Benjamin v. Island Management, LLC

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HELEN ZIEGLER BENJAMIN, TRUSTEE v.
ISLAND MANAGEMENT, LLC
(SC 20501)
Robinson, C. J., and McDonald, D’Auria, Mullins,
Kahn, Ecker and Keller, Js.
Syllabus
Pursuant to the provision (§ 34-255i (b) (2)) of the Connecticut Uniform
Limited Liability Company Act describing the conditions under which
a member of a manager-managed limited liability company is permitted
to inspect the company’s books and records, ‘‘a member may inspect
and copy full information regarding the activities, affairs, financial condi-
tion and other circumstances of the company as is just and reasonable
if . . . [t]he member seeks the information for a purpose reasonably
related to the member’s interest as a member . . . the member makes a
demand in a record received by the company, describing with reasonable
particularity the information sought and the purpose for seeking the
information . . . and . . . the information sought is directly connected
to the member’s purpose.’’
The defendant, a manager-managed limited liability company, appealed from
the judgment of the trial court, which determined that the defendant’s
refusal to disclose certain information to the substitute plaintiffs, cotrus-
tees of a trust that was a member of the defendant, violated both § 34-
255i and the defendant’s operating agreement. Z created trusts for the
benefit of each of his six adult children, including H, B, and C. These
trusts owned several family businesses from which Z’s children received
dividend income. The defendant was created to oversee and build the
family’s assets, and each of the children’s trusts were members and
equal one-sixth owners of the defendant, which was governed by an
operating agreement executed by Z’s children as trustees of their respec-
tive trusts. During the relevant time period, B and C served as both
comanagers and copresidents of the defendant, and they had significant
roles in family owned businesses from which the defendant received
income. Sometime after Z’s death, a disagreement arose regarding the
amount of the annual distributions. H believed that the family businesses
should be making larger distributions to benefit present trust beneficiar-
ies, whereas others, including B and C, believed that the distribution
levels were satisfactory. H, in her capacity as cotrustee of her trust,
made a series of four written demands for inspection of the defendant’s
books and records, each of which cited § 34-255i, or its predecessor,
as authority for the demand. The final demand, which requested twenty-
seven categories of information, stated that the purposes of the demand
were to determine the value of her trust’s membership interest in the
defendant and to ascertain the condition and affairs of the family owned
businesses so that H’s trust could exercise its rights as a member of
the defendant in an informed manner. The defendant produced many
records in response to each of the successive demands but declined to
produce others. H, in her capacity as trustee, thereafter sought to compel
the defendant to comply with her inspection demands, alleging that the
member trust’s right to inspection under § 34-255i had been violated
and that the defendant’s failure to comply with her inspection demands
constituted a breach of the defendant’s operating agreement. Prior to
trial, the court granted a motion to substitute the successor trustees
of H’s trust as the plaintiffs, and the defendant provided additional
information to the plaintiffs. By the time trial commenced, the plaintiffs
contended that the four remaining categories of information at issue
were the defendant’s general ledger, information pertaining to the defen-
dant’s management services agreements, information pertaining to the
compensation of the defendant’s managers, officers, and employees,
and records showing payments made to third parties on behalf of H’s
trust. The plaintiffs argued before the trial court that they were entitled
to inspect the remaining categories of information because the evidence
called into question whether manager and copresident compensation
for B and C was excessive, which, in turn, affected the fair value of the
defendant, and whether that compensation, if excessive, constituted a
disguised distribution not made available to the other children or their
respective member trusts. The trial court thereafter concluded that the
plaintiffs had demonstrated that they were entitled to inspect each of
the four outstanding categories of information under § 34-255i. The trial
court ultimately rendered judgment for the plaintiffs, and the defendant
appealed. Held:
1. There was no merit to the defendant’s claim that, in order for the investiga-
tion of mismanagement to be a proper purpose within the meaning of
§ 34-255i (b) (2) (A), the member of a limited liability company must
come forward with facts evidencing a credible basis to infer that misman-
agement may have occurred, as the text of § 34-255i neither contains a
credible proof requirement nor assigns any particular burden of proof
depending on the inspection purpose that is alleged, and there was no
policy basis that justified reading a credible proof of mismanagement
requirement into § 34-255i: although some jurisdictions, including Dela-
ware, have adopted the requirement of credible proof of mismanage-
ment, this court found the arguments cited by other jurisdictions against
that standard to be more persuasive, including the principle that the
books of a corporation are not the private property of the directors or
managers but are the records of their transactions as trustees for the
shareholders, and the theory that a credible proof of mismanagement
requirement would often deny shareholders the right to ascertain
whether their affairs have been properly conducted by the directors or
managers; moreover, because the determination of whether an obliga-
tion exists to provide factual support for the stated purpose of investigat-
ing mismanagement turns on whether the court interprets the legal
requirements in the applicable statute to include an express or implied
condition that the shareholder is seeking the information in good faith,
the fact that the Connecticut Business Corporation Act expressly incor-
porates a requirement that the shareholder is seeking the information
in good faith, whereas the Connecticut Uniform Limited Liability Com-
pany Act does not impose such a condition for an inspection by a
member of a limited liability company, cuts strongly against imposing
a credible proof requirement on limited liability company members;
furthermore, the defendant’s claim that, in the absence of a credible
proof requirement, there would be no basis to limit inspection to informa-
tion directly connected to the stated purpose, as required by § 34-255i
(b) (2) (C), was unavailing, as a request seeking inspection of records
in order to investigate mismanagement will typically set forth facts
evidencing a basis to suspect mismanagement, and, when such facts
are not provided, there are mechanisms other than a credible proof
requirement to vindicate a limited liability company’s concerns, includ-
ing the trial court’s discretion to require the member of a limited liability
company to provide greater specificity, or to limit the scope of inspection
if the member’s request is too burdensome or inadequately justified, as
well as the limited liability company’s right to resist the inspection by
demonstrating that the conditions of § 34-255i have not been met, or to
impose reasonable restrictions on the availability and use of information
sought under § 34-255i through its operating agreement.
2. The defendant could not prevail on its claim that the trial court was
required to determine, pursuant to § 34-255i (b) (2) (C), that there was
a direct connection between each of the four categories of information
at issue and one of the two specific purposes asserted in the four
demands but that it failed to engage in such an analysis: the trial court
expressly acknowledged that § 34-255i required that the information
sought has a direct connection to a proper purpose and cited case law
interpreting that requirement, and, although the trial court did not make
an express finding of a direct connection for each category of informa-
tion at issue, this court presumed, in the absence of evidence to the
contrary, that the trial court concluded that this requirement was met;
moreover, the defendant mistakenly assumed that the trial court did
not rely on the plaintiffs’ valuation purpose and that the plaintiffs’ sole
mismanagement concerns were excessive manager compensation and
management fees, as the court cited case law and testimony concerning
the plaintiffs’ valuation inspection purpose, and H’s final demand identi-
fied a valuation purpose as one of its two purposes.
3. The defendant could not prevail on its claim that two types of information
sought at trial, namely, the general ledger and employee compensation,
were not requested with reasonable particularity, as required by § 34-
255i (b) (2) (B), on the ground that neither was requested in H’s demands:
the trial court correctly concluded that several of the categories cited
in H’s fourth demand referenced information of the type that would be
in a general ledger and that this reference was sufficiently particular to
apprise the defendant about the information needed; moreover, although
information about employee compensation was not requested in any
written demand with reasonable particularity, the count of the plaintiffs’
complaint alleging a breach of the operating agreement supported the
trial court’s decision to order the defendant to permit inspection of its
employee compensation information, because the count of the plaintiffs’
complaint alleging a breach of the operating agreement was not purely
derivative of the count alleging a violation of § 34-255i, and the defendant
was afforded an opportunity to assert its right to arbitrate any dispute
arising under the operating agreement insofar as the plaintiffs’ complaint
provided fair notice that an independent violation of the operating agree-
ment was alleged.
Argued December 9, 2020—officially released November 2, 2021*
Procedural History
Action for a writ of mandamus to compel the defen-
dant to make certain books and records available for
inspection by the plaintiff, and for other relief, brought
to the Superior Court in the judicial district of Stamford-
Norwalk, where Scott A. Weisman et al., as cotrustees
of the William Ziegler III Family Irrevocable Trust
Agreement dated June 3, 2002, were substituted as the
plaintiffs; thereafter, the case was tried to the court,
Hon. A. William Mottolese, judge trial referee, who,
exercising the powers of the Superior Court, rendered
judgment for the substitute plaintiffs, from which the
defendant appealed to the Appellate Court; subse-
quently, the court, Hon. A. William Mottolese, judge
trial referee, issued an articulation of its decision, and
the defendant filed an amended appeal; thereafter, the
appeal was transferred to this court. Affirmed.
Lynn K. Neuner, with whom were Charles W. Piet-
erse, Wyatt R. Jansen and Sara A. Ricciardi, pro hac
vice, for the appellant (defendant).
Steven M. Frederick, with whom were David G.
Keyko, pro hac vice, and, on the brief, Christopher
Fennell, pro hac vice, and Gessi Giarratana, for the
appellees (substitute plaintiffs).
Opinion
MULLINS, J. The principal issue in this appeal is
one of first impression regarding the conditions under
which a member of a manager-managed limited liability
company (LLC) is permitted to inspect the LLC’s books
and records pursuant to General Statutes § 34-255i,1 a
provision of the Connecticut Uniform Limited Liability
Company Act (CULLCA), General Statutes § 34-243 et
seq. Specifically, we consider whether such a member
seeking information for the stated purpose of ascertain-
ing whether mismanagement has occurred must pro-
duce credible proof that mismanagement may have
occurred as a precondition for exercising the member’s
statutory inspection right. The defendant, Island Man-
agement, LLC, appeals from the judgment of the trial
court holding that the defendant’s refusal to disclose
certain information to the substitute plaintiffs, cotrus-
tees of the Helen Benjamin 2002 Trust,2 a member of
the defendant LLC, violated both § 34-255i and the
defendant’s operating agreement.3 The defendant con-
tends that the trial court (1) incorrectly concluded that
there is no requirement under § 34-255i that the
requesting member produce credible proof of misman-
agement, and (2) improperly failed to apply other statu-
tory requirements. It further contends that the alleged
violation of its operating agreement is merely derivative
of the alleged statutory violation, not an independent
basis for relief, and, therefore, the former fails for the
same reasons that the latter fails. We affirm the trial
court’s judgment.
