August 9, 2019

Books & Records: No Presumption of Confidentiality for DGCL Section 220 Productions

Earlier this week, in Tiger v. Boast Apparel, (Del.; 8/19), the Delaware Supreme Court rejected contentions that a presumption of confidentiality should apply to materials produced in response to a Section 220 books & records request.  Here’s the intro from this Proskauer blog:

The Delaware Supreme Court yesterday rejected a presumption of confidentiality for documents produced pursuant to books-and-records inspection requests under § 220 of the Delaware General Corporation Law. The decision holds that courts can impose confidentiality restrictions in appropriate cases, but that some justification of confidentiality is necessary – and that an indefinite period of confidentiality should be the exception, not the rule.

In light of the emphasis that the Delaware Supreme Court has placed on § 220 requests particularly in the context of shareholder derivative actions, parties making and receiving those requests might now need to focus more closely on whether and the extent to which confidentiality restrictions can be justified and, if so, how long they should last.

The blog says that indefinite confidentiality agreements for information produced in response to a Section 220 request now appear to be disfavored in Delaware, and that the case will likely result in more attention being paid to both the need for and the duration of any confidentiality agreement.  It also says that future cases may address the extent to which parties may be restricted from discussing potential derivative claims based on such information with other shareholders.

John Jenkins