IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE 

SOUTHEASTERN PENNSYLVANIA 

TRANSPORTATION AUTHORITY, 

Plaintiff, 

)

)

)

)

v. 

)

)

)

 C.A. No. 10374-VCG 

ABBVIE INC., 

Defendant. 

)

)

)

)

)

JAMES RIZZOLO, 

 

Plaintiff, 

)

)

)

)

v. 

)

)

)

 C.A. No. 10408-VCG 

ABBVIE INC., 

Defendant. 

)

)

)

MEMORANDUM OPINION

Date Submitted: February 11, 2015 

Additional Submission: April 9, 2015 

Date Decided: April 15, 2015 

Pamela S. Tikellis, Robert J. Kriner, Jr., Scott M. Tucker, and Matthew T. Arvizu, 

of CHIMICLES & TIKELLIS LLP, Wilmington, Delaware; Attorneys for 

Southeastern Pennsylvania Transportation Authority. 

Craig J. Springer and Peter B. Andrews, of ANDREWS & SPRINGER, LLC, 

Wilmington, Delaware; Attorneys for James Rizzolo. 
Lisa A. Schmidt, A. Jacob Werrett, and J. Scott Pritchard, of RICHARDS, 

LAYTON & FINGER, Wilmington, Delaware; OF COUNSEL: Robert J. 

Kopecky, Sallie G. Smylie, P.C., and Christa C. Cottrell, of KIRKLAND & ELLIS 

LLP, Chicago, Illinois; Attorneys for AbbVie Inc. 

GLASSCOCK, Vice Chancellor
1 

 The board of AbbVie, Inc. (“AbbVie” or the “Company”) decided to pursue 

a merger with a Jersey entity,1

 Shire plc (“Shire”), in part to take advantage of 

favorable tax treatment of income that would result under the then-current 

interpretation of U.S. tax law as enforced by the Treasury Department. Like 

practically all decisions taken by corporate boards, that action involved risk. Here 

the risk—which proved substantial—was that the law, or its interpretation by 

regulators, would change before sufficient tax advantages could be realized to 

offset the costs to stockholders of the transaction. As it turned out, the Treasury’s 

interpretation of applicable tax law changed in a way that eliminated the tax 

advantages of the merger before its consummation, and the board concluded that 

the Company would be better off withdrawing from the merger—and paying a 

substantial breakup fee—than proceeding. 

 The Plaintiffs here are AbbVie stockholders. They contend that the risk of 

loss of the tax advantages inherent in the merger with Shire was so substantial, and 

so obvious, that the directors must have breached their fiduciary duties to the 

stockholders by entering the deal. In these actions under Section 220, they seek to 

obtain records from the Company that will allow them to demonstrate this liability 

sufficiently to allow them to pursue a derivative action on behalf of AbbVie 

against the directors. Under the statute, they need only produce evidence 

 

1

 That is, a company incorporated under the laws of Jersey, an island in the Channel Islands 

between England and France that is a semi-autonomous political entity. 
2 

demonstrating a credible basis that actionable corporate wrongdoing on the part of 

the directors has occurred, a notably low standard of proof designed to ensure that 

the costs and effort required to answer the demand for documents does not 

outweigh the potential advantage to the corporation and its stockholders of 

production. Notwithstanding this low standard, however, the Plaintiffs have failed 

to meet it here: They have shown only that the directors took a risky decision that 

failed at substantial cost to the stockholders. Evaluating risk is the raison d’être of 

a corporate director. These directors are insulated from liability for breaches of a 

duty of care, and the Plaintiffs have failed to establish a credible basis to believe 

that the directors have acted disloyally here—that is, were interested in the 

transaction, not independent, or were acting in bad faith. If the stockholders 

believe that the directors acted unwisely, they have a remedy in the corporate 

franchise, but these stockholders have failed to establish a credible basis on which 

to imply actionable corporate wrongdoing sufficient to confer a right to the records 

they seek. 

