With litigation over section 220 demands becoming more frequent and contentious, the Supreme of Court Delaware weighed in an en banc ruling and affirmed shareholders’ rights to inspect a company’s books and records. In this protracted dispute which we’ve previously blogged about, AmerisourceBergen Corporation took the Chancery Court’s ruling allowing shareholders the right to inspect the Company’s documents relating to opioid distribution compliance to the Delaware Supreme Court. The full-five justice panel of the Delaware Supreme Court upheld the Chancery Court’s decision, ruling that investors need not identify what they intend to do with the books and records in the event they confirm their suspicion of wrongdoing. The Supreme Court also held that when alleging a proper purpose for the books and records pursuant to Section 220 of the Delaware General Corporation Law, the shareholder need not establish that the wrongdoing under investigation is legally actionable.
This decision, along with another recent opinion, show that Delaware Courts are growing weary of certain defendant strategies to thwart books and records demands in litigation. The opinion also reaffirms the relatively broad “proper purpose” legal standard shareholders must meet to gain access to books and records, and thereby take advantage of this important shareholder rights tool. As the Supreme Court clarified, a “myriad” of proper purposes to inspect books and records have been accepted under Delaware law, and the shareholder need only show by “a preponderance of the evidence” a credible basis from which the court can infer possible mismanagement or wrongdoing.
A pdf copy of the opinion is available here.