 12; JX 182.
12
purpose and that valuation is not its true purpose.66 Brighthouse also asserted that

Greenlight has all necessary and essential information and that the requested records

are confidential.67

Trial was held on June 26, 2023, during which Einhorn testified live.68 Post-

trial briefing was completed on August 21.69 On September 1, I declined to permit

a sur-reply brief and the matter was taken under advisement.70

II. LEGAL ANALYSIS

“Section 220 of the Delaware General Corporation law provides stockholders

with a qualified right to inspect corporate books and records.”71 A stockholder

invoking this right is required to comply with the statute’s form and manner

requirements and state a proper purpose.72 The stockholder must also “demonstrate

by a preponderance of the evidence that ‘each category of books and records is

essential to accomplish[] the stockholder’s articulated purpose for the inspection.’”73

66
JX 182 at 18.
67
Id. at 18-19.
68
See Dkts. 58, 63.
69
See Dkts. 64, 67-68.
70
Dkt. 74.
71
Simeone v. The Walt Disney Co., 302 A.3d 956, 966 (Del. Ch. July 27, 2023) (citing
Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 119 (Del. 2006)); see 8 Del. C. § 220.
72
See 8 Del. C. § 220(b)-(c).
73
Lebanon Cnty. Emps.’ Ret. Fund v. AmerisourceBergen Corp., 2020 WL 132752, at *6
(Del. Ch. Jan. 13, 2020) (quoting Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d
1026, 1035 (Del. 1996)), aff’d, 243 A.3d 417 (Del. 2020).
13
The parties agree that Greenlight’s demand complied with the statutory form

and manner requirements.74 Their dispute concerns whether Greenlight has a proper

primary purpose and, if so, whether Greenlight has all necessary and essential

information to satisfy that purpose.

Greenlight proved its valuation purpose. It did not, however, prove that the

information it seeks is necessary and essential to value its Brighthouse shares—with

limited exceptions.

A. Whether Greenlight Has A Proper Purpose for Inspection

A “proper purpose” under Section 220 is one “reasonably related to such

person’s interest as a stockholder.”75 The demand states that Greenlight’s purpose

is to “more accurately determine the value” of its equity interest in Brighthouse by

assessing the dividend capacity of BRCD.76 “It is settled law in Delaware that

valuation of one’s shares is a proper purpose for the inspection of corporate books

and records.”77

74
PTO ¶ 2.
75
8 Del. C. § 220(b)
76
Demand at 2.
77
Polygon Glob. Opportunities Master Fund v. West Corp., 2006 WL 2947486, at *3 (Del.
Ch. Oct. 12, 2006) (citing CM & M Group, Inc. v. Carroll, 453 A.2d 788, 792 (Del. 1982)).
14
Greenlight concedes that it can presently make a “reasonable estimate” of the

value of its Brighthouse shares using Brighthouse’s public filings.78 But it wishes

to reach “a better valuation of this investment than is possible” without non-public

information.79 Books and records inspections for this end are generally

permissible.80

A purpose of evaluating a company’s dividend payment ability has also been

deemed proper if it is “part of a more general inquiry” into share value.81 “The

ability to pay dividends is one of several recognized components of a corporation’s

fair value.”82 The fact that Greenlight seeks to learn about the dividend capacity of

