Delaware Chancery Court Orders Production of Board Materials and Deposition of Corporate Representative in Section 220 Books and Records Litigation: Court Rejects Argument That Stockholders Must Assert a Credible Basis of Actionable Wrongdoing to Obtain Books and Records and Places Burden on Company to Identify Relevant Documents

Sullivan & Cromwell LLP - January 17, 2020
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In a January 13, 2020 decision, the Delaware Court of Chancery held in Lebanon County Employees’ Retirement Fund and Teamsters Local 443 Health Services & Insurance Plan v. AmerisourceBergen Corp. that plaintiffs, putative AmerisourceBergen stockholders, were entitled under 8 Del. C. § 220 to inspect board-level documents that formally evidence the directors’ deliberations and decisions (which the Court referred to as “Formal Board Materials”) relating to whether AmerisourceBergen engaged in wrongdoing in connection with the distribution of opioids and also to take a Rule 30(b)(6) deposition to ascertain whether other pertinent information exists.  The Court described AmerisourceBergen’s opioid issues as a “corporate trauma,” and concluded that a wealth of circumstantial evidence as to potential illegal behavior was enough to justify the Section 220 request even if the stockholder was not yet in a position to show that the facts surrounding the trauma would lead to a legally cognizable claim.  The decision will likely be viewed favorably by stockholders seeking to use Section 220 in the wake of corporate trauma to bolster a Caremark claim seeking to hold directors and officers personally liable for breaching their duty of loyalty to monitor corporate operations.