A Commercial Litigation Lawyer Explains the Playbook for Founders
You’ve been locked out of the company by your co-founder. You no longer have access to company email, the cap table, internal systems, or board meetings. The soft-power strategies we discussed in our previous post didn’t work. You tried to reason, to document your dissent quietly, to deescalate and preserve relationships while building leverage. But your co-founder either ignored you—or moved faster.
Now it’s time to escalate.
This guide—written by a commercial litigation lawyer—explains what to do when the quiet, strategic push didn’t work. While this article focuses on Delaware-incorporated companies, the general approach applies in most jurisdictions with minor variations. We handle business litigation cases in Delaware, Pennsylvania, New York, and across the country, as allowed.
One important note: it’s not about where you live or work—it’s about where the company is incorporated. That’s what controls the legal playbook.
If your company is incorporated in Delaware, this is the playbook we use. And while it won’t apply in full everywhere, the core logic—about timing, leverage, and strategic documentation—translates across most business litigation contexts.
Step One: File a Books and Records Request (Properly, With A Delaware Business Litigation Lawyer)
Once you’ve been frozen out of company communications, your ability to assess what’s happening inside the business is severely limited. That’s not just frustrating—it’s strategically disabling. You’re flying blind. Your first move is usually a formal books and records demand under Section 220 of the Delaware General Corporation Law (DGCL).
We’ve written a guide on DGCL 220 here (and side note, I wrote my law school thesis at Georgetown about it, it’s kind of my thing, maybe that’s why I’m not married. We do them all the time, from small, closely held companies, to Fortune 500).
Think of it this way: you’re not suing yet. You’re asking for the data you need to make informed decisions—and laying the groundwork for future litigation, if necessary. This is the foundational step that can preserve your claims and give you insight into whether litigation is worth pursuing.
Many founders are tempted to send this demand themselves. We strongly advise against that.
A books and records request isn’t just a customer support ticket—it’s a legal document with consequences. It must be carefully framed, well-supported, and accurate. In Delaware, these letters are often used as exhibits in later litigation. Sloppy drafting, inconsistent tone, or vague demands will hurt your credibility. Worse, they may lead to denial of your request and weaken your future claims.
Don’t believe me, read this article: “Why You Should Never Send A Books And Records Request Without A Delaware Commercial Litigation Lawyer”.
We’ve ghostwritten these requests for clients who weren’t ready to surface counsel. But in most cases, we recommend having your commercial litigation lawyer send it directly. That signals seriousness. It ensures the request is legally compliant. And it helps preserve the integrity of your litigation posture.
What Makes a Valid Section 220 Demand? Delaware Commercial Litigation Lawyer Breaks It Down
Under Delaware law, a books and records demand must:
- State a proper purpose—usually to investigate potential mismanagement or breaches of fiduciary duty;
- Be supported by evidence that you’re a current stockholder;
- Be narrowly tailored to that purpose; and
- Specify the documents requested with precision.
In our firm, we don’t just cite the statute. We cite relevant precedent. We provide factual context. We articulate a clean theory of the case. That’s what courts—and opposing counsel—respect.
If the company fails to respond, or responds with a blanket denial, your lawyer can use that refusal as evidence of bad faith. In Delaware, that can support a request for attorney’s fees. And if the company hires a firm to respond, their reply often gives you your first window into how they’re thinking. Are they scared? Overconfident? Do they understand their own exposure? These early moves can shape the litigation that follows.
What Documents Can You Request?
The Delaware Chancery Court has discretion over what’s considered “necessary and essential” to your stated purpose. That phrase—”necessary and essential”—is litigated frequently. But here are the categories we routinely request:
- Board meeting minutes and written consents
- Resolutions approving major actions
- Stock ledgers and cap tables
- Communications involving key governance decisions
- Financial statements and forecasts
- Contracts involving new hires, advisors, or strategic partners
Note: Delaware has narrowed the scope of acceptable requests in recent years. Courts are increasingly skeptical of broad demands. Your request must be carefully drafted, tailored, and supported. This is where legal experience matters.
Step Two: What If They Refuse? Bifurcation, Strategy, and the Litigation Fork in the Road. Commercial Litigation Lawyer Explains.
Sometimes, your co-founder or their counsel will deny the request—or ignore it altogether. When that happens, you face a strategic decision: do you sue to compel books and records under Section 220, or do you skip ahead to a full breach of fiduciary duty action?
Many clients assume that a 220 action is quick and easy. After all, it’s labeled a “summary proceeding.” But in reality, 220 litigation is complex, costly, and often drawn-out. These are not quick hearings before a magistrate. They are mini-trials with full briefing, depositions, and in some cases, live testimony.
They can last six to twelve months. They can require hundreds of attorney hours. And if you’re going to litigate that hard, we often ask: why not bring the full lawsuit?