The record reveals the following undisputed facts and
procedural history. In 2002, William Ziegler III created
trusts for the benefit of each of his six children: Helen
Ziegler Benjamin, William (Bill) T. Ziegler, Cynthia
Ziegler Brighton, Karl H. Ziegler, Melissa J. Ziegler, and
Peter M. Ziegler.4 These trusts own, directly or indi-
rectly, several family businesses from which the siblings
receive dividends. In 2015, Forbes Magazine estimated
the collective value of the Ziegler family entities to be
in excess of $2.8 billion.
The defendant, a manager-managed LLC headquar-
tered in Darien, was created to oversee and build the
family’s assets. Those assets are held by Hay Island
Holding Corporation (Hay Island). Hay Island’s primary
assets are two wholly owned subsidiaries: Swisher
International, Inc., a major supplier of cigars, and Ned’s
Island Investment Corporation, an investment vehicle
that manages a substantial portfolio. The defendant pro-
vides management services relating to both of these
subsidiaries, providing advice on investment of capital,
acquisitions, and day-to-day operations, among other
things. The defendant derives income from two manage-
ment services agreements, one with Hay Island and one
with Swisher.
Each of the six siblings’ trusts are members and equal
one-sixth owners of the defendant. The defendant is
governed by an operating agreement executed by all
six siblings as trustees of their respective trusts. The
sibling trustees contemporaneously executed a docu-
ment consenting to the appointment of two of the sib-
lings, Bill and Cynthia, as comanagers of the defendant.
As comanagers, they were authorized under the operat-
ing agreement to hire officers and to set officer salaries.
The sibling trustees subsequently consented to the
appointment of Bill and Cynthia to serve as copresi-
dents of the defendant. During the relevant period, in
addition to Bill and Cynthia, the defendant had four
officers, including one person acting as chief operating
officer and chief finance officer, and six nonofficer
employees.
Bill and Cynthia also have significant roles in family
enterprises from which the defendant receives income.
Bill is Hay Island’s chief executive officer and chairman.
Cynthia is Hay Island’s president and treasurer. Bill and
Cynthia sit on Swisher’s compensation committee.
Sometime after the death of the siblings’ father in
2008, a disagreement arose among some of the siblings
regarding the amount of the annual distributions. The
net return of the distributions to each sibling’s trust
was well under 1 percent of the Forbes estimate of the
total value of the family enterprises. Helen, who has
no children, believed that the family businesses should
be making larger distributions to benefit present trust
beneficiaries. Bill, Cynthia, and Karl, some of whom
have children, took the position that the present distri-
bution levels were satisfactory and that more earnings
should be retained to preserve the family’s wealth for
future generations.5 Neither the instrument creating the
siblings’ trusts nor the defendant’s operating agreement
contained a statement of purpose regarding the father’s
intent on this matter.
As a result of this ongoing disagreement, in early
2016, Helen was approached by the other Ziegler trust-
ees about a potential buyout offer for her interests in
the family businesses. That offer was well below the
value her one-sixth interest would have yielded if the
Forbes estimate were accurate. Helen made an informal
request for financial and related information about the
defendant and other family enterprises, which was
denied.6
Thereafter, the original plaintiff, Helen, in her capac-
ity as cotrustee of her trust, made a series of four written
demands for inspection of the defendant’s books and
records—respectively dated June 20 and July 7, 2016,
April 11, 2017, and June 29, 2018—each of which cited
§ 34-255i (or its predecessor) as authority for the demand.7
Section 34-255i (b) (2) permits members of a manager-
managed LLC to obtain ‘‘information regarding the
activities, affairs, financial condition and other circum-
stances of the company’’ if certain conditions are met.
See footnote 1 of this opinion. The defendant produced
many records in response to each of the successive
demands but refused to produce others, claiming that
the information was unnecessary (irrelevant or already
provided through prior disclosures) or the request was
improper.
Helen received incomplete information about the
compensation Bill and Cynthia received as managers
and copresidents. This information revealed that their
collective annual compensation significantly increased
from 2011 to 2016, while annual distributions to mem-
bers remained roughly flat or decreased during this
same period.8
The final demand requested twenty-seven categories
of information, including financial statements, income
tax returns, descriptions of cash and assets, manager
and officer compensation/procedure for setting com-
pensation, and information relating to management
arrangements and fees. The stated purposes of the
demand were (1) to ‘‘determine the value of the Benja-
min 2002 Trust’s membership interest in the [defen-
dant]’’9 and (2) to ‘‘ascertain the condition and affairs
of such entities so that the Benjamin 2002 Trust may
exercise its rights as a member of the [defendant] in
an informed manner.’’ Regarding this second purpose,
Helen’s demand letter, which was addressed to Bill and
Cynthia, further explained: ‘‘I have concerns because
of the inherent conflict [of interest] that you have as a
result of your personal financial interests as copresi-
dents and managers of the [defendant], the interests of
trusts for your benefit in the [defendant] and related
businesses, your roles in the businesses to which the
[defendant] provides management services, and your
roles as trustees of trusts having interests in such
related businesses. I have requested documents con-
cerning the management arrangements and compensa-
tion of the [defendant’s] managers and officers . . .
because I wish to evaluate whether such arrangements
and payments are proper. In particular, I wish to investi-
gate the appropriateness of fees paid to the [defendant]
from other family owned entities. I believe those fees
may be inflated in order to increase revenue for the
[defendant]. I also believe that the fees paid to the
managers of the [defendant], who determine their own
compensation and benefits without consulting or even
advising the members of the [defendant], may be exces-
sive. The refusal to provide information to the members
of the [defendant] concerning such payments raises
questions about the propriety of the management
arrangements and fees. I therefore have a reasonable
basis to suspect possible irregularities. The requested
information and documents are necessary to investigate
whether the payments were, in fact, improper.’’
In response to the final demand, the defendant agreed
to produce reasonable updates to certain information
previously provided but refused to produce any other
information. The defendant’s written reply to the
demand asserted that the request for information was
unreasonable and/or that the production of additional
information was unnecessary as to the stated valuation
purpose because the defendant had already disclosed
sufficient records to achieve that purpose. The reply
also asserted that the request was improper as to the
stated mismanagement purpose because the statutory
inspection right requires credible proof of mismanage-
ment, of which there was none.
Helen, in her capacity as trustee of her trust, there-
after commenced the present action by way of a two
count complaint seeking to compel the defendant to
comply with her inspection demands. The first count
alleged that the member trust’s right to inspection under
§ 34-255i had been violated. The second count alleged
that the defendant’s failure to comply with the inspec-
tion demands was a breach of § 5.7 of the defendant’s
operating agreement.10 The defendant filed an answer
and asserted special defenses to both counts, claiming
that the demands were made for improper purposes—
to maximize Helen’s financial gain, to engage in a fishing
expedition to find any possible basis for a claim against
the defendant, and to harass the defendant—and that
the action was moot because Helen had received all of
the documents to which she legally was entitled. Shortly
after the complaint was filed, Scott A. Weisman and
Stephen D. Benjamin, Helen’s husband, were appointed
successor trustees of the Benjamin 2002 Trust, and the
court thereafter granted a motion to substitute them,
in their capacity as trustees, as the plaintiffs in the
present action.11
At some point prior to trial, the defendant provided
additional information to the plaintiffs, although it dis-
claimed any legal obligation to do so. By the time trial
commenced, the plaintiffs contended that there were
four categories of information remaining at issue: (1)
the defendant’s general ledger; (2) information per-
taining to the defendant’s management services agree-
ments with Hay Island and Swisher; (3) information
pertaining to the compensation of the defendant’s man-
agers, officers, and employees; and (4) records showing
payments made to third parties on behalf of the Benja-
min 2002 Trust.
At trial, the parties stipulated to the admission of
numerous documents pertaining to the business of the
Ziegler family enterprises and the defendant’s opera-
tions in particular, some of which had been previously
disclosed in response to Helen’s written demands, and
documents memorializing communications between
the parties.12 The plaintiffs presented testimony from
two witnesses: Weisman, one of the substitute plaintiff
trustees, whose background was in corporate law,
investment banking, and capital markets; and Vladimir
Starkov, a certified valuation analyst specializing in
intercompany pricing and asset valuation. The defen-
dant presented testimony from one witness, Howard
Romanow, the defendant’s chief operating officer and
chief finance officer since 2011. The plaintiffs argued, in
essence, that they were entitled to inspect the remaining
categories of information because the evidence called
into question (1) whether manager and copresident
compensation for Bill and Cynthia was excessive (in
part because actual management of the defendant
appeared to have been delegated to Romanow and other
highly compensated professional staff), which, in turn,
affected the fair value of the defendant,13 and (2)
whether that compensation, if excessive, constituted a
disguised distribution not made available to the other
siblings or their respective member trusts.
The trial court thereafter issued a written decision,
concluding that the plaintiffs had demonstrated that
they were entitled to inspect each of the four outstand-
ing categories of information under § 34-255i. It cited
case law from our Appellate Court recognizing that a
corporate shareholder’s desire to value shares or to
determine whether improper transactions have occurred
are proper inspection purposes. It rejected an argument
raised in the defendant’s trial brief that Connecticut
courts should interpret § 34-255i, as Delaware courts
had interpreted that state’s corporate records inspec-
tion statute, to require credible proof of mismanage-
ment when inspection is sought for the alleged purpose
of investigating mismanagement. The trial court also
determined that there was no merit to the defendant’s
special defenses. The court found that there was no
evidence that the plaintiffs were pressing their inspec-
tion demands for the purpose of pressuring Helen’s
siblings to increase dividends or the buyout offer, or
to harass them.14 The court noted, however, that it
would not be improper, in any event, for a trustee to
seek to maximize income or asset value.
The court also addressed two arguments raised by the
defendant at trial but not pleaded as special defenses
contesting the plaintiffs’ entitlement to pursue relief
under the operating agreement: (1) the plaintiffs had
waived that right by pursuing a mutually exclusive statu-
tory claim, and (2) the plaintiffs were barred from seek-
ing such relief in a judicial action because there is a
mandatory arbitration provision in the operating agree-
ment. In rejecting these arguments, the court noted
that § 5.7 of the operating agreement ‘‘has particular
significance to the present case because it evinces a
clear and unmistakable intent that all books and records
of the [defendant] should be open to inspection and
copying for any legitimate purpose . . . . The court
sees this provision as not only confirmatory of the statu-
tory remedy but as expansive of it so much so that the
request need not even be in writing.’’ (Internal quotation
marks omitted.)
