Faillace v. Outlander Gamma 5.2, LLC, C.A. No. 2025-0582-DG
Background:
On October 24, 2025, the Court of Chancery issued a decision ordering Outlander Gamma 5.2, LLC (“Outlander”), to provide a member with a member list in the form and manner articulated under 6 Del. C. Section 18-305. The Court also found that Outlander engaged in “glaringly egregious conduct” sufficient to warrant fee-shifting in favor of the Plaintiff.[1]
The case began when Plaintiff made a demand for a list of the members of Outlander in the form and manner specifically articulated under 6 Del. C. Section 18-305(a)(3) after being provided with “two proposed capitalization tables that varied significantly” and after Outlander “claimed it was not ‘able to’ explain the error” while also “conced[ing] that multiple erroneous capitalization tables had been issued in the past, but did not explain how many or for how long this had been the case.”[2] For six months Plaintiff exchanged letters with Outlander requesting the member list for the purpose of discussing these erroneous capitalization tables as well as other issues relating to mismanagement with other members, yet Outlander refused. In its final correspondence, Outlander stated “that Plaintiff ‘will fail in any litigation seeking the personal information of [Outlander’s] investors.’”[3]
The Court ultimately held that Plaintiff had a proper purpose for seeking the member list and the list was necessary and essential to his stated purpose and ordered the Outlander to produce the list to Plaintiff. The Court found that Outlander had “no valid basis to deny Plaintiff’s statutory inspection right,” rejecting a “pretext defense,” “Section 18-305(c)-based arguments” and an “actionability defense.”[4] It was Outlander’s “actionability defense” that ultimately played a significant role in the Court shifting fees for bad faith litigation conduct.
Fee-Shifting for Glaringly Egregious Conduct:
Outlander argued that Plaintiff’s investigative purpose “cannot be proper because” it was “insulated” from any potential litigable claims on the basis of the underlying agreements.[5] The Court noted that “[o]ur courts call this an ‘actionability’ argument, and the argument has been rejected.”[6] The Court cited to the Delaware Supreme Court’s decision in AmerisourceBergen[7] which rejected the idea that a “plaintiff could not state a credible basis to infer a possibility of wrongdoing because the plaintiff’s future litigation would be unsuccessful.”[8] The Court found Outlander’s actionability argument “[p]articularly problematic” given that the Company “relied on AbbVie[9], which has been overruled. The Court assumes Defendant was aware that the precedent had been overruled because Defendant also cited, and relied upon, the Delaware Supreme Court’s AmerisourceBergen decision, which explicitly overruled AbbVie.”[10] The Court also found Outlander’s confidentiality argument “dubious” explaining that “Defendant had to ignore the remainder of the Subscription Agreement, existing case law, and the fact that the LLC Agreement lacked any explicit language modifying Delaware’s statutory inspection rights.”[11] The Court held that the combination of “[t]hese arguments, too, convince me to recommend fee shifting for glaringly egregious litigation conduct because this argument, too, was baseless.”[12] Yet the Court’s concern regarding Outlander’s conduct was not limited to positions in litigation. The Court held that the company’s “pre-litigation conduct was also concerning.”[13] In particular, the Court was troubled by the company’s repeated refusal to accept Plaintiff’s stated purposes, repeated assertions of an actionability requirement, “ignor[ing]” Plaintiff’s offer to enter into a confidentiality agreement and “needlessly escalating rhetoric over the likelihood of Plaintiff’s success in potential litigation.”[14] Put simply, the Court viewed Outlander’s pre-litigation and litigation conduct as “a ‘desperate search for reason after reason to deny Plaintiff’s statutory right’ to the member list” that more than warranted an award of fees for egregious misconduct.[15]
[1] Faillace v. Outlander Gamma 5.2, LLC, C.A. No. 2025-0582-DG, at 37 (Del. Ch. Oct. 24, 2025).
[2] Id. at 17.
[3] Id. at 9.
[4] Id. at 20-35.
[5] Id. at 24.
[6] Id. at 25.
[7] AmerisourceBergen Corp. v. Lebanon Cnty. Emps.’ Ret. Fund, 243 A.3d 417 (Del. 2020).
[8] Faillace, at 26.
[9] Se. Pa. Transp. Auth. v. AbbVie, Inc., 2015 WL 1753033 (Del. Ch. Apr. 15, 2015).
[10] Faillace, at 37.
[11] Id. at 39.
[12] Id.
[13] Id. at 40.
[14] Id.
[15] Id.
Disclaimer
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.