That said, there are scenarios where a 220 action is useful. Courts will sometimes provide informal commentary on whether you’ve stated a “proper purpose.” That commentary—while technically dicta—can shape settlement negotiations. It gives you a sense of how the court views your theory of the case.
In other cases, the company relents after the complaint is filed. They produce documents in an effort to avoid losing in court. Even partial production can be valuable. We assess those documents, re-evaluate strategy, and decide whether to proceed with full litigation.
Business Litigation Attorney Hack: Section 225: When Governance Is Disputed
If your removal from the board was improper, or if you believe a key vote was invalid, a Section 225 action may be the proper next step. This is another summary proceeding, but it is focused specifically on who holds corporate office.
For example:
- Were you removed as a director without a valid shareholder vote?
- Was there a contested election or written consent dispute?
- Did the board take action without proper quorum or notice?
These cases are time-sensitive and highly procedural. Delaware courts take corporate governance seriously. If you can prove that formalities were ignored or manipulated, you may be reinstated. Or at a minimum, you gain leverage in negotiations.
225 actions are often combined with books and records demands. But whether they proceed independently or as part of broader litigation depends on timing, risk, and goals. Your commercial litigation lawyer can walk you through this.
What Comes Next: Direct and Derivative Claims
Once the dust settles, litigation begins. That litigation often involves two categories of claims: direct and derivative.
Direct claims are those that impact you personally. Examples include:
- Being wrongfully removed from your role
- Having your shares diluted without proper notice
- Being cut out of board decisions
Derivative claims involve harm to the company itself. In these cases, you sue on behalf of the corporation:
- Self-dealing by your co-founder
- Waste or misappropriation of corporate assets
- Improper related-party transactions
- Use of company resources for personal gain
Derivative claims require procedural steps: demand futility analysis, verification, and special pleading standards. But they can unlock substantial leverage, especially when investor trust or third-party involvement is at stake.
Most real-world litigation involves both. And the way we frame these claims—factually and legally—can shape everything from motions to dismiss to settlement outcomes.
Emergency Relief With a Commercial Litigation Lawyer: Injunctions and TROs
In some cases, waiting isn’t an option. If your co-founder is about to close a financing round, transfer assets, or sign a major deal that would irreversibly harm you, we may seek emergency relief.
This includes:
- Temporary restraining orders (TROs)
- Preliminary injunctions
- Expedited discovery
Courts don’t grant these lightly. You must show that you’re likely to succeed on the merits, that irreparable harm will result without relief, and that the equities favor you.
These actions are intense and expensive. But in some cases, they’re the only way to preserve the status quo while the case unfolds.
Strategic Planning and Litigation Budgeting for Founder-Dispute Commercial Litigation
Before we file anything, we provide clients with a detailed litigation strategy. That includes:
- A written analysis of claims and defenses
- Identification of jurisdictional options
- Potential timelines
- Budget estimates by phase (pre-filing, discovery, motion practice, trial)
Litigation is expensive. Most high-stakes founder disputes cost between $150,000 and $500,000 if they don’t settle quickly. We don’t sugarcoat that. But we also don’t recommend litigation unless the outcome justifies the risk.
In some cases, the goal is a clean buyout. In others, it’s reinstatement and restructuring. In a few, it’s scorched-earth accountability. We work with you to decide which path makes sense.
What You Can Do Now
If you’ve been locked out, here are immediate steps to take:
- Preserve all emails, text messages, and Slack threads related to the dispute.
- Make a written timeline of events, including dates of meetings, votes, or removals.
- Gather all company documents in your possession: bylaws, operating agreements, board decks, and cap tables.
- Reach out to a commercial litigation lawyer who knows how to handle these cases in Delaware and beyond.
Every day you wait, the record continues to evolve without your input. Sometimes that’s harmless. Other times, it’s fatal to your claims.
If you act early, we can still shape the narrative. We can help you create facts. And we can protect your equity, your name, and your options, ideally a lot less expensively than full-blown litigation.
Final Thoughts
Most founders wait too long. They tell themselves it will blow over. They try to reason. They normalize dysfunction. And then one day, they wake up and they’re out—for good.
You don’t have to be that founder. If you’re reading this, you probably already know what’s coming.
We can help you face it.
Equal Justice Solutions
Equal Justice Solutions is a faith-driven law firm for ethical companies, whistleblowers, and those whose voices are too often ignored. We handle high-stakes matters with Big Law rigor and care, without the bloat, misaligned incentives, or hollow billing practices that can distort legal judgment. Rooted in Catholic social teaching, we understand the practice of law as a vocation—one that calls for excellence, honesty, and love expressed through faithful service to clients and the common good.
To speak with a commercial litigation lawyer about your founder dispute, reach out at www.equaljusticesolutions.org or contact our office directly. We service Delaware, Pennsylvania, and New York.