Despite its conclusions as to the operating agree-
ment, the trial court initially rendered judgment for the
plaintiffs only on count one, the statutory violation.
Following the defendant’s motion for articulation, the
court modified the judgment to include judgment in
favor of the plaintiffs on the second count as well.15
The defendant then filed an amended appeal with the
Appellate Court, which we transferred to this court.
See footnote 3 of this opinion.
On appeal, the defendant claims that the trial court
improperly rendered judgment for the plaintiffs and
that the case must be remanded for a new trial under
the proper legal standard. Specifically, it contends that
the trial court erred as a matter of law by failing to apply
various statutory requirements. It further contends that
the claimed violation of the operating agreement was
purely derivative of the statutory violation and, thus,
cannot provide an alternative basis on which to affirm
the judgment. We disagree with both contentions.
I
We turn first to the question of whether the trial
court correctly determined that the defendant’s conduct
violated the plaintiffs’ statutory inspection right. Sec-
tion 34-255i (b) (2) provides in relevant part: ‘‘[A] mem-
ber may inspect and copy full information regarding
the activities, affairs, financial condition and other cir-
cumstances of the company as is just and reasonable
if: (A) The member seeks the information for a purpose
reasonably related to the member’s interest as a mem-
ber; (B) the member makes a demand in a record
received by the company, describing with reasonable
particularity the information sought and the purpose
for seeking the information; and (C) the information
sought is directly connected to the member’s purpose.’’
(Emphasis added.)
The defendant claims that the trial court improperly
failed to apply three statutory requirements. First, the
defendant contends that the court failed to recognize
that investigating mismanagement is a proper purpose
for inspection only if there is credible proof that mis-
management may have occurred. The defendant deems
this omission fatal because, according to the defendant,
the trial court’s decision did not rely on the alternative,
valuation purpose cited in Helen’s demands. Second,
the defendant contends that the court failed to apply
the requirement that the information sought must be
‘‘directly connected’’ to a proper purpose stated in the
demand. Third, the defendant contends that the court
failed to apply the requirement of stating the informa-
tion requested with ‘‘reasonable particularity’’ as to the
general ledger and employee compensation because
neither was expressly or implicitly referenced in the
written demands.
A
We begin by setting out the legal landscape that
informs our analysis. The Uniform Limited Liability
Company Act of 2006, as harmonized (ULLCA), or one
of its predecessors has been adopted by nineteen states,
including Connecticut, and by the District of Columbia.
See Uniform Law Commission, Limited Liability Company
Act, Revised, at https://www.uniformlaws.org/commit
tees/community-home?CommunityKey=bbea059c-6853
-4f45-b69b-7ca2e49cf740 (last visited November 2, 2021).
The inspection provision of the ULLCA that is the coun-
terpart to § 34-255i, § 410, has not been subjected to
judicial scrutiny by any of these jurisdictions. There is
also no illuminating Connecticut legislative history.16
Yet, we are not altogether without guidance on this
subject. Because LLCs are creatures of statute that are
viewed as a hybrid of a partnership and a corporation,
having some attributes of each,17 courts often rely on
jurisprudence pertaining to those entities when address-
ing comparable considerations for LLCs. See E. Miller,
‘‘Are the Courts Developing a Unique Theory of Limited
Liability Companies or Simply Borrowing from Other
Forms?,’’ 42 Suffolk U. L. Rev. 617 (2009); see, e.g.,
Morris v. Cee Dee, LLC, 90 Conn. App. 403, 414, 877
A.2d 899 (applying theories of piercing corporate veil
to LLCs), cert. granted, 275 Conn. 929, 883 A.2d 1245(2005) (appeal withdrawn March 13, 2006). As we
explain subsequently in this opinion, the contested stat-
utory terms in this appeal are the same as those applied
to corporate records inspection, which, unlike partner-
ship and LLC records inspection, has been the subject
of a well-developed body of law. We therefore consider
the treatment of this subject for corporations, as well
as any reasons to distinguish treatment of this subject
as applied to LLCs.18
The common law has long recognized the right of
shareholders to inspect a corporation’s books and
records for a ‘‘proper purpose,’’ which, consistent with
the requirement in § 34-255i (b) (2) (A), has been inter-
preted to mean a purpose reasonably related to such
person’s interest as a shareholder. See, e.g., State ex
rel. Costelo v. Middlesex Banking Co., 87 Conn. 483,
484–85, 88 A. 861 (1913); Pagett v. Westport Precision,
Inc., 82 Conn. App. 526, 532, 845 A.2d 455 (2004); see
also Annot., ‘‘Purposes for Which Stockholder or Officer
May Exercise Right To Examine Corporate Books and
Records,’’ 15 A.L.R.2d 15, § 2 (1951). See generally 5A
T. Bjur & D. Jensen, Fletcher Cyclopedia of the Law of
Private Corporations (Rev. 1995) § 2214, p. 342.
Most jurisdictions have adopted statutes prescribing
conditions for the inspection of books and records of
both corporations and partnerships. Many of these stat-
utes incorporate common-law principles. See generally
5A T. Bjur & D. Jensen, supra, § 2246, p. 490; A. Spark-
man, ‘‘Information Rights—A Survey,’’ 2 Bus. Entrepre-
neurship & Tax L. Rev. 41, 43–44, 117 (2018). Some
statutes are based on model or uniform acts that were
the source of the terms and conditions in § 410 of the
ULLCA, the inspection provision: inspection if just and
reasonable, purpose reasonably related to the person’s
interest as a member of that entity, demand made with
reasonable particularity, and information directly con-
nected to the asserted purpose. See Unif. Limited Liabil-
ity Company Act § 410, comment (amended 2013), 6C
U.L.A. 114 (2016) (acknowledging that language is
derived from §§ 304 and 407 of Uniform Limited Part-
nership Act of 2001); Unif. Limited Partnership Act
§ 304, comment (amended 2013), 6B U.L.A. 86 (2016)
(acknowledging that language is derived from § 16.02
of American Bar Association’s Model Business Corpora-
tion Act); see also Model Business Corporation Act
(A.B.A. 2002) § 16.02, comment (3), p. 16-9 (‘‘A ‘proper
purpose’ means a purpose that is reasonably relevant to
the demanding shareholder’s interest as a shareholder.
Some statutes do not use the phrase ‘proper purpose’;
the Model [Business Corporation] Act continues to use
it because it is traditional and well understood language
defining the scope of the shareholder’s right of inspec-
tion and its use ensures that the very substantial case
law that has developed under it will continue to be
applicable under the revised [a]ct.’’). Connecticut has
not adopted any version of the Uniform Limited Partner-
ship Act19 but has adopted the Model Business Corpora-
tion Act.20 See Connecticut Business Corporation Act,
General Statutes § 33-600 et seq.
We look to the jurisprudence interpreting these other
sources—statutory and common law—to inform our
analysis, and rely on them to the extent they are persua-
sive.21 Consistent with these sources, for convenience,
we use the term ‘‘proper purpose’’ as shorthand for a
purpose reasonably related to the requesting party’s
interest as a member, shareholder, or partner.
B
The defendant’s principal claim is that, in order for
the investigation of mismanagement to be a proper pur-
pose, the LLC member must come forward with facts
evidencing a credible basis to infer that mismanagement
may have occurred. The defendant points to the adop-
tion of this standard for shareholder inspection by Dela-
ware, a leading business law jurisdiction. It contends
that a requirement of credible proof of mismanagement
is necessary to ascertain whether the information
sought is ‘‘directly connected’’ to a proper purpose and
to ensure that the member is not seeking unfettered
access to information for improper purposes. In advanc-
ing this argument, the defendant does not contend that
credible proof is required to support any inspection
purpose, but only when the proffered purpose involves
a claim of mismanagement or comparable wrongdoing.
It contends that there is a difference between a purpose
such as valuation of a member’s interest, which is ‘‘com-
mon to all members, suggests no wrongdoing, and impli-
cates a discrete universe of information,’’ and the pur-
pose of investigating mismanagement, which has the
opposite characteristics.
The plaintiffs assert that our Appellate Court’s case
law involving shareholder inspection rights is incompat-
ible with the credible proof requirement. They point to
Pagett v. Westport Precision, Inc., supra, 82 Conn. App.
526, in which the Appellate Court quoted the following
official comment to the inspection provision in the
Model Business Corporation Act: ‘‘As a practical matter,
a shareholder who alleges a purpose in general terms,
such as a desire to determine the value of his shares, to
communicate with fellow shareholders, or to determine
whether improper transactions have occurred, has
been held to allege a proper purpose.’’ (Emphasis
added; internal quotation marks omitted.) Id., 533–34,
quoting Model Business Corporation Act, supra, § 16.02,
comment (3), p. 16-9.
We are not persuaded that the cursory reference by
the court in Pagett to improper transactions constitutes
due consideration of the particular issue before us. The
inspection purpose at issue in Pagett was to value the
plaintiff’s shares. Pagett v. Westport Precision, Inc.,
supra, 82 Conn. App. 534. The court in Pagett had no
occasion to examine case law from other jurisdictions
addressing the investigation of mismanagement. More-
over, an argument could be made that the Model Busi-
ness Corporation Act’s reference to allegations of
‘‘improper transactions’’ could be read consistently with
the Delaware standard that the defendant advocates
(i.e., the nature of the impropriety alleged—excessive
management salaries, failure to adhere to legal or con-
tractual requirements, depletion of assets, etc.—could
indicate a factual basis for a suspicion of mismanage-
ment).
We therefore consider the defendant’s claim, which
raises a question of statutory construction to which we
apply plenary review. See id., 528. We observe, at the
outset, that the text of § 34-255i neither contains a credi-
ble proof requirement nor assigns any particular burden
of proof depending on the inspection purpose that is
alleged. That said, the terms in the statute are suffi-
ciently elastic that we cannot say that the defendant’s
proposed standard is untenable as a matter of law.22
We turn therefore to the case law that has considered
this matter in the corporate context.
It is broadly recognized, as a general principle, that
investigating mismanagement is a proper purpose for
seeking inspection of corporate records. See Annot., 15
A.L.R.2d, supra, § 7, p. 30; see, e.g., Compaq Computer
Corp. v. Horton, 631 A.2d 1, 5 (Del. 1993) (‘‘[m]any
cases recognize a [shareholder’s] right to investigate
past acts of mismanagement’’); State ex rel. Fussell v.
