Page 20 - Delaware Lawyer - Winter 2020

FEATURE
Edward B. Micheletti, Bonnie W. David and Alexis A. Wiseley
Recent Trends in
Examining Section 220’s path from the back burner to the forefront of corporate litigation
In the last decade, three notable Delaware cases — C&J Energy,1 Corwin2 and Trulia3 — dramatically altered the deal litigation landscape, resulting in more frequent stockholder demands to inspect corporate books and records pursuant to Section 220 of the Delaware General Corporation Law.
18 DELAWARE LAWYER WINTER 2020
In 2014 and 2015, C&J Energy and Tru- lia significantly reduced the injunction practice that had dominated M&A liti-
gation in Delaware for nearly three de- cades. Faced with reduced chances of an injunction in the wake of C&J Energy, and with increased risk in obtaining a successful disclosure settlement as an al- ternative to an injunction hearing after Trulia, plaintiffs largely stopped pursu- ing those avenues. As a result, they found themselves without access to a pre-closing documentary record. Soon after, in 2015, Corwin reduced the chances that post- closing breach of fiduciary duty claims for damages would survive past the pleadings stage, a prospect that was exacerbated by the lack of pre-closing discovery.4
Without access to pre-closing discov- ery through litigation, plaintiffs turned
to other means for obtaining documents. As a result, the frequency of stockhold- er demands to inspect corporate books and records has increased, and, in turn, the case law concerning Section 220 demands is rapidly developing. Section 220 demands were once conceived as the primary “tools at hand” available to stockholder plaintiffs to draft and file detailed derivative complaints. Now, given the marked decrease in M&A in- junction requests and the corresponding decrease in discovery records created for that purpose, stockholder plaintiffs have increasingly looked to Section 220 — particularly in the merger context — for access to documents in advance of filing post-closing class action complaints for money damages that can survive a Cor- win defense.5
Books-and-Records Litigation