Presenting a live 90-minute webinar with interactive Q&A Stockholder Demands for Books and Records Inspections Under Delaware Law: Lessons From Recent Cases Responding to Inspection Demands, Limiting Scope of Inspection TUESDAY, MAY 12, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Jill K. Agro, Of Counsel, Womble Carlyle Sandridge & Rice , Wilmington, Del. Sara B. Brody, Partner, Sidley Austin , San Francisco B. Warren Pope, Partner, King & Spalding , Atlanta Michael R. Smith, Partner, King & Spalding , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Contacts SARA BRODY is a partner in Sidley’s San Francisco office and co-leader of the Securities and Shareholder Litigation practice. She has extensive experience in securities litigation, defending issuers, officers, directors, underwriters and venture capital firms in shareholder class actions and derivative actions in state and federal courts throughout the United States. Sara won one of the Top Ten Defense Verdicts of 2002, as selected by The National Law Journal . She is listed as one of the leading California litigators in the 2012 through 2015 editions of Chambers & Partners’ America’s Leading Business Lawyers, the 2012 through 2015 editions of The Best Lawyers in America, the Daily Journal as one of the Top Thirty Securities Litigators in California and was shortlisted as Litigator of the Year at the Chambers USA Women in Law Awards. Sara B. Brody sbrody@sidley.com (415) 772-1200 5
Purpose of and Trends in Books and Records Inspections May 12, 2015 Sara Brody Sidley Austin LLP 6
Philosophy Underlying Demands for Inspection of Company Books and Records Delaware Corporation Law Section 220 provides shareholders the right to inspect corporate records. Philosophy underlying inspection rights: “As a matter of self protection, the stockholder was entitled to know how his agents were conducting the affairs of the corporation…” Shaw v. Agri-Mark, inc., 663 A.2d 464, 467 (Del. 1995). However there are limits to scope of demands. All states have inspection statutes; not just Delaware. o But check differences if you get a demand under another statute. 7
Trends in Books and Records Inspection Demands Becoming extremely common Precursor to shareholder derivative actions Delaware courts may dismiss fiduciary duty cases that lack specificity if the plaintiff-shareholder did not seek books and records in advance. “After the repeated admonitions of the Supreme Court (of Delaware) to use the ‘tools at hand’ (referring to § 220) lawyers who fail to use those tools to craft their pleading do so at some peril.” Mizel v. Connelly, 1999 WL 550369, 5 (Del. Ch. Aug. 2, 1999) Section 220 provides the “tools at hand to develop the necessary facts for pleading purposes.” Brehm v. Eisner , 746 A.2d 244, 266-67 (Del. 2000). 8
Trends in Books and Records Inspection Demands (con’t.) Most trends suggest increasing ease and scope of inspection. Loosening of Credible Basis Standard. LAMPERS v. The Hershey Company , No. 7996-ML (Del. Ch., March 18, 2014) (the showing required for credible basis “may ultimately fall well short of demonstrating that anything wrong occurred.”) Recent Delaware Supreme Court decision in Wal- Mart case ordered an expanded production. May include production of privileged documents in some circumstances. 9
Trends in Books and Records Inspection Demands (con’t.) But, there are still limits Fuchs Family Trust v. Parker Drilling Company , C.A. No. 9986-VCN (Del. Ch., March 4, 2015) (“Even if a plaintiff demonstrates a proper purpose, that plaintiff is not entitled to inspect all documents that he or she believes are relevant or even likely to lead to information relevant to that purpose. The scope of inspection… is limited to those documents that are necessary and sufficient.”) Southeastern Pennsylvania Transportation Authority v. Rizzolo , (Abbvie case) C.A. No. 10374 & 10408 (Del. Ch., April 15, 2015) (viability of fiduciary claim, if that is the alleged proper purpose, can be considered in a § 220 action. If DGCL § 102(b)(7) exculpates, then inspection demand can be denied). 10
Procedure for Inspecting Corporate Books and Records Under Delaware Law May 12, 2015 Jill Agro Womble Carlyle 11
Contacts Jill Agro is an experienced litigator in Delaware’s renowned Court of Chancery. She litigates and advises on an array of Chancery matters including breaches of fiduciary duties, books and records demands, receivership issues, contract law, and business tort claims. In this role, she works closely with corporate clients, their boards and executive leadership, and their legal teams to resolve corporate and commercial disputes. Jill also represents individual directors and officers in a variety of matters ranging from advancement to complex securities class action litigation. Beyond Chancery, Jill also has extensive experience in all of Delaware’s state and federal courts in cases involving the gamut of issues from constitutional rights to commercial sales subject to the Uniform Commercial Code. In addition, Jill guides clients in Delaware-based arbitration and mediation, with a focus on containing litigation costs. Finally, with a Bachelors of Science in computer information systems, Jill is well- Jill Agro prepared to assist clients with complex e-discovery needs. - See more at: jagro@wcsr.com http://www.wcsr.com/Professionals/Lawyer-Bios/Agro- Jill-K#sthash.oL0WQSdw.dpuf (302) 252-4325 12
Procedure for § 220 Inspection 8 Del. C. § 220(b) sets forth the procedural requirements for a shareholder seeking to inspect corporate books and records. Strict compliance with the statute is mandatory. 13
§ 220 Requirements 1. Demand Must Be In Writing A stockholder’s demand to inspect books and records must be in writing. 14
§ 220 Requirements 2. Owner of Record or Beneficial Owner If the stockholder seeking inspection is an owner of record, no documentary evidence of ownership is required. If the stockholder seeking inspection is a beneficial owner, documentary evidence of ownership is required. 15
Beneficial Ownership A beneficial stockholder’s § 220 demand must : state the person’s status as a stockholder, be accompanied by documentary evidence of beneficial ownership of the stock, and state that such documentary evidence is a true and correct copy of what it purports to be. 16
Beneficial Ownership (con’t) This language has been interpreted to require: A power of attorney (if an attorney or agent is making the demand) Documentary evidence of beneficial ownership Sworn statement that the documentary evidence is a “true and correct copy of what it purports to be.” 17
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