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 Section 220 stockholder inspection demands.  The Court held that (i) it is not necessary for a stockholder to specify the “ultimate objectives” of the investigation in the stockholder’s Section 220 demand; and (ii) a stockholder is not required to establish that the alleged corporate wrongdoing would be judicially “actionable” in order to obtain corporate records under Section 220.  This decision of the Delaware Supreme Court provides essential guidance to Delaware corporations and practitioners on the full panoply of issues related to Section 220 demands.
Continue Reading Delaware Supreme Court Provides Important Guidance Regarding Section 220 Demands, Rejecting Several Limiting Principles Frequently Offered By Corporations Resisting Stockholder Inspection Demands

In City of North Miami Beach Gen. Employees’ Ret. Plan v. Dr Pepper Snapple Group, Inc., C.A. No. 2018-0227-AGB, 2018 WL 2473150 (Del. Ch. June 1, 2018), the Delaware Court of Chancery (Bouchard, C.) denied stockholders of Dr Pepper Snapple Group, Inc. (“Dr Pepper”) appraisal rights related to the reverse triangular merger of Keurig Green Mountain, Inc. (“Keurig”) and a subsidiary of Dr Pepper created for the purpose of effectuating the merger. This decision clarifies standing requirements for appraisal petitions in this merger structure and continues Delaware jurisprudence holding that, to perfect appraisal rights, stockholders must at a minimum meet the requirements of 8 Del. C. § 262 as plainly written.
Continue Reading Delaware Chancery Court Strictly Construes Appraisal Statute to Deny Stockholders Appraisal Rights in a Reverse Triangular Merger

In In re Walgreen Co. Stockholder Litigation, No. 14 C 9786, 2016 WL 4207962 (7th Cir. Aug. 10, 2016) (Posner, J.), the United States Court of Appeals for the Seventh Circuit issued a highly charged opinion critical of an unopposed settlement of a stockholder class action “strike suit” which provided “nonexistent” benefits to class members yet “sweet fees for class counsel.”  In this case, a putative stockholder class action was filed immediately after Walgreen Co. (“Walgreens”) issued a proxy statement seeking approval of its reorganization as a new Delaware corporation to be called Walgreens Boots Alliance, Inc.  (As the Seventh Circuit noted, this was hardly unusual, as an astounding 94.9% of public company strategic transactions involving $100 million or more in recent years have triggered “strike suits” or “deal litigation.”)  Echoing criticisms of similar types of disclosure-only settlements by the Delaware Court of Chancery (see In re Trulia, Inc. Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016); blog article here], the Seventh Circuit reversed the district court’s approval of the settlement.  This decision from an influential federal jurist will put additional pressure on plaintiffs in these types of cases to forego or abandon litigation over public company strategic transactions (or, perhaps ironically, to litigate these cases more aggressively).
Continue Reading Seventh Circuit Criticizes Disclosure-Only M&A Litigation Settlements, Holding That Supplemental Proxy Disclosures Must Address and Correct a Plainly Material Misrepresentation or Omission

In In re Appraisal of Dell Inc., No. 9322 VCL, 2016 Del. Ch. LEXIS 81 (Del. Ch. May 31, 2016) (Laster, V.C.), the Delaware Court of Chancery determined that the fair value of the common stock of Dell Inc. (“Dell” or the “Company”) as of the effective date of a 2012 management buyout (“MBO”) was $17.62 per share, or $3.74 per share more than the merger consideration of $13.75 per share plus a $0.13 special dividend.  Although Dell’s directors properly discharged their fiduciary duties, and the sale process included a go-shop period that triggered a bidding contest, according to the Court, the MBO underpriced the Company by more than $5 billion.  Notably, the factors responsible for this divergence included limitations inherent in any MBO-driven sale process.  The Court relied entirely on a discounted cash flow (“DCF”) analysis to determine fair value.  The decision likely will further increase the frequency in which stockholders of Delaware corporations pursue statutory appraisal rights, particularly in the MBO context.
Continue Reading Delaware Chancery Court Rejects MBO Merger Price as Best Evidence of Fair Value in Appraisal Proceeding