I. BACKGROUND FACTS2

A. The Parties and Relevant Non-Parties 

Defendant AbbVie is a “global, research-based biopharmaceutical 

company,” which since its spin-off from Abbott Laboratories in 2013 “has grown 

 

2

 Citations to exhibits in the stipulated joint trial record appear as “JX.” All pinpoint citations 

refer to the document’s original pagination. 
3 

to become an approximately $86 billion market capitalization company with 

approximately 25,000 employees worldwide across over 170 countries and sales of 

nearly $19 billion in 2013.”3

 AbbVie is a publicly-traded Delaware corporation 

with its principal place of business in North Chicago, Illinois.4

Non-party Shire is a “leading global specialty biopharmaceutical company 

that focuses on developing and marketing innovative specialty medicines.”5 Shire 

is a public limited company registered in the island of Jersey, a Crown 

Dependency of the United Kingdom, with its principal place of business in Dublin, 

Republic of Ireland.6

Plaintiffs Southeastern Pennsylvania Transportation Authority (“SEPTA”) 

and James Rizzolo (“Rizzolo”) were the beneficial owners of shares of AbbVie 

common stock at all times relevant to this dispute.7

B. AbbVie Draws Up a Tax Inversion 

These coordinated actions to inspect certain corporate books and records of 

AbbVie pursuant to Section 220 of the Delaware General Corporation Law both 

arise from the highly publicized failed merger of AbbVie with Shire in late 2014 

(the “Proposed Inversion”). The concept for the Proposed Inversion was born 

among AbbVie’s senior management in 2013 as part of its ongoing and periodic 

 

3

 JX 12 at 12. 

4

Id.

5

Id. 

6

Id.

7

 JX 1 at 1, Ex. A; JX 11, Ex. A. 
4 

review of the Company’s business, which included “evaluation of potential 

opportunities for business combinations, acquisitions, and other financial and 

strategic alternatives.”8

 In October 2013, AbbVie’s senior management identified 

several companies, including Shire, as potential partners in a strategic transaction.9 

With the help of J.P. Morgan, AbbVie’s senior management continued to internally 

evaluate potential transactions through the spring of 2014, with an increasing focus 

on a “significant strategic transaction” with Shire known as an “inversion.”10

 

A corporate inversion is a corporate reorganization in which a company 

changes its country of residence by resituating its parent element in a foreign 

country.11 Inversions are—or were—attractive as a strategic business maneuver 

because they allow a corporation to adopt a foreign country’s more favorable tax or 

corporate governance regime.12 In the past few decades, inversions have become 

especially popular among corporations domiciled in the United States, due to the 

United States’ onerous—relative to that of many other countries—corporate tax 

code, under which a U.S. corporation must pay a relatively high tax (up to 35%) 

both on all income earned within U.S. borders and on income earned outside U.S. 

 

8

 JX 12 at 48. 

9

Id. 

10 Id. 

11 JX 13 at 4. 

12 Id. at 1–2. 
5 

borders when that foreign income is repatriated to the domestic corporation.13 

Inversions’ role in helping U.S. corporations avoid federal tax obligations has 

earned these transactions the moniker in this country of “tax inversions.”14

Due to regulatory restrictions, which will be addressed below, the Proposed 

Inversion envisioned by AbbVie’s senior management in late 2013 and early 2014 

necessitated a partner like Shire, and would require a series of transactions and 

merger subsidiaries to take effect. In simplified terms, AbbVie was to form a 

wholly owned subsidiary under the laws of Jersey (“New AbbVie”), acquire Shire 

for mixed consideration of cash and New AbbVie common stock15 (referred to by 

the parties as the “Arrangement”), and convert AbbVie common stock into New 

AbbVie common stock (referred to by the parties as the “Merger”).16 At the 

culmination of these transactions, AbbVie and Shire would each be indirect, 

wholly owned subsidiaries of New AbbVie—effectively expatriating AbbVie.17

 

13 Id. at 2. To avoid double taxation on foreign income, the U.S. tax code offers U.S. companies 

a foreign tax credit, under which “tax due on repatriated income is reduced by the amount of 

foreign taxes already paid.” Id. 