McLendon, 109 So. 2d 783, 786 (Fla. App. 1959) (‘‘[a
shareholder] in a corporation has, in the very nature
of things and upon principles of equity, good faith, and
fair dealing, the right to know how the affairs of the
company are conducted and whether the capital of
which he has contributed a share is being prudently
and profitably employed’’ (internal quotation marks
omitted)); Kalanges v. Champlain Valley Exposition,
Inc., 160 Vt. 644, 645, 632 A.2d 357 (1993) (‘‘[p]roper
purpose has been found [when] shareholders wanted
. . . to ascertain possible mismanagement of the cor-
poration’’). In the vast majority of cases deeming inspec-
tion proper for this purpose, however, specific acts of
actual mismanagement or facts providing a reasonable
basis to suspect mismanagement were alleged. See
Annot., 15 A.L.R.2d, supra, § 7, p. 33 (‘‘it appears that
in most of the cases [in which] the [shareholder] has
been successful in enforcing an inspection on this
ground there have been at least allegations suggesting
grounds for suspicion of ineptitude or misconduct on
the part of the officers or directors’’).
No jurisdiction holds that allegations or proof of
actual mismanagement is required. See id.; see also,
e.g., Security First Corp. v. U.S. Die Casting & Develop-
ment Co., 687 A.2d 563, 568 (Del. 1997) (expressly
rejecting this requirement); Arctic Financial Corp. v.
OTR Express, Inc., 272 Kan. 1326, 1329–30, 38 P.3d
701 (2002) (same). But some jurisdictions, including
Delaware, have held that a shareholder seeking to
inspect corporate records to investigate whether the
corporation is being properly managed must come for-
ward with facts that demonstrate a reasonable basis to
suspect mismanagement. See, e.g., Brehm v. Eisner,
746 A.2d 244, 267 n.75 (Del. 2000) (‘‘a party needs to
show, by a preponderance of the evidence, that there
is a legitimate chance that [the party’s] reason for sus-
pecting mismanagement is credible’’); Security First
Corp. v. U.S. Die Casting & Development Co., supra,
568 (‘‘A mere statement of a purpose to investigate
possible general mismanagement, without more, will
not entitle a shareholder to broad [statutory] inspection
relief. There must be some evidence of possible mis-
management as would warrant further investigation of
the matter.’’ (Emphasis omitted; internal quotation
marks omitted.)). Delaware has the most developed
body of case law articulating and applying this require-
ment,23 but other jurisdictions have required similar fac-
tual support, whether as allegations in the demand or
evidentiary proof. See, e.g., Weigel v. O’Connor, 57 Ill.
App. 3d 1017, 1025, 373 N.E.2d 421 (1978) (stating that
‘‘[g]ood faith fears of mismanagement are sufficient’’
after setting forth evidentiary basis for plaintiff’s fears);
Bernstein v. Pritsker, Docket No. MICV2012-3183-C,
2013 WL 678043, *4 (Mass. Super. February 14, 2013)
(noting that, for closely held corporation, ‘‘[a] reason-
able articulation of suspected facts, not mere specula-
tion, supporting an inference of possible mismanage-
ment or wrongdoing should be enough,’’ but suggesting
that, in other circumstances, Delaware’s credible proof
standard would apply); Cain v. Merck & Co., 415 N.J.
Super. 319, 334, 1 A.3d 834 (App. Div. 2010) (‘‘unsup-
ported allegations of mismanagement do not present
a ‘proper purpose’ entitling a shareholder to examine
corporate documents’’); Towle v. Robinson Springs
Corp., 168 Vt. 226, 228, 719 A.2d 880 (1998) (‘‘[c]laims
of mismanagement . . . must be supported by evi-
dence’’); see also, e.g., Meyer v. Board of Managers of
Harbor House Condominium Assn., 221 Ill. App. 3d
742, 748, 583 N.E.2d 14 (1991) (pointing to plaintiff’s
affidavits that stated that defendant ‘‘[a]ssociation was
not collecting assessments from delinquent unit own-
ers’’ and ‘‘was incurring excessive [attorney’s] fees’’ as
establishing ‘‘a [good faith] fear that the [a]ssociation
was mismanaging its financial matters, which was a
proper purpose to inspect the [a]ssociation’s records’’);
North Oakland County Board of Realtors v. Realcomp,
Inc., 226 Mich. App. 54, 58–60, 572 N.W.2d 240 (1997)
(‘‘[u]nder [Michigan] common law, a shareholder stated
a proper purpose for an inspection by raising doubts
whether corporate affairs had been properly conducted
by the directors or management,’’ and, although plain-
tiff’s alleged inspection purposes to monitor company’s
financial health and compliance with amended bylaws
‘‘were arguably overbroad and nonspecific,’’ its subse-
quently submitted affidavit of accountant set forth ‘‘con-
cerns regarding allocation of computer equipment,
allegedly improper employee benefits, discrepancies
between actual expenditures for tax line charges and
the operating budget, expenditures in hiring certain
employees, and reaffirmation of plaintiff’s ownership
interest’’ that were sufficiently ‘‘specific, limited in
scope, and reasonably related’’ to plaintiff’s interest as
shareholder).
Several reasons have been offered as justification
for the requirement of facts supporting a suspicion of
mismanagement. Some courts cite the common-law
principle that seeking inspection ‘‘for speculative pur-
poses,’’ ‘‘to gratify idle curiosity’’; Guthrie v. Harkness,
199 U.S. 148, 156, 26 S. Ct. 4, 50 L. Ed. 130 (1905);
or to undertake a ‘‘fishing expedition’’; News-Journal
Corp. v. State ex rel. Gore, 136 Fla. 620, 623, 187 So.
271 (1939); is not a proper purpose. See, e.g., Nodana
Petroleum Corp. v. State ex rel. Brennan, 50 Del. 76,
81–82, 123 A.2d 243 (1956); Weigel v. O’Connor, supra,
57 Ill. App. 3d 1025; Cain v. Merck & Co., supra, 415
N.J. Super. 332.
A related justification cited is that this standard bal-
ances the plaintiff’s need for information for legitimate
purposes against the burden imposed on the entity and
other stakeholders. See, e.g., Cain v. Merck & Co.,
supra, 415 N.J. Super. 333–34; see also, e.g., Dynamics
Corp. of America v. CTS Corp., 479 N.E.2d 1352, 1355
(Ind. App. 1985). These concerns are another way of
saying that ‘‘the primary purpose of the inspection must
not be one that is adverse to the best interests of the
corporation.’’ Abdalla v. Qadorh-Zidan, 913 N.E.2d 280,
287 (Ind. App. 2009), transfer denied, 929 N.E.2d 782(Ind. 2010); see also Cain v. Merck & Co., supra, 332
(‘‘[a]n inspection to investigate possible wrongdoing
where there is no credible basis . . . is a license for
fishing expeditions and thus adverse to the interests of
the corporation’’ (internal quotation marks omitted)).
Finally, this standard is sometimes justified as neces-
sary to meet a statutorily imposed burden of proof. See,
e.g., Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d
1026, 1031 (Del. 1996) (‘‘When a [shareholder] seeks
inspection of books and records, the burden of proof
is on the [shareholder] to demonstrate that his purpose
is proper. . . . In order to meet that burden of proof,
a [shareholder] must present some credible basis from
which the court can infer that waste or mismanagement
may have occurred.’’ (Citation omitted; footnote omit-
ted.)); Weigel v. O’Connor, supra, 57 Ill. App. 3d 1025(describing burden of proof).24
Other jurisdictions, however, have rejected the prop-
osition that inspection for the purpose of investigating
mismanagement is not permitted unless the shareholder
comes forward with facts substantiating the possibility
that mismanagement may have occurred. See, e.g.,
Schein v. Northern Rio Arriba Electric Cooperative,
Inc., 122 N.M. 800, 804, 932 P.2d 490 (1997); Lake v.
Buckeye Steel Castings Co., 2 Ohio St. 2d 101, 105, 206
N.E.2d 566 (1965); Rosentool v. Bonanza Oil & Mine
Corp., 221 Or. 520, 532–33, 352 P.2d 138 (1960). This
position appears to rely on the following principles.
First, ‘‘[t]he books [of the corporation] are not the
private property of the directors or managers, but are
the records of their transactions as trustees for the
[shareholders].’’ (Internal quotation marks omitted.)
Guthrie v. Harkness, supra, 199 U.S. 155. ‘‘The right of
inspection rests [on] the proposition that those in
charge of the corporation are merely the agents of the
[shareholders] who are the real owners of the property.’’
Id.; see, e.g., Schein v. Northern Rio Arriba Electric
Cooperative, Inc., supra, 122 N.M. 803 (citing sharehold-
er’s ‘‘right to know how his agents, the corporation’s
[decision makers], are conducting the affairs of the
organization’’); Rosentool v. Bonanza Oil & Mine Corp.,
supra, 221 Or. 533 (citing same principle).
Second, ‘‘[t]o say that [shareholders] have the right
[to ascertain whether their affairs have been properly
conducted by the directors or managers], but that it
can be enforced only when they have ascertained, in
some way without the books, that their affairs have
been mismanaged, or that their interests are in danger,
is practically to deny the right in the majority of cases.
Oftentimes frauds are discoverable only by examination
of the books by an expert accountant.’’ (Internal quota-
tion marks omitted.) Guthrie v. Harkness, supra, 199
U.S. 155; see, e.g., Schein v. Northern Rio Arriba Elec-
tric Cooperative, Inc., supra, 122 N.M. 804 (‘‘We reject
[the] contention that [the shareholder] needed to pos-
sess some basis for suspecting illegal or improper
behavior on the part of [the corporation] to warrant
the request for information. Such a proposition would
thwart efforts of oversight by shareholders, making
abuses of corporate power more likely. Moreover, it
would deny owners their proprietary right of monitoring
and safeguarding their interests.’’). ‘‘Until an examina-
tion of the corporate records is obtained, the share-
holder often can do nothing more than entertain a belief
of mismanagement . . . .’’ Rosentool v. Bonanza Oil &
Mine Corp., supra, 221 Or. 533.