78
Einhorn Tr. 31 (“We have a sense of what the value of Brighthouse is, if you assume that
there are no further dividends from BRCD. There’s enough disclosure to make a
reasonable estimate of what that is.”).
79
Madison Ave. Inv. P’rs, LLC v. Am. First Real Est. Inv. P’rs, L.P., 806 A.2d 165, 177
(Del. Ch. 2002) (emphasis in original).
80
Id. (granting an inspection under the DRULPA where the plaintiff “s[ought] to obtain a
better valuation of its investment than is possible using only the market price for units and
the information that is publicly available in SEC filings”); cf. Kosinski v. GGP Inc., 214
A.3d 944, 957 (Del. Ch. 2019) (“Plaintiff’s belief concerning the value of his stock at the
time of the merger does not deprive him of his right to seek corporate records in order to
make an informed conclusion.”).
81
Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc., 525 A.2d 160, 165 (Del. Ch.
1987); see also Dobler v. Montgomery Cellular Hldg. Co., Inc., 2001 WL 1334182, at *3
(Del. Ch. Oct. 19, 2001) (“While the law in Delaware may be unclear as to whether this
purpose [to evaluate the non-payment of dividends], standing alone, is proper, it is well-
settled that this purpose is proper when combined with a request to value shares of the
corporation.”).
82
Helmsman, 525 A.2d at 165 (citing Application of Delaware Racing Ass’n, 206 A.2d
664 (Del. Ch. 1965), aff’d, 213 A.2d 203 (Del. 1965)).
15
a subsidiary does not render its purpose improper. Section 220 expressly permits

inspection of subsidiary-level books and records.83

Brighthouse argues that Greenlight’s stated purpose is a pretext for its true

motivation: “activism.”84 “[I]n order to succeed, [Brighthouse] must prove that the

plaintiff pursued its claim under false pretenses, and its primary purpose is indeed

improper.”85 This defense is “fact intensive and difficult to establish.”86

In support of its defense, Brighthouse points to a September 2023 email

thread between Einhorn and senior officers at Greenlight. In the communication,

Einhorn told his colleagues that it was “time to consider activism” toward

83
8 Del. C. § 220(b)(2)(a) (“Any stockholder . . . shall, upon written demand . . . have the
right . . . to inspect for any proper purpose, and to make copies and extracts from: A
subsidiary’s books and records, to the extent that: (a) The corporation has actual possession
and control of such records of such subsidiary. . . .”); see also Brown v. Empire Resorts,
Inc., 2020 WL 1049428, at *1 (Del. Ch. Mar. 2, 2023) (ORDER) (implementing a bench
ruling granting inspection of subsidiary-level documents for the purpose of valuing public
company shares). Brighthouse does not aver that it lacks possession, custody, or control
of BRCD’s documents.
84
Def.’s Post-trial Answering Br. (Dkt. 67) 5.
85
Pershing Square, L.P. v. Ceridian Corp., 923 A.2d 810, 817 (Del. Ch. 2007).
86
Id.; see also Woods Tr. of Avery L. Woods Tr. v. Sahara Enters., Inc., 238 A.3d 879, 891
(Del. Ch. 2020) (“[O]nce a stockholder has identified a proper purpose, such as valuing
shares, the burden shifts to the corporation to prove that the stockholder’s avowed purpose
is not her actual purpose and that her actual purpose for conducting the inspection is
improper.”).
16
Brighthouse.87 He suggested pursuing a FOIA request or “a books and records

inspection demand” as a next step.88

Activism is not, however, a purpose unto itself. It could imply a number of

intentions.89 Before Greenlight explores possible next steps, it wishes to value its

Brighthouse shares.90 That threshold valuation purpose is proper, irrespective of the

