![]() 24, 2020) allowed inspection of some emails, noting that “wide-ranging mismanagement or waste” might require a “more wide-ranging inspection.” That case thus indicated that the scope of the alleged wrongdoing may affect the scope of the production. Relatedly, the Court of Chancery in Pettry v. 10, 2021), the Court of Chancery ordered Facebook to produce emails and text messages between board members concerning a settlement with the Federal Trade Commission over data privacy breaches, finding that formal materials only revealed surface-level facts about Facebook’s negotiations and that the board regularly used informal communication methods to discuss the settlement. ![]() In Employees’ Retirement System of Rhode Island v. 25, 2019), the Court of Chancery permitted shareholders to access emails between a controlling shareholder and certain directors before and after a critical committee meeting. But many of the cases that followed continued to require the production of informal communications.įor example, in Bucks County Employees Retirement Fund v. The court left the door open for other corporate defendants to resist inspection of emails and other electronic communications if they could show that traditional, non-electronic documents were sufficient to satisfy the shareholder’s needs. In 2019, the Delaware Supreme Court held that a trial court abused its discretion in not allowing a shareholder access to emails because the company had a history of not complying with required corporate formalities and had conducted corporate business informally in connection with the alleged wrongdoing. In recent years, courts have demonstrated a greater willingness to allow access to informal board materials, more frequently finding that formal board materials alone are insufficient. If those are still not sufficient, courts may extend inspection to officer-level documents. Courts start with ordering the production of formal board materials, but if these materials are insufficient, courts may also allow inspection of informal board materials. And once a shareholder has what is sufficient for her investigation, inspection should stop. In any Section 220 demand, once shareholders satisfy the procedural requirements of the statute, such as showing standing and certain oath requirements, and show a proper purpose for the demand, such as evaluating the possibility of initiating a shareholder derivative lawsuit, the focus then turns to whether the documents they seek are “necessary and essential” to achieving their purposes. Informal Materials Were Becoming Easier to Obtain But two decisions this summer ( Amazon and National) may have put the brakes on this trend and may serve to protect against future shareholder demands that reach too far. While all cases are fact specific, until recently, Delaware courts seemed to be heading in the direction of more liberally granting inspection of informal materials. One category of books and records that has been the subject of much litigation over the past several years has been whether shareholders are entitled to informal board- and officer-level materials, such as emails and text messages. ![]() And as the Delaware courts have made it easier for shareholders to demonstrate a proper purpose to seek inspection, corporations increasingly must defend these actions by challenging the scope of documents that may be sought. Corporate books and records demands are on the rise.
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