Third, in the absence of a clear statutory directive
placing the burden on the shareholder to prove his or
her purpose, it is sufficient for the shareholder to allege
a proper purpose in general terms to make a prima facie
case in support of inspection, and, if the corporation
disputes that allegation, it may come forward with evi-
dence that the primary purpose of inspection is, in fact,
an improper purpose. See, e.g., Schein v. Northern Rio
Arriba Electric Cooperative, Inc., supra, 122 N.M. 803;
In re Marcato, 102 App. Div. 2d 826, 826, 476 N.Y.S.2d
582 (1984); Cooke v. Outland, 265 N.C. 601, 615, 144
S.E.2d 835 (1965); Lake v. Buckeye Steel Castings Co.,
supra, 2 Ohio St. 2d 105–106; Rosentool v. Bonanza
Oil & Mine Corp., supra, 221 Or. 533–34; see also, e.g.,
Franklin v. Middle Tennessee Electric Membership
Corp., Docket No. M2007-1060-COA-R3-CV, 2009 WL
2365572, *6 (Tenn. App. July 31, 2009) (‘‘[t]here has
been extensive litigation dealing with general questions
involving access to corporate records, and while there
is a split of authority as to where the burden of proof
lies, the majority view is that the burden is on the
corporation to prove an improper purpose’’).
We find the arguments against the Delaware standard
more persuasive, especially as applied to LLC member
inspection. The foregoing cases demonstrate that the
decision as to whether an obligation exists to provide
factual support for the stated purpose of investigating
mismanagement seems to turn on whether the court
interprets the legal requirements (1) to include an
implied or express condition that the shareholder is
seeking the information in good faith and (2) to impose
the burden on the shareholder to prove good faith or
on the entity resisting inspection to prove bad faith.
These considerations bring into focus an important dis-
tinction between the statutory schemes for inspection
of corporate records and for inspection of LLC records
that was overlooked by the parties and the trial court
in the present case.
The Connecticut Business Corporation Act expressly
incorporates the first condition, permitting inspection
if the shareholder’s demand ‘‘is made in good faith and
for a proper purpose,’’ i.e., a purpose germane to the
shareholder’s interest. (Emphasis added.) General Stat-
utes § 33-946 (d). By contrast, the CULLCA does not
impose such a condition for LLC member inspection
except when inspection is sought by a dissociated mem-
ber, who must not only satisfy all of the conditions that
a current member must satisfy under § 34-255i (b) (2),
but also the condition that ‘‘[t]he person seeks the infor-
mation in good faith . . . .’’ General Statutes § 34-255i
(c) (2). The absence of this good faith requirement for
current LLC members cuts strongly against imposing a
credible proof requirement on such members.25
We also are not persuaded by the defendant’s argu-
ment that, in the absence of a credible proof require-
ment, there would be no basis to limit inspection to
information ‘‘directly connected’’ to the stated purpose,
as is required by § 34-255i (b) (2) (C), and thus a mere
allegation of mismanagement could lead to unfettered
and burdensome inspection.
If history is any guide, it demonstrates that, in most
cases, a person seeking inspection of records in order
to investigate mismanagement will provide facts evi-
dencing a basis to suspect mismanagement in order to
justify the scope of inspection sought. That was so in
the present case.26 When such facts are not provided,
there are mechanisms other than the credible proof
requirement to vindicate the defendant’s concerns.
Statutory conditions for inspection are cast in terms
that plainly confer discretion on the court—purpose
‘‘reasonably related to the member’s interest as a mem-
ber’’; (emphasis added) General Statutes § 34-255i (b)
(2) (A); demand stated with ‘‘reasonable particularity’’;
(emphasis added) General Statutes § 34-255i (b) (2) (B);
and information ‘‘directly connected to the member’s
purpose.’’ (Emphasis added.) General Statutes § 34-255i
(b) (2) (C). This discretion permits the trial court to
require the LLC member to provide greater specificity
when justified by the facts and circumstances of the
case, including the nature of the entity and the extent
of the member’s knowledge of the company’s business.
See, e.g., Model Business Corporation Act, supra, § 16.02,
comment (3), p. 16-9 (explaining that inspection provi-
sion ‘‘attempts to require more meaningful statements
of purpose, if feasible, by requiring that a shareholder
designate ‘with reasonable particularity’ his purpose
and the records he desired to inspect’’ (emphasis added));
see also, e.g., Security First Corp. v. U.S. Die Casting &
Development Co., supra, 687 A.2d 569 (‘‘While the trial
court has wide latitude in determining the proper scope
of inspection, it is the responsibility of the trial court
to tailor the inspection to the [shareholder’s] stated
purpose. Undergirding this discretion is a recognition
that the interests of the corporation must be harmo-
nized with those of the inspecting [shareholder].’’ (Inter-
nal quotation marks omitted.)); Kelley Mfg. Co. v. Mar-
tin, 296 Ga. App. 236, 241, 674 S.E.2d 92 (2009) (‘‘the
trial court has much discretion . . . to determine
whether the purpose named is a proper one’’ (internal
quotation marks omitted)), cert. denied, Georgia
Supreme Court, Docket No. S09C1052 (May 18, 2009);
Parsons v. Jefferson-Pilot Corp., 333 N.C. 420, 429–30,
426 S.E.2d 685 (1993) (‘‘[T]he record does not show that
the plaintiff had any specific knowledge of corporate
mismanagement or of any improper use of corporate
assets at the time that she made the demand. The record
shows only that the plaintiff was dissatisfied with the
return on her investment in the defendant corporation.
In light of the plaintiff’s actual knowledge at the time
of the demand, it would not have been feasible to state
her purpose with any greater particularity. . . .
Although the plaintiff’s demand was broad . . . there
is nothing in this record to show that the plaintiff could
have described the desired records with any greater
particularity than she did . . . .’’). In addition, because
inspection of LLC records is permitted only to the extent
it is ‘‘just and reasonable’’; General Statutes § 34-255i
(b) (2); the trial court may limit the scope of inspection
if the request is too burdensome or inadequately justi-
fied. Cf. Thomas & Betts Corp. v. Leviton Mfg. Co.,
supra, 681 A.2d 1035 (noting that provision vesting trial
court with discretion to prescribe inspection limitations
that are just and proper gives it ‘‘wide latitude in
determining the proper scope of inspection’’); Kasten
v. Doral Dental USA, LLC, 301 Wis. 2d 598, 637–38,
733 N.W.2d 300 (2007) (‘‘[O]ne purpose of the language
‘upon reasonable request’ is to protect the company
from member inspection requests that impose undue
financial burdens on the company. Whether an inspec-
tion request is so burdensome as to be unreasonable
requires balancing the statute’s bias in favor of member
access to records against the costs of the inspection
to the company. When applying this balancing test, a
number of factors may be relevant . . . . Decisions
of [a trial] court regarding the reasonableness of an
inspection request are addressed to its discretion.’’
(Footnotes omitted.)).
An LLC resisting inspection also can produce evi-
dence to demonstrate that the statutory conditions have
not been met. The company may, as the defendant
unsuccessfully attempted to do in the present case,
persuade the court that an improper purpose is the
true, primary purpose.27 Cf. Alexandria Venture Invest-
ments, LLC v. Verseau Therapeutics, Inc., Docket No.
2020-0593-PAF, 2020 WL 7422068, *5 (Del. Ch. Decem-
ber 18, 2020) (‘‘Once the court has found that the [share-
holder’s] primary purpose is proper, any secondary or
ulterior [purpose] is irrelevant. The court may, however,
take into account an ulterior purpose when considering
the permitted scope of inspection.’’ (Footnote omit-
ted.)); Advance Concrete Form, Inc. v. Accuform, Inc.,
158 Wis. 2d 334, 344, 462 N.W.2d 271 (App. 1990)
(‘‘[When] a [shareholder] who seeks inspection of cor-
porate books and records has two purposes, one [share-
holder related] and the other not, the critical inquiry is
whether the [shareholder related] purpose predomi-
nates over the ulterior purpose. . . . If the ulterior pur-
pose is the shareholder’s primary purpose, the share-
holder may not obtain inspection relief under a [proper
purpose] statute.’’ (Citation omitted; internal quotation
marks omitted.)). If the company believes that requested
records are not directly connected to the member’s
purpose, it can submit those records to the court for
an in camera examination. See Model Business Corpo-
ration Act, supra, § 16.02, comment (3), pp. 16-9 through
16-10; see also, e.g., Parsons v. Jefferson-Pilot Corp.,
106 N.C. App. 307, 322–23, 416 S.E.2d 914 (1992), rev’d
in part on other grounds, 333 N.C. 420, 426 S.E.2d
685 (1993).
Finally, the CULLCA recognizes that an LLC may,
through its operating agreement, impose reasonable
restrictions on the availability and use of information
provided for under § 34-255i. See General Statutes § 34-
243d (c) (8); see also Unif. Limited Liability Company
Act § 105 (c) (8), supra, 6C U.L.A. 27–28. As we explain
in part II of this opinion, the defendant’s operating
agreement in the present case expands, rather than
restricts, the statutory access to LLC records.
In sum, we conclude that there is neither a textual
nor a policy basis that justifies reading a credible proof
of mismanagement requirement into § 34-255i. A trial
court may, however, consider the absence of facts dem-
onstrating a basis to suspect mismanagement, in combi-
nation with other factors, in determining whether an
improper purpose is the true reason for the demand
and the extent to which disclosure is just and reason-
able under the circumstances. Although our reasons
differ somewhat from those on which the trial court’s
decision rested, that court correctly determined that
there is no credible proof of mismanagement require-
ment in § 34-255i.
C
The defendant also claims that the trial court improp-
erly failed to apply the requirement under § 34-255i (b)
(2) (C) that ‘‘the information sought is directly con-
nected to the member’s purpose’’ for all four categories
of information at issue, as well as the requirement that
the information sought be stated with ‘‘reasonable par-
ticularity’’ for two categories of information. General
Statutes § 34-255i (b) (2) (B). It contends that, because
it is challenging the application of an improper legal
standard, this claim presents an issue of law subject to
plenary review. The plaintiffs contend that the issue is
not whether the trial court failed to apply these require-
ments but, rather, a challenge to the evidentiary support
for the trial court’s conclusion, which is subject to
review for clear error.
We do not agree entirely with either characterization.
The defendant raises some legal arguments that impli-
cate the proper construction of these requirements and
the trial court’s decision. Other arguments effectively
challenge whether there is support in the record for
these requirements having been met. As to this latter
category, although a handful of cases have treated these
requirements as giving rise to factual findings subject
to review for clear error; see, e.g., Pagett v. Westport
Precision, Inc., supra, 82 Conn. App. 539; Towle v. Rob-
inson Springs Corp., supra, 168 Vt. 228; we conclude
that the abuse of discretion standard is more apt. As
we explained in part I B of this opinion, the statutory
conditions for inspection require the balancing of many
factors. Subordinate factual findings would be subject
to the clearly erroneous standard, but the ultimate
determination involves the exercise of discretion. See,
e.g., Kelley Mfg. Co. v. Martin, supra, 296 Ga. App. 241(distinguishing review of findings from discretionary
determination).