87
JX 83 (“The goal is to either participate in a purchase of the company (with a fantasy of
managing some of the assets in addition to making a great return), trigger a sale to someone
else or change the board to accelerate capital release.”).
88
Id. Brighthouse also cites to various statements by Einhorn during his deposition and at
trial suggesting that Greenlight seeks to value Brighthouse as a whole, rather than its
shares. Def.’s Post-trial Answering Br. 48-51; see Einhorn Dep. 150, 223-24; Einhorn Tr.
131-32; Demand at 3 (“[T]he purpose of the demanded inspection is to determine the value
of Stockholder’s Shares and the value of the Corporation in general.”). But Einhorn’s loose
language does not overwhelm the weight of the evidence, which indicates that Greenlight
primarily wishes to value its shares. E.g., Demand at 2 (“The purpose of this demand is to
permit the Stockholder, an investment fund, to more accurately determine the value of the
Shares.”); infra notes 89-90.
89
Cf. In re Aerojet Rocketdyne Hldgs., Inc., 2022 WL 2180240, at *15 (Del. Ch. June 16,
2022) (discussing “classic notions” of activism as opposed to the parties’ interpretation).
In Einhorn’s view, pursuing the books and records is activism. See Einhorn Tr. 109 (“What
I said is the purpose—the activism purpose is to obtain the records so that we can value the
shares. The activism is obtaining the records. And then those records can then be used in
valuation. So the purpose of obtaining the records is to be able to do a valuation.”); Einhorn
Dep. 225 (“Those three goals [from the email exchange] do not appear in the demand letter.
What the demand letter includes is asking for the information so that we can figure out
what the shares are worth so that we can then evaluate what other goals we might want to
pursue.”).
90
Demand at 6; Einhorn Tr. 70-71 (“We would like to value the shares of Brighthouse.
We may do those other things somewhere down the line, but that’s not what we’re here for
today. Today we’re here to value the shares and to get the information so that we can
understand what our investment is worth.”); compare Disney, 2023 WL 4208482, at *8
(concluding that a stated purpose in a demand was not the stockholder’s actual purpose
where he claimed to be motivated by different intentions unrelated to his interests as a
stockholder).
17
fact that Greenlight first pursued a FOIA request.91 “[A]ny secondary purpose or

ulterior motive that [Greenlight] might have is irrelevant.”92

B. Whether the Requested Documents are Necessary and Essential to
Greenlight’s Purpose

A stockholder with a proper purpose “is not entitled to inspect all the

documents that he or she believes are relevant or even likely to lead to information

relevant to that purpose.”93 Rather, “[t]he scope of inspection should be

circumscribed with precision and limited to those documents that are necessary,

essential and sufficient to the stockholder’s purpose.”94 If a stockholder’s purpose

91
Cf. Caspian Select Credit Master Fund Ltd. v. Key Plastics Corp., 2014 WL 686308, at
*4 (Del. Ch. Feb. 24, 2014) (concluding that a company failed to show a stockholder’s
valuation purpose was not one of its primary purposes and explaining that an attempt to
gather information before making a Section 220 demand does not prejudice right to bring
a Section 220 action); King v. VeriFone Hldgs., Inc., 12 A.3d 1140, 1150 (Del. 2011).
92
Helmsman, 525 A.2d at 164; see also Pershing Square, 923 A.2d at 817 (“A corporate
defendant may resist demand where it shows that the stockholder’s stated proper purpose
is not the actual purpose for the demand. This showing is not made where a secondary
improper purpose exists.”) (citation omitted); Grimes v. DSC Commc’ns Corp., 724 A.2d
561, 565 (Del. Ch. 1998) (holding that despite a plaintiff having secondary improper
purposes, the plaintiff had a right to inspect books and records pursuant to a primary
purpose); Sahara Enters., 238 A.3d at 891 (“Delaware law does not require that a
stockholder establish both a [valuation] purpose for seeking an inspection and an end to
which the fruits of the inspection will be put.”); AmerisourceBergen Corp. v. Lebanon
Cnty. Emps.’ Ret. Fund, 243 A.3d 417, 430 (Del. 2020) (“[A stockholder] is not required
to specify the ends to which it might use the books and records.”).
93
Okla. Firefighters Pension & Ret. Sys. v. Amazon.com, Inc., 2022 WL 1760618, at *13
n.113 (Del. Ch. June 1, 2022) (citing Norfolk Cnty. Ret. Sys. v. Jos. A. Bank Clothiers, Inc.,
2009 WL 353746, at *6 (Del. Ch. Feb. 12, 2009), aff’d, 977 A.2d 899 (Del. 2009)).
94
Marathon P’rs, L.P. v. M&F Worldwide Corp., 2004 WL 1728604, at *4 (Del. Ch. July
30, 2004).
18
is to value shares of a public company’s stock, the stockholder must demonstrate

that the information in the company’s public records is insufficient.95 If adequate

public information exists to satisfy the stockholder’s stated purpose, the Section 220

demand will be denied.96

Greenlight has only proven that a narrow subset of the materials it requests

are necessary and essential to its valuation purpose. Brighthouse issues extensive,

regular disclosures through SEC filings and earnings calls.97 BLIC likewise makes

routine SEC filings, as well as statutory filings that are publicly available.98

Yet Greenlight insists that there is a gap in the public record regarding BRCD.

