Requests for the inspection of books and records pursuant to
Section 220 of the Delaware General Corporation Law is an important part of corporate litigation in Delaware. One important issue for these types of proceedings is the scope of documents that these types of requests can reach, particularly when it comes to privileged documents and other pre-discovery material. The following was published by
This article provides a summary of recent Delaware decisions on the permissible scope of shareholder books and records demands pursuant to Section 220 of the Delaware General Corporation Law (“Section 220”), including whether shareholders may use Section 220 to obtain pre-complaint discovery and/or privileged corporate documents. In short, there has been a significant uptick in Section 220 demand litigation in recent years and shareholders are frequently using Section 220 as an alternative method of obtaining discovery for ongoing or potential future fiduciary litigation. Thi
Tuesday, February 9, 2021
This past year, Proskauer’s private fund litigation blog highlighted a Delaware Chancery case adopting an expansive view in favor of parties seeking information from companies under Section 220 of the Delaware General Corporation Law. The Delaware Supreme Court recently affirmed the Chancery Court’s ruling, providing additional appellate guidance on Section 220 and endorsing limits the Chancery Court set on certain defenses companies may have against such requests.
Section 220 allows stockholders to inspect books and records of a Delaware corporation for any proper purpose and to compel inspection if refused. Recognized “proper purposes” to inspect books and records include, among others, determining director independence and investigating disclosures, waste, and possible mismanagement or self-dealing. For investigatory purposes, stockholders must demonstrate a credible basis to infer possible mismanagement warranting further inves
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The Delaware Court of Chancery’s docket exploded with expedited “broken” deal litigation in 2020, driven by the impact of COVID-19. Beyond pandemic-related merger litigation, stockholder plaintiffs remained focused on claims involving controlling stockholders and increased focus on claims against officers for breaches of the duty of care. There were also significant developments in connection with stockholder statutory books-and-records requests.
Broken Deals
Transaction participants in 2020 faced extraordinary and unprecedented circumstances due to COVID-19. In addition to the crisis’ uncertain economic impact, many companies faced employee health concerns and government-mandated shutdowns of core business operations, among other things. (See “US M&A Outlook: Rebounding Market Fuels Optimism for Deal Activity in 2021.”) As merger parties grappled with the pandemic and its impact on pending deals, expedited l
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Del. Books And Records Ruling Offers 4 Lessons For Cos.
Law360 (January 22, 2021, 3:36 PM EST) A recent decision by the Delaware Supreme Court cemented a trend in Delaware cases granting broad inspection rights to stockholders under Section 220 of the Delaware General Corporation Law and cautioning companies that aggressively defend against stockholder inspection demands.
The Dec. 10, 2020, decision, AmerisourceBergen Corp. v. Lebanon County Employees Retirement Fund, could have significant impacts on companies responding to broad stockholder books and records demands.
The Delaware Supreme Court narrows defenses to Section 220 inspection demands.
The decision concerns a stockholder demand to inspect books and records of AmerisourceBergen, a publicly traded wholesale distributor of opioid pain medications.
Section 220 of the Delaware General Corporation Law, 8
Del. C. § 220 (“Section 220”), permits a stockholder of a Delaware corporation to inspect corporate books and records upon a showing of a proper purpose. The Delaware courts have long urged stockholders to avail themselves of Section 220 the “tools at hand” to inspect relevant corporate documents before commencing plenary derivative litigation.
See,
e.g.,
Grimes v. Donald, 673 A.2d 1207, 1216 & n.11 (Del. 1996). Perhaps as a result of stockholders heeding this advice, recent years have seen an increase in litigation arising out of Section 220 demands, with corporations pursuing various objections and defenses to resist inspection. In
AmerisourceBergen Corp. v. Lebanon County Employees’ Retirement Fund, 2020 WL 7266362 (Del. Dec. 10, 2020), the Delaware Supreme Court (Traynor, J.) weighed in on and ultimately rejected two objections commonly proffered by corporations who seek to limit or resist Se