1
The defendant argues that the trial court was required
to determine that there was a direct connection between
each of the categories of information at issue and one
of the specific purposes asserted in the demands—(1)
to value the Benjamin 2002 Trust’s interest in the defen-
dant, and (2) to investigate the appropriateness of fees
paid to the defendant from other family entities and
the fees paid to the defendant’s managers—but failed
to engage in such an analysis. It contends that the court,
at best, could be said to have found that some of the
information sought could expose mismanagement of
some nature. It also contends that, for each of the con-
tested categories of information, the court either failed
to make a determination regarding the direct connec-
tion requirement, relied on a connection to a purpose
that was not alleged in the demands, or relied on find-
ings or principles that were irrelevant or erroneous. A
recurring theme in the defendant’s brief is that produc-
tion of the remaining information is unnecessary in light
of the adequacy of the records it has already provided,
and, therefore, the remaining information lacks a direct
connection to the inspection purposes alleged.
We disagree with several propositions on which the
defendant’s claim rests. Most of these propositions
depend on an artificially strict and unduly literal inter-
pretation of the trial court’s decision and the underlying
testimony. The defendant overlooks settled law that
‘‘[a] judgment is entitled to reasonable presumptions
in support of its validity.’’ (Internal quotation marks
omitted.) Brookfield v. Candlewood Shores Estates,
Inc., 201 Conn. 1, 7, 513 A.2d 1218 (1986). ‘‘[A] claim
of error cannot be predicated on an assumption that
the trial court acted [improperly]. . . . Rather, we are
entitled to assume, unless it appears to the contrary,
that the trial court . . . acted properly, including con-
sidering the applicable legal principles.’’ (Citations
omitted; emphasis added; internal quotation marks
omitted.) Rosenblit v. Danaher, 206 Conn. 125, 134, 537
A.2d 145 (1988). In the present case, the trial court
expressly acknowledged that § 34-255i required that the
information sought has a direct connection to a proper
purpose and cited case law interpreting that require-
ment. Although it did not make an express finding of
a direct connection for each category of information
at issue, we presume, in the absence of evidence to
the contrary, that it concluded that this requirement
was met.
The defendant also mistakenly assumes that the trial
court did not rely on the plaintiffs’ valuation purpose
and therefore discounts any testimony relating to that
purpose to establish the requisite connection. The trial
court quoted case law regarding proper inspection pur-
poses and underscored two of the examples given, cor-
responding to the two purposes explicitly specified in
Helen’s demands. One of those examples was ‘‘to deter-
mine the value of [the shareholder’s] shares . . . .’’
(Emphasis omitted; internal quotation marks omitted.)
In discussing the general ledger, the trial court recited
reasons Weisman gave in his testimony for needing
various information, one of which unambiguously
related to valuation. Furthermore, because the plain-
tiffs’ theory was that excessive compensation was not
just a mismanagement issue but also affected valuation,
any evidence relating to the former necessarily sup-
ported the latter.
The defendant additionally assumes, incorrectly, that
the plaintiffs’ sole mismanagement concerns were exces-
sive manager compensation and management fees.
Those two matters were identified as being of particular
concern in Helen’s final demand, but the demand did not
limit itself in this respect. Instead, the demand broadly
identified one of its two purposes as to ‘‘ascertain the
condition and affairs of such entities so that the Benja-
min 2002 Trust may exercise its rights as a member
of the [defendant] in an informed manner.’’ We are
therefore inclined to view the purpose cited by the trial
court in connection with the records of payments made
on behalf of the Benjamin 2002 Trust—‘‘achieving and
assuring lawful trust administration’’—as consistent
with the demand.
We also disagree with the defendant’s interpretation
of the direct connection requirement insofar as it seems
to equate that requirement to a test of strict necessity.
The defendant’s view is that, if it has provided sufficient
records from which the plaintiffs can accomplish their
purposes, any remaining records lack a direct connec-
tion to those purposes. We recognize that Delaware
applies a strict necessity test; see, e.g., Security First
Corp. v. U.S. Die Casting & Development Co., supra,
687 A.2d 569 (‘‘[t]he plaintiff bears the burden of proving
that each category of books and records is essential to
the accomplishment of the [shareholder’s] articulated
purpose for the inspection’’); see also, e.g., Cain v.
Merck & Co., supra, 415 N.J. Super. 334 (following Secu-
rity First Corp.); and that cases from some other juris-
dictions have cited the necessity of the record when
considering whether the right to inspection was estab-
lished. See, e.g., Computer Solutions, Inc. v. Gnaizda,
633 So. 2d 1100, 1102 (Fla. App. 1994); Cardiovascular
Specialists, P.S.C. v. Xenopoulos, 328 S.W.3d 215, 219
(Ky. App. 2010).
We find no support for a strict necessity test, how-
ever, in the plain meaning of ‘‘direct connection,’’28
which is more suggestive of relevance than indispens-
able need. See, e.g., Bacompt Systems, Inc. v. Peck,
879 N.E.2d 1, 6 (Ind. App. 2008) (The court rejected
argument that the report sought was ‘‘not directly
related to a proper purpose because, given the ‘plethora’
of documents provided, the . . . report is not neces-
sary and essential. . . . [T]he provisions of Indiana
Code [§] 23-1-52-2 do not articulate such a ‘necessary
and essential’ standard for determining whether a
requested document is directly connected with a share-
holder’s purpose. In any event, the relationship of the
. . . report to the [shareholder’s] purpose is a factual
matter for the trial court upon remand to determine.
But the mere fact that a ‘plethora’ of documents has
already been provided does not preclude a factual find-
ing that the . . . report is nevertheless directly con-
nected to a proper purpose.’’); see also, e.g., Dewey v.
Bechthold, 387 F. Supp. 3d 919, 928 (E.D. Wis. 2019)
(‘‘A record is ‘directly connected’ to the purpose of
determining the book value of a share if the record
assists in valuing the company. That is, a record is
‘directly connected’ to the determination of book value
if an analyst would need the record in order to conduct
a valuation.’’ (Emphasis added.)); Pagett v. Westport
Precision, Inc., supra, 82 Conn. App. 539 (upholding
trial court’s direct connection conclusion because of
‘‘a correlation’’ between stated purpose and documents
requested).
Cumulative sources may be important to confirm the
correctness of information in hand or may expose
inconsistencies. If information is duplicative and the
effort needed to produce it imposes an undue burden
on the company, that concern is better left to the court’s
discretion under the consideration of whether allowing
inspection is ‘‘just and reasonable . . . .’’ General Stat-
utes § 34-255i (b) (2).
Finally, the defendant suggests that it is insufficient
for the plaintiffs’ witnesses to make assumptions about
what they expect the records to reveal and that the
trial court is required to credit testimony to the contrary
by defense witnesses.29 We disagree with both proposi-
tions. The trial court is not required to credit a witness’
testimony. See, e.g., Osborn v. Waterbury, 333 Conn.
816, 824 n.5, 220 A.3d 1 (2019). Moreover, a comment
to the Model Business Corporation Act suggests that,
‘‘[i]f disputed by the corporation, the ‘connection’ of
the records to the shareholder’s purpose may be deter-
mined by a court’s in camera examination of the
records.’’ Model Business Corporation Act, supra,§ 16.02, comment (3), pp. 16-9 through 16-10; see, e.g.,
Parsons v. Jefferson-Pilot Corp., supra, 106 N.C. App.
322–23 (remanding case to trial court to reconsider
direct connection issue because trial court improperly
had relied on purpose stated in shareholder’s pleadings/
motions rather than in demand and ordering trial court
‘‘to conduct an in camera examination of the desired
records to determine which records, if any, are directly
connected with the plaintiff’s purpose’’). The contested
documents were not submitted for such examination
in the present case.
Having reviewed the record, we are not persuaded
that the trial court abused its discretion in concluding
that there was a direct connection between the four
categories of information sought and the proper pur-
poses of inspection.
2
The defendant also contends that two types of infor-
mation sought at trial—the general ledger and employee
compensation—were not requested with ‘‘reasonable
particularity’’; General Statutes § 34-255i (b) (2) (B);
because neither was requested in any of Helen’s
demands.
We agree with the trial court that several of the
twenty-seven categories cited in the fourth demand ref-
erenced information of the type that would be in a
general ledger and that this reference was sufficiently
particular to apprise the defendant about the informa-
tion needed. See, e.g., Sunlitz Holding Co., W.L.L. v.
Trading Block Holdings, Inc., 17 N.E.3d 715, 722 (Ill.
App.) (‘‘[T]he particularity requirement . . . is a rela-
tive one, turning on the degree of knowledge that a
movant in a particular case has about the documents
he requests. . . . [T]he shareholder’s request must be
sufficient to apprise a [person] of ordinary intelligence
what documents are required, depending on the facts
and circumstances of each case.’’ (Citations omitted;
internal quotation marks omitted.)), appeal denied, 21
N.E.3d 719 (Ill. 2014).
The plaintiffs effectively conceded at oral argument
before this court, however, that employee compensa-
tion was not requested in any written demand with
reasonable particularity. They acknowledged that their
interest in this information arose after the complaint
was filed, when Romanow’s deposition revealed that
one of Cynthia’s children was employed by the defen-
dant, and, therefore, their entitlement to this informa-
tion is contractual only. We turn, therefore, to the judg-
ment rendered on count two, the violation of the
operating agreement, to determine whether the plain-
tiffs were entitled to employee compensation informa-
tion.30
II
Section 5.7 of the defendant’s operating agreement
provides in relevant part: ‘‘Upon request, each [m]ember
. . . shall have the right, during ordinary business
hours, to inspect and copy any and all of the books
and records of the [c]ompany at the expense of the
[m]ember . . . making such request.’’ The trial court
observed that this provision unambiguously provides a
more expansive right of inspection than is afforded by
statute and permits such inspection upon an informal
request rather than a written demand. The defendant
does not contend otherwise; nor does it contend that
any particular information sought for inspection falls
outside of this provision.
The defendant instead claims that, as litigated in the
present case, the count alleging a violation of the
operating agreement is purely derivative of the count
alleging a statutory violation and, therefore, cannot pro-
vide an independent basis to support the judgment in
favor of the plaintiffs. It points to the fact that each of
the written demands expressly and exclusively invoked
§ 34-255i (or its predecessor) as authority for the
demand and emphasizes allegations in the complaint
citing those written demands as the basis for the action.