14 See, e.g., JX 15. 

15 Units of equity ownership in a Jersey entity are referred to as “ordinary shares,” but that term 

is synonymous with “common stock.” For the sake of clarity, I refer to ordinary shares as 

“common stock” and holders of ordinary shares as “stockholders.” 

16 For a detailed overview of the mechanics of the Proposed Inversion, see JX 12 at 65–66. 

AbbVie planned to use separate merger subsidiaries under New AbbVie to maintain Shire and 

AbbVie as independent entities under New AbbVie. Id. 

17 Id. at 65. 
6 

C. AbbVie Successfully Woos Shire, the Reluctant Bride

AbbVie’s senior management first brought the Proposed Inversion to the 

Company’s board of directors at a regular board meeting on February 20, 2014.18 

In the following weeks, the Company engaged with J.P. Morgan and AbbVie’s 

U.S. and U.K. legal advisors to further analyze the transaction’s strategic business 

and legal considerations.19 On April 7, 2014, AbbVie formally retained J.P. 

Morgan to serve as its financial advisor, in which capacity J.P. Morgan met with 

AbbVie’s officers the next day to discuss “financial analyses, transaction 

considerations[,] and tactical considerations relating to a potential strategic 

transaction with Shire.”20 On April 30, 2014, at a special board meeting, senior 

management communicated the “legal, financial, and other considerations” of the 

Proposed Inversion to AbbVie’s board, which then granted senior management 

authorization to reach out to Shire with a non-binding, preliminary proposal for the 

transaction.21

With the board’s blessing, in May 2014 AbbVie’s Chief Executive Officer, 

Richard Gonzalez, began a lengthy back-and-forth courtship of Shire via its NonExecutive Chairman, Susan Kilsby. At Gonzalez’s request, the pair first met in 

Switzerland on May 5, where Gonzalez informed Kilsby of AbbVie’s interest in a 

 

18 Id. at 48. 

19 Id.

20 Id. 

21 Id. 
7 

strategic transaction and floated AbbVie’s first proposal, valuing Shire at £39.50 

per share.22 On May 9, Kilsby notified Gonzalez that Shire’s board had rejected 

the offer.23 Gonzalez regrouped with AbbVie’s board, senior management, and 

financial and legal advisors and submitted AbbVie’s second bid days later on May 

13, valuing Shire at £40.97 per share.24 Following the second offer, J.P. Morgan 

reached out to Shire’s financial advisors directly to discuss the terms, but to no 

avail; Shire’s board rejected the second proposal on May 20.25 Gonzalez floated a 

third proposal on May 30, valuing Shire at £46.26 per share, this time meeting in 

person with Kilsby and Shire’s Chief Executive Officer in France to discuss the 

transaction, but on June 16 Shire’s board rejected this proposal as well, indicating 

that AbbVie was still undervaluing Shire and that “continuing discussions at such 

an offer level would be a distraction for Shire[‘s] management team.”26 Shortly 

thereafter, the U.K. Panel on Takeovers and Mergers forced AbbVie and Shire to 

acknowledge press rumors of a potential transaction and reveal the details of 

AbbVie’s overtures, requiring the parties to continue their previously private 

negotiations in the public light.27

 

22 Id.

23 Id. at 49. 

24 Id. 

25 Id. 

26 Id. at 49–50.

27 Id. at 50. 
8 

Undeterred by the publicity or Shire’s rebuffing, AbbVie rebounded with an 

additional series of proposals in July 2014. On July 8, AbbVie issued a press 

release announcing a fourth proposal, valuing Shire at £51.15 per share.28 This 

proposal was sufficient to land the Company a private meeting with Shire 

executives to better evaluate the value of the transaction.29 Following the meeting, 