It believes that there may be substantial reserves at BRCD that could materially

affect Brighthouse’s financial condition.99 It asserts that the ten categories of

95
See Polygon, 2006 WL 2947486, at *3 (“The court will limit or deny any inspection to
the extent that the requested information is available in the corporation’s public filings.”)
(citation omitted); DPF, Inc. v. Interstate Brands Corp., 1975 WL 1963, at *2 (Del. Ch.
Oct. 2, 1975) (“[T]he stock is not only traded on the New York Stock Exchange but it is
also registered with the Securities and Exchange Commission . . . . [T]he plaintiff could
well already have access to all the information that it is reasonably and fairly entitled to
receive for the purpose stated [valuation of stock].”); see also Leviton Mfg., 681 A.2d at
1035 (“The burden of proof is always on the party seeking inspection to establish that each
category of the books and records requested is essential and sufficient to [that party’s]
stated purpose.”).
96
E.g., Interstate Brands, 1975 WL 1963, at *2.
97
See, e.g., supra notes 13-15 and accompanying text.
98
See supra notes 16-19 and accompanying text.
99
See Einhorn Tr. 59 (“[Greenlight has] a reasonable grasp on what the value of
Brighthouse is excluding BRCD, which we think is substantially more than the current
trading price of Brighthouse stock. But we also think that there’s substantial additional
19
information it seeks are crucial to understanding BRCD’s future dividend capacity

and any effect on the value of its Brighthouse shares.100 As Einhorn put it at trial,

Greenlight wants to know “how many cookies are in [the BRCD cookie] jar.”101

The demanded books and records include BRCD’s cash flow projections,

financial statements, auditor and actuarial opinions, and agreements with BLIC.102

The date range for these materials spans several years, beginning in 2019. Stale

projections and financial information, however, are hardly necessary to value

Greenlight’s Brighthouse shares today. And materials reflecting future potential

dividend capacity would merely inform a guess about whether BRCD may—at some

point—issue another dividend.103

value at BRCD, which we have no way to quantify because there’s no good disclosure that
enables us to do that.”).
100
See generally Einhorn Tr. 35-56; see also Stern Report at 11-21.
101
Einhorn Tr. 31; see also JX 85 at 1 (noting about BRCD that “[t]here is no disclosure.
People think it’s a black hole. It makes BHF ‘in investable’ for many . . . . So, instead of
being a black hole [] it’s really a cookie jar. I want to know how many cookies are in the
jar. As best I can tell the slightly conservative value of BHF today is about $80 +/- the
black hole/cookie jar.”); JX 86 at 2 (“[W]e have also seen 2 releases of an aggregate $1.2
billion from the reinsurance company [BRCD] approved by the regulator—that makes it
to us more of a fantastic opaque cookie jar. It’s time to see what’s in the cookie jar. The
catch is—somehow those statutory filings don’t seem to be readily available/public.”).
102
Demand at App. A (categories 1 through 6, category 8, and category 10); see supra note
55 and accompanying text.
103
The Court of Chancery has granted inspections of cash flow projections “because they
are essential to valuation.” Quantum Tech. P’rs IV, L.P. v. Ploom, Inc., 2014 WL 2156622,
at *12 (Del. Ch. May 14, 2014). In such cases, though, the relevant cash flow analyses
generally would affect share value at the time of the request. See e.g., id.; In re BioClinica,
Inc. S’holder Litig., 2013 WL 673736, at *5 (Del. Ch. Feb. 25, 2013) (granting inspection
of management’s financial projections because “projections of the future value of the
20
The market knows that BRCD might have capacity to issue future dividends,

which is already factored into Brighthouse’s stock price. The bulk of the requested

non-public information might allow Greenlight to make a better prediction about

whether BRCD could pursue another dividend.104 But this is too attenuated from

Greenlight’s purpose of more accurately determining the current value of its

Brighthouse shares to be essential.105

The Court of Chancery’s decision in Madison Avenue Investment Partners,

LLC v. America First Real Estate Investment Partners, L.P. is instructive.106 There,

