In Deborah Pettry, et al. v. Gilead Sciences, Inc., C.A. No. 2020-0132-KSJM (Del. Ch. Nov. 24, 2020), the Court of Chancery found that plaintiffs may rely on allegations forming the basis of other lawsuits to meet the credible basis standard for demands to inspect books and records under Section 220 of the DGCL. Further, the Court granted plaintiffs leave to move for attorneys’ fees and expenses as a result of Gilead Sciences, Inc.’s (“Gilead”) “overly aggressive defense” at the Section 220 phase, pointing to Gilead’s pre-litigation and litigation-related conduct as a potential basis for awarding fees.Read More
In Juul Labs, Inc. v. Daniel Grove, C.A. No. 2020-0005-JTL (Del. Ch. August 13, 2020), defendant and e-cigarette maker Juul Labs, Inc. (“Juul”) is a privately held Delaware corporation with its principal place of business in California. The Delaware Court of Chancery (the “Court”) granted in part Juul’s motion for declaratory judgment, which sought confirmation that a stockholder seeking inspection rights was limited to rights and remedies under the Delaware General Corporation Law (“DGCL”), and could not apply California law, among other things. The Court held that inspection rights are a matter of internal affairs under the internal affairs doctrine articulated by the Supreme Court, and thus Delaware law applies.Read More
In James Rivest v. Hauppauge Digital, Inc., C.A. No. 2019-0848-PWG (Del. Ch. Aug. 3, 2020), the Delaware Court of Chancery examined the circumstances in which the Court will set aside a default judgment under Court of Chancery Rule 60(b)(1). The Court’s decision illustrates the context in which a party’s failure to timely respond may warrant relief from a previously issued court order. It also highlights the Court’s willingness to consider the unique challenges imposed by the COVID-19 pandemic in exercising its discretion.Read More
In Fortis Advisors LLC, v. Allergan W.C. Holding Inc., C.A. No. 2019-0159-NTZ (Del. Ch. May 14, 2020), a shareholder representative appointed pursuant to a merger agreement asserted a claim on behalf of selling stockholders for certain contingent payments. The defendant surviving corporation brought a motion in the Delaware Court of Chancery (the “Court”) to (i) compel the selling stockholders to participate in discovery as parties-in-interest to the action and to be subject to trial subpoenas as parties or (ii) compel the shareholder representative to procure and produce discovery from the selling stockholders. The Court denied the motion in full.Read More
In Paraflon Investments Ltd. v. Linkable Networks, Inc., C.A. No. 2017-0611-JRS (Del. Ch. April 3, 2020), the Delaware Court of Chancery (the “Court”) granted, in part, stockholder Paraflon Investments, Ltd.’s (“Paraflon”) request, after a trial on a paper record, for corporate books and records pursuant to Section 220 of the DGCL where proper purpose was shown with respect to the desire to investigate mismanagement and wrongdoing.Read More
In High River Limited Partnership, Icahn Partners Master Fund LP, and Icahn Partners LP v. Occidental Petroleum Corporation, C.A. No. 2019-0403-JRS (Del. Ch. November 14, 2019), the Delaware Court of Chancery (the “Court”) dismissed a demand by stockholders of Occidental Petroleum Corporation (“Occidental”) under Section 220 of the Delaware General Corporate Law (“Section 220”) for documents and information relating to Occidental’s acquisition of Anadarko Petroleum and related transactions. The Court held that the stockholders’ demand for books and records to aid in a proxy contest did not constitute a proper purpose, and that a broad demand for corporate records was not necessary and essential to the stockholders’ purpose of challenging company management over its decision to enter into a transaction.
In KT4 Partners LLC v. Palantir Technologies, Inc., C.A. No. 2017-0177-JRS (Del. Ch. Feb. 22, 2018), in a post-trial ruling, the Delaware Court of Chancery granted a stockholder limited rights to inspect a corporation’s books and records related to the stated purpose of investigating possible wrongdoing, but the Court denied the stockholder’s request to obtain other books and records related to the purpose of valuing its shares because its initial demand did not explicitly state a valuation purpose.
In In re UnitedHealth Group, Inc. Section 220 Litigation, Consolidated C.A. No. 2017-0681-TMR (Ch. Ct February 28, 2018) certain stockholders (“Plaintiffs”) of UnitedHealth Group, Inc. (“UnitedHealth”) sent a books and records inspection demand to UnitedHealth relying on a complaint in a type of whistleblower (qui tam) action alleging that UnitedHealth engaged in improper Medicare billing, United States ex rel. Poehling v. UnitedHealth Group, Inc. (the “Qui Tam Action”). The Qui Tam Action was based in part on a 5-year investigation by the US Department of Justice (“DOJ”) and included depositions of 20 of UnitedHealth’s employees and production by UnitedHealth of over 600,000 documents. Plaintiffs made their demand in order to investigate mismanagement or misconduct, possible breaches of fiduciary duties and the independence and disinterestedness of the board. UnitedHealth rejected the demand and a trial was held on January 9, 2018. UnitedHealth argued that Plaintiffs were not entitled to inspection of books and records because they lacked a credible basis to infer wrongdoing or mismanagement based on the Qui Tam Action and because the alleged activities of UnitedHealth were not illegal. The Court found that Plaintiffs’ demand stated a proper purpose and a credible basis from which a court could infer mismanagement or wrongdoing.