Gonzalez submitted a fifth proposal to Kilsby on July 12, valuing Shire at £52.25 

per share.30 On July 13, Gonzalez and Kilsby met to discuss “the Fifth Proposal 

and closing conditions, break fees[,] and arrangements for Shire employees in a 

potential recommended transaction.”31 In light of that conversation, AbbVie’s 

board authorized and extended a sixth proposal later that day, valuing Shire at 

£53.20 per share, which Kilsby indicated to Gonzalez “the Shire Board would be 

willing to recommend . . . subject to satisfactory resolution of the other terms” of 

the proposal.32

Representatives of both companies met in the following days to negotiate the 

transaction’s “other terms,” which included 

the conditions to the transaction, the process and timing of obtaining 

antitrust and competition clearances, whether a break fee or other 

compensation payment would apply if the [Proposed Inversion] were 

not to be completed under various scenarios (including the AbbVie 

 

28 Id. at 51. 

29 Id. 

30 Id. 

31 Id. 

32 Id. 
9 

Board changing its recommendation or the AbbVie shareholders 

failing to approve the [Proposed Inversion]) and arrangements for 

Shire employees.33

On July 17, AbbVie’s board held a special meeting to consider the final terms 

reached by the parties. After hearing from the Company’s senior management and 

advisors, including J.P. Morgan, which rendered a fairness opinion in favor of the 

transaction on the agreed-upon terms,34 AbbVie’s board approved the Proposed 

Inversion and authorized Company officials to enter into a formal agreement with 

Shire.35

D. Terms of the AbbVie-Shire Union 

1. Price and Structure

On July 18, 2014, AbbVie and Shire publicly announced the Proposed 

Inversion in a press release detailing the basic terms agreed upon by the parties 

(the “Announcement”): Shire’s stockholders were to receive £24.44 in cash and be 

issued 0.8960 share of New AbbVie common stock per share of Shire common 

stock in the Arrangement, and shares of AbbVie common stock would be 

converted into shares of New AbbVie common stock at a one-to-one ratio in the 

Merger.36 On these terms, the parties expected that, after the culmination of the 

 

33 Id. at 52 (emphasis added). 

34 J.P. Morgan gave an oral fairness opinion at the July 17 special meeting; the following day, J.P 

Morgan supplemented its oral opinion with a full written opinion, “which set[] forth the 

assumptions made, matters considered[,] and limits on the review undertaken.” Id. 

35 Id. 

36 JX 6, Ex. 2.1, at 1–2. 
10 

Proposed Inversion, AbbVie’s former stockholders would own approximately 75% 

of the New AbbVie common stock, and Shire stockholders would have received 

approximately £14.6 billion in the aggregate and own approximately 25% of the 

New AbbVie common stock.37 The combined cash and stock consideration that 

AbbVie was to pay Shire’s stockholders in the Arrangement priced Shire at 

approximately £32 billion, approximately $54 billion at the time the transaction 

was announced.38

2. The Pre-Nup: The Co-Operation Agreement and Reverse

Termination Fees

The same day as the they released the Announcement, AbbVie and Shire 

executed an agreement “set[ting] out certain mutual commitments to regulate the 

basis on which [the parties were] willing to implement the [Proposed Inversion]” 

(the “Co-Operation Agreement”).39 The Co-Operation Agreement contains the 

parties’ covenants and conditions in connection with the transactions necessary to 

effect the Proposed Inversion (i.e., the Arrangement and Merger), as well as 

 

37 JX 12 at 65. 

38 JX 6, Ex. 2.1, at 1; see also JX 7, Annex A & Annex B (providing that the indicative value per 

share of Shire is £53.20, the total number of shares issued is 598,420,949, and the exchange rate 

is $1 to £0.5840). The parties use the $54 billion figure for the value of Shire, but by my own 

calculation using the provided metrics (i.e., indicative value per share, the total number of shares, 

and the exchange rate) the indicative value of Shire is closer to $54.5 billion. 

39 JX 7 at 1. The same day, AbbVie and certain of its subsidiaries additionally executed an 

agreement governing the Merger (the “Merger Agreement”). See JX 12 at 78–80. However, the 

provisions of the Merger Agreement are not at issue in this litigation. 
11 

establishes a two-tiered scheme of reverse termination fees payable to Shire by 

AbbVie if the deal were to fall apart under certain enumerated circumstances. 