limited partners sought books and records from Delaware limited partnerships for

purposes of valuing their investment. Specifically, the plaintiffs sought to determine

if subsidiaries of the entities had any obligation upon liquidation to a third party,

company are valuable to a stockholder deciding whether to exchange his ownership for the
consideration tendered”); see also Dobler, 2001 WL 1334182, at *8 n.31 (holding that a
plaintiff seeking books and records for a valuation purpose is entitled to inspect cash flow
projections because they are “essential to valuation”) (citation omitted); Riker v. Teucrium
Trading, LLC, 2020 WL 2393340, at *8 (Del. Ch. May 12, 2020) (granting inspection of
“projections . . . [that] would be important to valuing [the plaintiff]’s interests because what
an investor cannot hope to do is to replicate management’s inside view of the company’s
prospects”). Here, by contrast, the requested cash flow analyses are either backward-
looking (regarding the 2020 and 2021 dividends) or Greenlight failed to prove that they
have any effect on the current valuation of its Brighthouse shares.
104
See Riker, 2020 WL 2393340, at *4 (“A stockholder . . . must ‘make specific and
discrete identification, with rifled precision, of the documents sought.”) (citing Brehm v.
Eisner, 746 A.2d 244, 266 (Del. 2000)).
105
See Madison Ave., 806 A.2d at 178.
106
806 A.2d 165.
21
which could reduce the value of the plaintiffs’ units. Vice Chancellor Lamb denied

the requests insofar as the plaintiffs sought documents that “presuppose[d] that an

event of liquidation w[ould] occur.”107 He explained that although it was “possible

for [the plaintiffs] to forecast the likelihood that such a liquidation or liquidations

w[ould] occur, and, using that probability, assign a value to the impact such an event

would have on the units [they] h[eld], such information f[ell] short of what [wa]s

reasonably necessary for [the plaintiffs] to currently value [their] units.”108

The circumstances here are similarly uncertain. Greenlight seeks books and

records to assess whether BRCD has dividend capacity, which would help it better

“assess the probability of future dividends at any time.”109 That is an exercise in

guesswork. At present, a dividend is far from certain; none has been paid in two

years. Irrespective of BRCD’s reserves, the payment of a dividend would require

that Brighthouse or its subsidiaries decide to request Department approval and that

the Department’s approval be granted. Given these intervening steps, documents

allowing Greenlight to forecast the likelihood of a dividend are not vital for

Greenlight to “currently value” its Brighthouse shares.110

107
Id. at 178.
108
Id.
109
Pl.’s Post-trial Opening Br. (Dkt. 64) 62 n.169.
110
Madison Ave., 806 A.2d at 178; see also Helmsman, 525 A.2d at 165 (explaining that a
purpose of assessing dividend potential is proper not in isolation but where it is linked to a
valuation purpose). The cases cited by Greenlight are inapposite. Pl.’s Pre-trial Opening
22
By contrast, books and records evidencing any recent decision to pursue a

dividend payment or associated requests to the Department are sufficiently tied to

the current value of Greenlight’s Brighthouse stock. If Brighthouse or its

subsidiaries were actively taking steps toward obtaining approval for a dividend,