It also points to the fact that the operating agreement
has a mandatory arbitration provision. The defendant
contends that, under these circumstances, it had no
notice or reason to suspect that Helen or the plaintiffs
were making a demand under the operating agreement
and would have invoked the arbitration provision if an
independent claim under the operating agreement had
been asserted. We disagree.
The defendant conflates the issues of whether there
was a demand under the agreement and whether it had
fair notice that the plaintiffs were advancing a claim
under the agreement. The operating agreement requires
nothing more than an inspection ‘‘request’’; it does not
require that the request expressly invoke the operating
agreement. The defendant points to no text in the agree-
ment that suggests otherwise.
We agree that, because all of the demands expressly
and exclusively invoked § 34-255i or its predecessor,
the defendant may have lacked fair notice that Helen
or the plaintiffs were invoking a contractual right to
inspect its records prior to the filing of the complaint.31
The complaint, however, provided the requisite notice.
See, e.g., Grenier v. Commissioner of Transportation,
306 Conn. 523, 536, 51 A.3d 367 (2012) (‘‘The interpreta-
tion of pleadings is always a question of law for the court
. . . . Our review of the trial court’s interpretation of
the pleadings therefore is plenary.’’ (Internal quotation
marks omitted.)). To read the complaint otherwise
would ignore the fact that it is stated in two counts and
specifically alleges that Helen, in her capacity as trustee,
was seeking an order to compel the defendant to comply
with § 34-255i ‘‘and [the defendant’s] obligations under
the operating agreement . . . .’’ Moreover, if the
inspection right and the remedy sought in count two
are wholly derivative of the right and remedy sought
in count one, as the defendant contends, count two
would serve no purpose.
Because the complaint provided fair notice that an
independent violation of the operating agreement was
alleged, the defendant was afforded an opportunity to
press its right to arbitrate any dispute arising under the
agreement. The trial court’s decision thoroughly and
appropriately explained why the defendant was required
to plead arbitration as a special defense; see Practice
Book § 10-50; and why its failure to do so constituted
a waiver of that right. As the trial court further observed,
the defendant also failed to make a formal demand for
arbitration in any other form. See General Statutes § 52-
409 (motion to compel arbitration and to stay judicial
proceedings).
The defendant alternatively suggests that the trial
court improperly construed § 5.7 of the operating agree-
ment to allow ‘‘carte blanche access’’ to all of the defen-
dant’s records for any purpose because a requirement
is implied in such provisions that the members seeking
information must have a proper purpose that is not
adverse to the company. The case cited by the defen-
dant does not stand for this proposition. Rather, under
the so-called ‘‘implied improper purpose’’ rule, when a
proper purpose is not expressly required, the entity can
avoid inspection if it proves that disclosure would, in
fact, be adverse to the entity. See, e.g., Arbor Place,
L.P. v. Encore Opportunity Fund, LLC, Docket No.
CIV. A. 18928, 2002 WL 205681, *4 n.9 (Del. Ch. January
29, 2002); Bond Purchase, LLC v. Patriot Tax Credit
Properties, L.P., 746 A.2d 842, 859 (Del. Ch. 1999). The
trial court rejected the defendant’s various improper
purposes defenses, and, although the defendant criti-
cizes these conclusions and the supporting factual find-
ings in footnotes in its appellate brief, it has not directly
challenged those rulings on appeal.
Count two of the complaint, alleging a violation of
§ 5.7 of the operating agreement, therefore, supports the
trial court’s decision ordering the defendant to permit
inspection of its employee compensation information.
The judgment is affirmed.
In this opinion the other justices concurred.
* November 2, 2021, the date that this decision was released as a slip
opinion, is the operative date for all substantive and procedural purposes.
1
Section 34-255i distinguishes between inspection rights and duties in
member-managed companies and in manager-managed companies. Subsec-
tion (b) of § 34-255i, which applies in the present case, provides in relevant
part: ‘‘In a manager-managed limited liability company, the following
rules apply:
***
‘‘(2) During regular business hours and at a reasonable location specified
by the company, a member may inspect and copy full information regarding
the activities, affairs, financial condition and other circumstances of the
company as is just and reasonable if: (A) The member seeks the information
for a purpose reasonably related to the member’s interest as a member; (B)
the member makes a demand in a record received by the company, describing
with reasonable particularity the information sought and the purpose for
seeking the information; and (C) the information sought is directly connected
to the member’s purpose.
‘‘(3) Not later than ten days after receiving a demand pursuant to subpara-
graph (B) of subdivision (2) of this subsection, the company shall in a record
inform the member that made the demand of: (A) The information that the
company will provide in response to the demand and when and where the
company will provide the information; and (B) the company’s reasons for
declining, if the company declines to provide any demanded information.
. . .’’
General Statutes § 34-271, which was not cited in the operative complaint,
authorizes a direct action against another member, a manager, or the LLC to
enforce the member’s rights and to protect the member’s interests, including
those arising under an LLC’s operating agreement.
2
Consistent with the parties’ designation, we use the term Benjamin 2002
Trust to refer to the trust interest created for the benefit of Helen Ziegler
Benjamin by the William Ziegler III Family Irrevocable Trust Agreement,
dated June 3, 2002.
3
The defendant directly appealed to the Appellate Court, and we thereafter
transferred the defendant’s subsequently amended appeal to this court pur-
suant to General Statutes § 51-199 (c) and Practice Book § 65-1.
4
For the purpose of simplicity, we refer to each of the siblings individually
by first name when appropriate.
5
Helen’s siblings did, however, approve a onetime $50 million payment
to Helen in 2012, as a consequence of the disagreement over distributions.
6
Helen thereafter obtained a valuation of her trust’s collective interests
from an accounting firm, which purportedly was characterized as prelimi-
nary due to incomplete information. That estimate far exceeded what the
other siblings had offered to pay for Helen’s interests, and the buyout offer
was withdrawn in early 2017.
7
The first three demands cited General Statutes § 34-144, and the fourth
demand cited § 34-255i, which replaced the former as of July 1, 2017. The
operative complaint alleged only a violation of § 34-255i, and the plaintiffs
have made no argument that § 34-144 (c), which did not impose the same
express preconditions to inspection as § 34-255i; see footnote 16 of this
opinion; governed their inspection rights for any of the categories of informa-
tion at issue in this case. Our analysis therefore focuses exclusively on
§ 34-255i.
8
Member distributions increased in 2012 and 2013 but thereafter dropped
to approximately 2011 levels or lower. Information disclosed by the time
of the trial revealed that 2017 and 2018 comanager compensation was two
and one-half to three times the 2011 comanager compensation.
9
The fourth demand linked this valuation purpose to another purpose
relating to a pending transfer of Peter’s trust interest, following his death
in 2017, specifically to determine whether the Benjamin 2002 Trust should
exercise its ‘‘right of first refusal’’ of that interest pursuant to the operating
agreement. The right of first refusal under the operating agreement was
resolved in arbitration and is not relevant to the present appeal. Another
appeal is pending before this court relating to Peter’s testamentary power
of appointment. The legal issues in that matter have no bearing on the
present appeal.
10
Section 5.7 of the defendant’s operating agreement provides: ‘‘The [m]an-
agers shall maintain and preserve, during the term of the [c]ompany, and for
seven (7) years thereafter, all accounts, books, and other relevant [c]ompany
documents as provided in [§] 9.2 of this [o]perating [a]greement. Upon
request, each [m]ember and [e]conomic [i]nterest [o]wner shall have the
right, during ordinary business hours, to inspect and copy any and all of
the books and records of the [c]ompany at the expense of the [m]ember or
[e]conomic [i]nterest [o]wner making such request.’’
Section 9.2 of the operating agreement requires the defendant to keep
(1) a current list of its past and present members, (2) copies of its articles
of organization, all amendments thereto, and any powers of attorney pursu-
ant to which an amendment had been exercised, (3) copies of its federal,
state, and local income tax returns and financial statements for the six most
recent fiscal years, and (4) copies of any of its past and present written
operating agreements and amendments thereto. Helen sought all of these
records in her demands, and the defendant initially withheld some but
eventually produced all of them.
11
For convenience, we hereafter refer to the substitute plaintiffs as the
plaintiffs in this opinion.
12
Pursuant to the parties’ request, the trial court ordered the exhibits, the
parties’ trial briefs, and the trial transcripts to be sealed to protect confiden-
tial information.
13
Weisman explained that overpayment of compensation would affect fair
value because the amount of overpayment should come out of the company’s
profit and loss and be recharacterized as a distribution. The intrinsic worth
of the businesses is their ‘‘fair value,’’ as opposed to fair market value,
because the siblings’ interests cannot be sold in the open market.
14
The basis for the harassment allegation appears to be not only the
expansiveness of the inspection request, but also the fact that Helen had
initiated several other legal proceedings against various Ziegler entities or
officers of those entities.
15
The defendant originally appealed to the Appellate Court, which issued
an order to show cause why the appeal should not be dismissed for lack
of a final judgment, pursuant to Meribear Productions, Inc. v. Frank, 328
Conn. 709, 183 A.3d 1164 (2018). That case held that a final judgment has
not been rendered if the trial court has failed to dispose of a count alleging
an alternative theory of recovery that is not legally inconsistent with a count
on which judgment was rendered. See id., 717–24. The defendant then sought
an articulation from the trial court as to whether it had disposed of count
two, which the court granted. The trial court’s articulation stated that the
judgment would be modified to render judgment for the plaintiffs on both
counts, citing two pages of its written decision in which it had discussed
the operating agreement.
16
Connecticut adopted the ULLCA in 2016; see Public Acts 2016, No. 16-
97; which went into effect on July 1, 2017. That public act repealed the then
existing LLC inspection provision, which provided in relevant part: ‘‘During
ordinary business hours a member may, at the member’s own expense,
inspect and copy upon reasonable request any limited liability company
record, wherever such record is located.’’ (Emphasis added.) General Stat-
utes (Rev. to 2015) § 34-144 (c). This predecessor statute similarly was not
subjected to judicial scrutiny by our courts. But see In re Newman, 500
B.R. 328, 330–32 (Bankr. D. Conn. 2013) (addressing whether attorney-client
privilege shielded documents from inspection under predecessor statute).
In the absence of any case law or legislative history, there is no clear
indication whether the multipronged successor statute was intended to give
greater clarity to considerations subsumed under the existing reasonable-
ness standard or was intended to impose a more stringent standard.
