In AmerisourceBergen Corp. v. Lebanon County Employees’ Retirement Fund1, the Delaware Supreme Court recently addressed the issue of whether a stockholder seeking inspection of a corporation’s books and records pursuant to Section 220 of the Delaware General Corporation Law (“Section 220”) for the purpose of investigating mismanagement or wrongdoing by the corporation or its fiduciaries must demonstrate that the alleged mismanagement or wrongdoing is actionable in order to establish a proper purpose for the inspection.
There is a divergence in decisions of the Delaware Court of Chancery as to this issue. Some Court of Chancery opinions have held that a stockholder must demonstrate that alleged corporate mismanagement or wrongdoing is actionable in order to state a proper purpose under Section 2202. Other Court of Chancery decisions have held that stockholders are not required to demonstrate that the alleged mismanagement or wrongdoing is actionable in order to assert their Section 220 inspection rights3. The position that stockholders must demonstrate actionable wrongdoing found some support in the Delaware Supreme Court’s summary affirmance of the Court of Chancery’s decision in Southeastern Pennsylvania Transportation Authority v. AbbVie, Inc.4. In AbbVie, the Supreme Court summarily affirmed a Court of Chancery decision holding that a stockholder had not stated a proper purpose for the requested inspection because the corporation’s directors were protected by an exculpatory provision of the corporation’s certificate of incorporation that was authorized by Section 102(b)(7) of the Delaware General Corporation Law (“DCGL”).5
However, in AmerisourceBergen, the Supreme Court squarely addressed the issue of whether a stockholder must establish the actionability of mismanagement or wrongdoing in order to demonstrate a proper purpose under Section 220 and held that a stockholder need not demonstrate that the alleged mismanagement or wrongdoing is actionable6. To the extent that its summary affirmance in AbbVie suggested otherwise, the AmerisourceBergen Court expressly overruled that decision.7