payment seems more likely. Knowledge that this process was underway would

improve Greenlight’s ability to accurately value its interest in Brighthouse.111

Br. (Dkt. 55) 46-47 n.151 (listing cases). All but one involved private companies whose
financial documents were inaccessible to stockholders absent a demand or litigation, and
where the demanded financial records had a direct relation to present share value. See
Leviton Mfg., 685 A.2d at 1034 (limiting an inspection by a “locked-in” minority
stockholder to only those documents “essential and sufficient” to its valuation purpose);
Madison Ave., 806 A.2d at 178-79 (holding that the production of “all non-public financial
statements specifically relating to the real estate held or owned by” the partnerships was
“not necessary to value [the plaintiffs’] investment . . . [but] that non-public financial
statements specifically relating to the subsidiary partnerships through which” the
partnership invests were “reasonably necessary to value [the plaintiffs’] investment in that
partnership” (emphasis in original)); Southpaw Credit Opportunity Master Fund L.P. v.
Advanced Battery Techs., Inc., 2015 WL 915486, at *1 (Del. Ch. Feb. 26, 2015) (granting
inspection of quarterly financial data over the span of several years of a de-listed publicly
traded company that “ha[d] not complied with [its] disclosure obligations”); Sanders v.
Ohmite Hldg., LLC, 17 A.3d 1186, 1190, 1195 (Del. Ch. 2011) (granting inspection of
“[a]ll quarterly and annual financial reports” of an LLC where “information available from
other sources” was insufficient to satisfy the plaintiff’s stated purpose); Sahara Enters.,
238 A.3d at 886 (granting an inspection of “financial information” and board materials
from a privately held company where the plaintiff’s purposes were to value shares and
investigate wrongdoing or mismanagement); Macklowe v. Planet Hollywood, Inc., 1994
WL 560804, at *1 (Del. Ch. Sept. 29, 1995) (granting inspection of a privately held
company’s annual financial statements and accompanying information for a valuation
purpose).
111
Whether Brighthouse or its subsidiaries have recently taken steps toward the payment
of a dividend is not in the record. If they have not done so, Brighthouse need not produce
any books and records to Greenlight.
23
Category 7 of Greenlight’s demand seeks “[d]ocuments to, or received from,

the [Department] in connection with, or relating to, any request for approval of any

dividend payment by BRCD.”112 Category 9 seeks Brighthouse, BRCD, and BLIC

board minutes concerning “the payment of dividends by BRCD.”113 Greenlight is

entitled to responsive documents (if any) sufficient to show that (1) the board of

Brighthouse or its subsidiaries has determined to request Department approval to

pay a dividend in the near term or (2) Brighthouse or its subsidiaries are engaged

with the Department regarding a request for approval to pay a dividend in the near

term.114 Greenlight is also entitled to know the amount of any such request. Only

board minutes and formal communications with the Department need be produced.

Greenlight’s demands are otherwise overbroad.115

112
Demand at App. A.
113
Id.
114
By “near term,” I mean that the dividend will be paid fairly soon. To my mind, that
would be within the next six months. If the dividend would be paid in years, for example,
I do not believe that it is sufficiently related to current value to warrant production. But
given Brighthouse’s superior knowledge about the time it takes to issue a dividend after a
request for approval, I ask that the parties meet and confer about it in the first instance.
Information about stale or rejected requests need not be provided. Further, board-level
assessments of BRCD’s reserves are outside the scope of what Greenlight is entitled to.
See Pl.’s Post-trial Opening Br. 51; Demand at App. A. As with the financial information
discussed above, this would merely allow Greenlight to speculate about the possibility of
a dividend. See supra notes 102-10 and accompanying text.
115
Brighthouse may redact any information in the minutes that is non-responsive to this
issue. See Amazon.com, 2022 WL 1760618, at *13 (“[R]edactions to material unrelated to
the subject matter of a demand are proper because Section 220 only entitles a stockholder
24
C. Whether Brighthouse’s Proposed Condition Is Proper

Brighthouse argues that, if Greenlight is granted inspection, the court must

safeguard Brighthouse’s confidential information from potential misuse.116

Brighthouse asks that I bind Greenlight to a confidentiality order prohibiting trading

on non-public information.117

“Delaware courts have repeatedly ‘placed reasonable restrictions on

shareholders’ inspection rights in the context of suit brought under 8 Del. C.

