November 14, 2024
Litigation Over Books & Records Demands Jamming Delaware Chancery
Earlier this week, Bloomberg reported on the recent surge in litigation over stockholder books & records demands in Delaware that threatens the Chancery Court’s reputation for promptly addressing urgent matters. Litigation involving Section 220 demands represented as much as 15% of the court’s workload in recent years. Chancellor McCormick recently acknowledged that the situation is not ideal:
Everyone involved would rather be doing something more substantive, but they’re responding rationally to structural incentives, Chancellor Kathaleen St. J. McCormick, the court’s chief judge, said at George Washington University. Although getting inside information offers clear advantages, “complaints just get longer and longer,” she said Oct. 25. “I’m not sure I need all that at the pleading stage, but it’s not hard to see why they’re doing it, and I can’t advise against it.”
The article says the court is working through these cases using magistrates, oral rulings and judges conscripted from other courts. It also discusses the dynamics driving the increase, saying, “As the path to liability grows slimmer, the emphasis on records is a logical counterweight.” On a more long-term note, Columbia University law professor Dorothy Lund said, “You see these cycles in litigation, with bad incentives being created and weird things happening. … And then Delaware responds.”
We post memos on related decisions in our “Books & Records” Practice Area.
– Meredith Ervine