Page 23 - Delaware Lawyer - Winter 2020

How the Delaware courts will con- tinue to define the contours of Section 220 remains to be seen, but one thing is certain: If stockholder plaintiffs con- tinue to use Section 220 with the same frequency they have in recent years, Dela- ware courts will have ample opportunity to weigh in.
NOTES
1. C&J Energy Servs., Inc. v. City of Miami Gen. Emps.’ & Sanitation Emps.’ Ret. Trust, 107 A.3d 1049 (Del. 2014). In C&J Energy, the Delaware Supreme Court indicated
(and the Court of Chancery has generally construed the decision to hold) that an injunction should not be issued where there is no alternative bidder and stockholders therefore risk losing the current deal if enjoined.
2. Corwin v. KKR Fin. Holdings, LLC,
125 A.3d 304 (Del. 2015). In Corwin, the Delaware Supreme Court clarified that, absent a conflicted controller, a fully informed vote of disinterested, uncoerced stockholders will extinguish breach of fiduciary duty claims, leaving only claims for waste.
3. In re Trulia, Inc. S’holder Litig., 129 A.3d 884 (Del. Ch. 2016). In Trulia, the Court of Chancery decided that it would no longer approve disclosure-based settlements unless the disclosures are “plainly material,” the release is narrowly tailored to the claims brought in the litigation and the claims are sufficiently investigated.
4. The Court of Chancery has acknowledged this difficulty. See, e.g., Lavin v. W. Corp., 2017 WL 6728702, at *9 (Del. Ch. Dec. 29, 2017), judgment entered, (Del. Ch. 2018) (“[I]t would be naïve to believe, in most instances, that the stockholder plaintiff will not face significant challenges to meet her pleading burden in anticipation of a Corwin defense if all she has in hand to prepare
her complaint are the public filings of the company whose board of directors she proposes to sue.”).
5. The Court of Chancery explicitly condoned this practice in Lavin v. West Corporation, 2017 WL 6728702 (Del. Ch. Dec. 29, 2017).
6. In re Facebook, Inc. Section 220 Litig., 2019 WL 2320842, at *2 (Del. Ch. May 30, 2019), as revised (May 31, 2019), judgment entered sub nom. In re Facebook, Inc. (Del. Ch. 2019).
7. One potential solution to address
this inconsistency would be to require stockholders seeking books and records to investigate wrongdoing in connection with bringing a potential merger class action to demonstrate a colorable claim, in addition
to or as part of the “credible basis” analysis. Fully exploring such a proposal would require greater explication than space constraints permit here.
8. 2019 WL 194634 (Del. Ch. Jan. 15, 2019).
9. 203 A.3d 738 (Del. 2019).
10. 2020 WL 132752 (Del. Ch. Jan. 13, 2020).
11. 2019 WL 2320842, at *2 (Del. Ch.
May 30, 2019), as revised (May 31, 2019), judgment entered sub nom. In re Facebook, Inc. (Del. Ch. 2019).
12.2019 WL 6311106 (Del. Ch. Nov. 25, 2019).
13.2019 WL 479082 (Del. Ch. Jan. 25, 2019).
14. 214 A.3d 933 (Del. 2019).
15. 214 A.3d 944 (Del. Ch. 2019).
16. See 8 Del. C. § 220(b).
17. 2019 WL 6040285 (Del. Ch. Nov. 14, 2019).

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