§ 220.”118 One commonly imposed restriction is a reasonable confidentiality order

to protect non-public information.119 The restrictions cannot, however, impart

“inequitable notion[s] into Delaware’s Section 220 jurisprudence.”120

Although Brighthouse has shown that the information it must produce (if any

exists) warrants confidential—even highly confidential—treatment, imposing a

trading restriction on Greenlight goes too far. Greenlight’s trading is already

to information essential to accomplishing its stated purposes for inspection. The redactions
appropriately cabin Section 220 inspections to their intended scope.”) (citation omitted).
116
See Def.’s Post-trial Answering Br. 54-55.
117
Id. at 55.
118
Disney v. The Walt Disney Co., 2005 WL 1538336, at *1 (Del. Ch. June 20, 2005)
(citation omitted); see also Carroll, 453 A.2d at 793; 8 Del. C. § 220(c).
119
See Tiger v. Boast Apparel, Inc., 214 A.3d 933, 935 (Del. 2019) (holding that though
there is no “presumption of confidentiality,” “the Court of Chancery may—and typically
does—condition Section 220 inspections on the entry of a reasonable confidentiality order”
where appropriate).
120
Ravenswood Inv. Co., L.P. v. Winmill & Co. Inc., 2014 WL 2445776, at *4 (Del. Ch.
May 30, 2014).
25
regulated by applicable federal law. “Delaware law should strive to maintain its

historically symbiotic relationship with the federal securities laws.”121 But doing so

does not require this court to engage in duplicative efforts.122

A standard confidentiality order, akin to that negotiated between the parties

before litigation ensued, is sufficient to protect Brighthouse’s interests. The fact that

BRCD is regulated under Title 18 does not require more stringent protections.123

Title 18 provides that the Delaware Insurance Commissioner must treat

Brighthouse’s records as confidential.124 A confidentiality order will require the

same of Greenlight.

D. Whether Fee Shifting Is Appropriate

Greenlight argues that the court should shift fees because Brighthouse refused

to produce non-public documents. It relies on Pettry v. Gilead Sciences, Inc., where

the court granted the plaintiffs leave to move for fees incurred in pursuing a

121
Rivest v. Hauppauge Digital, Inc., 2022 WL 3973101, at *26 (Del. Ch. Sept. 1, 2022),
aff’d, 300 A.3d 1270 (Del. 2023).
122
Id. (citing authority cautioning that “Section 220 should not be converted into a method
of enforcing the requirements of the federal securities laws”).
123
Brighthouse provides no authority for the notion that companies subject to insurance
regulatory oversight are exempt from Section 220. The statutory schemes of Title 18 and
Title 8 are not mutually exclusive.
124
See 18 Del. C. § 6920 (providing that certain documents “may not be made public by
the Commissioner”); id. § 321(g) (stating that working papers “may not be made public by
the Commissioner”); see also id. § 5007 (“Documents, materials or other information in
the possession or control of the Department . . . pursuant to § 5003(b)(12) and (13) . . .
§ 5004, § 5005, or § 5015 of this title . . . shall be confidential by law”).
26
Section 220 action after the defendant unreasonably impaired its inspection rights.125

There, the defendant “block[ed] legitimate discovery, misrepresent[ed] the record,

and t[ook] positions for no apparent purpose other than obstructing the exercise of

the plaintiffs’ statutory rights.”126

This case is nothing like Gilead. First, Greenlight failed to prove its

entitlement to most of the documents it demanded. Second, Greenlight declined

Brighthouse’s invitation to meet and confer before the complaint was filed.127 And

third, Greenlight engaged in costly discovery and litigation practices.128

This dispute was undoubtably heated, but neither party acted in bad faith.

Each will bear its own costs.

III. CONCLUSION

Greenlight has established a proper purpose and is entitled to inspect a limited

subset of documents responsive to Categories 7 and 9 of its demand, as outlined

above. Those documents (if any) will be produced under a reasonable

confidentiality order without a trading restriction. Greenlight has not met its burden

125
2020 WL 6870461, at *30 (Del. Ch. Nov. 24, 2020).
126
Id. at *30.
127
See JX 136.
128
See Def.’s Post-trial Answering Br. 58-59 (listing examples of purported aggressive
litigation practices by Greenlight).
27
of proving that the remaining books and records sought in its demand are necessary

and essential to its valuation purpose.

The parties are directed to confer on proposed implementing and

confidentiality orders, which must be filed within 14 days.

28