First, Section 7.1 provides that “on the occurrence of a Break Fee Payment 

Event . . . AbbVie will pay to Shire an amount in cash in US Dollars equal to three 

per cent . . . of the indicative value of the cash and shares” that AbbVie was to 

deliver to Shire’s stockholders in the Arrangement, calculated to be approximately 

$1.635 billion (the “Break Fee”).40 Section 7.2 enumerates the circumstances 

constituting a “Break Fee Payment Event;” relevant here, Section 7.2.1 states such 

an Event will occur if (1) the AbbVie board withdraws or modifies in a manner 

adverse to the Proposed Inversion its recommendation of the Merger; and (2) either 

(a) the AbbVie stockholders vote and do not adopt the Merger Agreement at a 

stockholder meeting following the board’s change in recommendation, or (b) no 

stockholder meeting takes place within 60 days after the board’s change in 

recommendation.41

 Second, Section 10.3 of the Co-Operation Agreement further provides that if 

AbbVie stockholders vote to not adopt the Merger Agreement in circumstances 

that do not trigger the Break Fee—for example, where AbbVie’s board has not 

withdrawn or modified its recommendation of the Merger—AbbVie must still pay 

 

40 JX 7, § 7.1; see also id. Annex A & Annex B (providing that the indicative value per share of 

Shire is £53.20, the total number of shares issued is 598,420,949, and the exchange rate is $1 to 

£0.5840). 

41 Id. § 7.2.1. 
12 

Shire to reimburse and compensate it for costs incurred in connection with the 

Proposed Inversion (the “Cost Reimbursement Payment”).42 The Cost 

Reimbursement Payment is calculated based on actual costs incurred by Shire, but 

in any event can be no less than $500 million or no more than “one per cent . . . of 

the indicative value of the cash and shares” that AbbVie was to deliver to Shire’s 

stockholders in the Arrangement—approximately $545 million.43

 The Co-Operation Agreement does not include a clause permitting AbbVie 

to abandon the Proposed Inversion without paying the Break Fee or Cost 

Reimbursement Payment if the U.S. government acted to deter inversions.44 

E. The Posting of the Banns: AbbVie Touts the Benefits and Explains the 

Risks of the AbbVie-Shire Union 

In addition to detailing the deal’s terms, the Announcement provided the 

Company’s rationale for pursuing the Proposed Inversion. In the section entitled, 

“Background to and reasons for the Transaction,” the Company listed several 

strategic and financial benefits that it expected to capture, including that “AbbVie 

expects the [Proposed Inversion] to reduce the effective tax rate for New AbbVie 

to approximately 13 per cent. by 2016,” and that “[t]he new tax structure will 

 

42 Id. § 10.3. 

43 Id.; see also id. Annex A & Annex B (providing that the indicative value per share of Shire is 

£53.20, the total number of shares issued is 598,420,949, and the exchange rate is $1 to 

£0.5840).

44 See id. §§ 7, 10. 
13 

provide AbbVie with flexible access to its global cash flows.”45 The Company 

repeated and elaborated on its rationales in the preliminary proxy statement, 

including “the potential realization of tax and operational synergies by New 

AbbVie” and “the opportunity for New AbbVie to have an enhanced financial 

profile and greater strategic and financial flexibility.”46

Also in the preliminary proxy statement, the Company explained that it 

weighed the Proposed Inversion’s potential benefits “against a number of 

uncertainties, risks and potentially negative factors,” including the possibility of 

having “to pay the Break Fee and [Cost Reimbursement Payment] under certain 

circumstances specified in the Co-Operation Agreement” and 

the risk that a change in applicable law with respect to Section 7874 

of the [Internal Revenue] Code or any other US tax law, or official 

interpretations thereof, could cause New AbbVie to be treated as a US 

domestic corporation for US federal income tax purposes following 

the consummation of the [Proposed Inversion].47

AbbVie provided more robust discussion of the latter tax-based risk in the “Risk 

Factors” section of the preliminary proxy statement, including specific multiparagraph subsections explaining how “[t]he US Internal Revenue Service 

. . . may not agree with the conclusion that New AbbVie is to be treated as a 

 

45 JX 6, Ex. 2.1, at 9–11. 

46 JX 12 at 53; see also id. at 4 (explaining the expected tax benefits of operating under the U.K. 

tax code as opposed to the U.S. tax code, but cautioning that “New AbbVie’s ability to realize 

these benefits is subject to certain risks. See ‘Risk Factors’ beginning on page 25.”). 