17
‘‘Our common law does not recognize LLCs, which were first created
by statute in Connecticut in 1993. Public Acts 1993, No. 93-267. An LLC is
a distinct type of business entity that allows its owners to take advantage of
the pass-through tax treatment afforded to partnerships while also providing
them with limited liability protections common to corporations.’’ Styslinger
v. Brewster Park, LLC, 321 Conn. 312, 317, 138 A.3d 257 (2016); see, e.g.,
Marx v. Morris, 386 Wis. 2d 122, 138, 925 N.W.2d 112 (2019) (‘‘Similar to a
partnership, an LLC allows for informality and flexibility of organization
and operation, internal governance by contract, direct participation by mem-
bers in the business, and no taxation at the entity level. . . . Similar to a
corporation, however, an LLC grants its investors limited liability such that
a member is not personally liable for any debt, obligation or liability of the
[LLC], except that a member or manager may become personally liable by
his or her acts or conduct other than as a member. . . . Therefore, as with
a shareholder in a corporation, each LLC member’s potential liability to
third parties is limited to the amount the member chose to invest in the
LLC.’’ (Citations omitted; internal quotation marks omitted.)).
18
The trial court in the present case suggested that corporate records
inspection statutes should not be consulted because a material difference
between corporations and LLCs is the ‘‘magnitude of the number of share-
holders who own a publicly traded [corporation].’’ Although this statement
may be factually accurate in the majority of cases, there is no legal limit to
the number of members of an LLC, and some have hundreds of members.
See E. Welle, ‘‘Limited Liability Company Interests as Securities: An Analysis
of Federal and State Actions Against Limited Liability Companies Under the
Securities Laws,’’ 73 Denv. U. L. Rev. 425, 431 (1996); see also L. Brenman,
‘‘Limited Liability Companies Offer New Opportunities to Business Owners,’’
10 J. Partnership Taxation 301, 308 (1994). Moreover, ‘‘corporations, partner-
ships, pension plans, and foreign investors may become members of an
LLC.’’ L. Brenman, supra, 308. We do not intend to suggest, however, that an
inspection request always must yield the same result regardless of whether
it is made to a closely held LLC or to a large, publicly traded corporation.
As we explain subsequently in this opinion, the trial court has discretion
to consider many factors when assessing whether to allow inspection and
the reasonable scope of inspection, and the entities’ governing agreement
may impact inspection rights as well. See footnote 21 of this opinion
(acknowledging other differences in statutes).
19
Connecticut’s statutes governing partnership inspection rights have not
been amended for several decades, and the one applicable to limited part-
ners, General Statutes § 34-18, is similar to the predecessor to § 34-255i for
LLC inspection, General Statutes (Rev. to 2015) § 34-144 (c). See footnote
16 of this opinion.
20
General Statutes § 33-946, which mirrors § 16.02 of the Model Business
Corporation Act; see Pagett v. Westport Precision, Inc., supra, 82 Conn.
App. 533; provides in relevant part: ‘‘(d) A shareholder may inspect and
copy the records described in subsection (c) of this section only if: (1) His
demand is made in good faith and for a proper purpose; (2) he describes
with reasonable particularity his purpose and the records he desires to
inspect; and (3) the records are directly connected with his purpose. . . .’’
(Emphasis added.)
21
We do not intend to suggest that, simply because these sources impose
similar conditions to the ones at issue in the present case, they afford the
same scope of inspection under the same conditions in every case. There
are some material differences in these statutes regarding the treatment of
certain categories of information. Shareholders and limited partners have
the right to inspect certain records that the corporations and partnerships
are statutorily required to maintain without any showing of good cause. See
Unif. Limited Liability Company Act § 410 (a) (1), supra, 6C U.L.A. 113; Unif.
Limited Partnership Act § 304 (a), supra, 6B U.L.A. 84. LLCs are no longer
statutorily required to maintain any specific records under Connecticut law;
see Public Acts 2016, No. 16-97, § 110 (repealing General Statutes § 34-144);
and the CULLCA draws no distinction for inspection rights based on the
type of records sought. Shareholders may inspect specific types of records;
see General Statutes § 33-946 (c); whereas LLC members may inspect infor-
mation ‘‘regarding the company’s activities, affairs, financial condition, and
other circumstances . . . .’’ Unif. Limited Liability Company Act § 410 (a)
(1), supra, 6C U.L.A. 113; see Unif. Limited Partnership Act § 304 (b), supra,
6B U.L.A. 84 (recognizing same inspection rights with respect to limited part-
ners).
22
Neither party is contending that all of the pertinent statutory terms are
plain and unambiguous, susceptible to only one definition.
23
Delaware’s corporate inspection statute requires a plaintiff to establish
that inspection is for a ‘‘proper purpose,’’ a term it defines as ‘‘reasonably
related to such person’s interest as a stockholder.’’ Del. Code Ann. tit. 8,
§ 220 (b) (2011). This statute does not expressly limit inspection to records
directly connected to the purpose advanced or require reasonable particular-
ity in the demand, but Delaware courts have effectively adopted these
requirements as part of the proper purpose requirement (i.e., if the record
is not essential to accomplishing the purpose, it is not being sought for a
proper purpose). See, e.g., Security First Corp. v. U.S. Die Casting &
Development Co., supra, 687 A.2d 569 (‘‘The plaintiff bears the burden of
proving that each category of books and records is essential to the accom-
plishment of the [shareholder’s] articulated purpose for the inspection. . . .
[I]t is the responsibility of the trial court to tailor the inspection to the
[shareholder’s] stated purpose.’’ (Footnote omitted.)). Although the trial
court discounted Delaware case law in part because that state did not
adopt the Model Business Corporation Act, we find the corporate inspection
statutes, as interpreted, similar in material respects.
24
The Illinois and Delaware shareholder inspection statutes expressly
impose the burden of proof either on the shareholder, requiring him or her
to prove a proper purpose, or on the corporation, requiring it to prove that
the shareholder does not have a proper purpose, depending on the type of
records sought. See Del. Code Ann. tit. 8, § 220 (c) (2011); 805 Ill. Comp.
Stat. Ann. 5/7.75 (b) and (c) (West 2010); see also N.J. Stat. Ann. § 14A:5-
28 (3) and (4) (West Cum. Supp. 2020) (imposing burden of proof on share-
holder, requiring him or her to prove proper purpose for inspection of
certain records).
25
We express no opinion as to whether this statutory obligation would
support a credible proof of mismanagement requirement for corporations,
only that the absence of this requirement for current LLC members is a
factor that weighs against a credible proof requirement for such members.
26
The plaintiffs pointed to, among other things, the comanager siblings’
conflicts of interest, which could have provided an opportunity for self-
dealing, highly trained officers who managed the day-to-day operations of
the businesses, a buyout offer that fell well short of a valuation estimate
Helen obtained; see footnote 6 of this opinion; and manager/president com-
pensation increasing almost threefold over an eight year period while mem-
ber distributions decreased or stayed at approximately the same level for
most of those years despite increased company earnings. See, e.g., Weigel
v. O’Connor, supra, 57 Ill. App. 3d 1025 (‘‘[a] desire to learn the reasons for
lack of dividends or insubstantial dividends, and suspicion of mismanage-
ment arising from such a dividend policy alone, will constitute a proper
purpose’’); Taylor v. Eden Cemetery Co., 337 Pa. 203, 208–209, 10 A.2d 573(1940) (concluding that concern about whether salaries paid to officers and
trustees of defendant company were excessive was proper purpose for
seeking inspection). In their trial briefs, the plaintiffs assumed that they
were required to establish credible proof but argued that it was the lowest
possible burden of proof. During argument by counsel, the trial court ques-
tioned the basis for applying this standard to § 34-255i.
27
A Connecticut Superior Court case cited by the defendant proves this
very point. See Strauss v. Educational Innovations, Inc., Docket No. CV-
XX-XXXXXXX-S, 2008 WL 5220278, *5–6 (Conn. Super. November 14, 2008)
(finding that shareholder was not entitled to inspection when ‘‘there was
no credible proof’’ supporting his allegations of mismanagement and there
was evidence that inspection was sought for improper purposes—share-
holder ‘‘was engaging in a similar, possibly competing business’’ and sought
inspection to ‘‘harass the company and its officers and directors and/or [to]
go on a ‘fishing expedition’ ’’).
28
See Random House Unabridged Dictionary (2d Ed. 1993) pp. 432, 559
(defining ‘‘connection’’ as ‘‘association’’ or ‘‘relationship’’ and ‘‘direct’’ as
‘‘proceeding in a straight line’’ or ‘‘without intervening persons, influences,
factors’’); see also Webster’s Third New International Dictionary (2002) p.
481 (defining ‘‘connection’’ as ‘‘relationship or association in thought (as of
cause and effect, logical sequence, mutual dependence or involvement)’’).
29
In its brief to this court, the defendant cites testimony from Weisman
as to information about a specific Ziegler business enterprise that he claimed
would be relevant and testimony from Romanow indicating that the defen-
dant had no involvement with that enterprise. Because the defendant makes
a broad legal argument that the proper legal standard was not applied to
any of the categories of information sought and makes no claim that specific
information sought should not have been ordered to be disclosed, we express
no opinion on the propriety of ordering inspection as to any particular piece
of information.
30
Because count two must be reached under any circumstances, a legiti-
mate question arises as to why our analysis does not begin and end there.
We note that the trial court’s decision in the present case expressly retained
jurisdiction over the case ‘‘to resolve any dispute which may arise concerning
the accessibility to particular documents not included within the [four]
broad categories noted [in its decision].’’ The interests of judicial economy
impel us to rule on the contours of the statutory right to inspection under
these circumstances.
31
The plaintiffs’ concession to this court that their interest in employee
compensation information arose after the demands were made; see part I
C 2 of this opinion; does not similarly compel the conclusion that Helen
failed to make a ‘‘request’’ for that information that would satisfy the less formal
requirements of the operating agreement. The plaintiffs’ written demands
included an ambiguous request for information regarding management
arrangements, management fees, and ‘‘other such arrangements or fees . . . .’’
The plaintiffs specifically alleged in their complaint that the defendant had
failed to produce records ‘‘showing compensation and benefits paid to or
provided for each . . . officer and employee annually . . . .’’ (Emphasis
added.) Because the operating agreement does not require the formalities
of a demand that the statute does, we presume that there was a ‘‘request’’
made in accordance with the operating agreement. The defendant makes
no argument that there was no request that met the requirements of the
operating agreement, only that the count alleging a violation of the operating
agreement is wholly derivative of the count alleging the statutory violation,
which imposes more formal requirements.