Absence of Claim of Wrongdoing Can Defeat Books and Records Demands

November 2016


In recent years, as potential stockholder plaintiffs have begun to heed the advice of the Delaware Supreme Court to use the “tools at hand” to investigate potential corporate wrongdoing before filing derivative litigation, use of Section 220 books and records demands has become a routine precursor to derivative litigation. The announcement of an adverse corporate event now is frequently the trigger for one—and often many—Section 220 demands from potential stockholder plaintiffs seeking to inspect corporate books and records for the ostensible purpose of investigating whether to bring fiduciary duty claims against the directors and officers who permitted the adverse event to occur.

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