47 Id. at 54. 
14 

foreign corporation for US federal income tax purposes following the [Proposed 

Inversion],” and “[f]uture changes to US or international tax laws could adversely 

affect New AbbVie.”48 In the latter subsection, the Company discussed specific 

then-pending legislative proposals that, if enacted, could have the effect of 

eliminating the tax benefits of the Proposed Inversion.49 In addition, the Company 

reiterated the risk of an adverse change in U.S. tax law in the section of the 

preliminary proxy statement addressing U.S. federal income tax consequences, 

explaining, in a multi-page discussion, that 

a subsequent change in the facts or in law might cause New AbbVie 

to be treated as a domestic corporation for US federal income tax 

purposes, including with retroactive effect. In addition, by the time 

of the completion of the [Proposed Inversion], there could be a 

change in law under Section 7874 of the [Internal Revenue] Code, in 

the regulations promulgated thereunder, or other changes in law that, 

if enacted, could (possibly retroactively) cause New AbbVie to be 

treated as a US corporation for US federal income tax purposes.

50

In laying out the totality of expected benefits and risks of the Proposed 

Inversion in the preliminary proxy statement, AbbVie clarified that it could not, 

and did not attempt to, weigh the importance of any one benefit or risk: 

In view of the wide variety of factors considered by the AbbVie Board 

in connection with its evaluation of the [Proposed Inversion], the 

 

48 Id. at 30–31. 

49 See id. at 31 (describing a provision in the Obama administration’s 2015 budget proposals and 

certain legislative proposals, and explaining that “[t]hese proposals, if enacted in their present 

form and if made retroactively effective to transactions completed during the period in which the 

effective time of the transaction occurs, would cause New AbbVie to be treated as a US 

corporation for US federal tax purposes”). 

50 Id. at 94. 
15 

AbbVie Board did not consider it practical to, and did not, quantify, 

rank or otherwise assign specific weights to the factors that it 

considered in reaching its determination and recommendation. . . . 

The AbbVie Board considered this information as a whole, and 

overall considered the information and factors to be favorable to, and 

in support of, its determinations and recommendations.

51

However, when pressed by investors and analysts in a follow-up conference call to 

reveal just how important the tax benefits were to AbbVie in pursuing the 

Proposed Inversion, Gonzalez downplayed the tax implications, stating that “[t]ax 

is clearly a benefit, but it’s not the primary rationale for [the Proposed Inversion];” 

that the deal “has excellent strategic fit and has compelling financial impact well 

beyond the tax impact;” and that AbbVie “would not be doing it if it was just for 

the tax impact.”52

F. Shifting Regulatory Backdrop: “If Anyone Knows Just Cause Why These 

Two Should Not Be Wed, Let Him Speak Now . . .” 

1. Closing the Inversion “Loophole”

Neither tax inversions nor political opposition to tax inversions is a novel 

development. A decade prior to the announcement of the Proposed Inversion, the 

U.S. government, in an effort to protect its tax base against tax inversions, included 

an anti-inversion provision in the American Jobs Creation Act of 2004 (the 

“AJCA”) targeting and eliminating a straightforward inversion technique that had 

 

51 Id. at 55. 

52 JX 24. 
16 

become popular in the preceding years known as a “naked inversion.”53 However, 

the AJCA left open other avenues to an inversion, notably mergers with foreign 

corporations: After the AJCA, a U.S. corporation could still re-organize in a 

foreign country and be treated as a non-U.S. corporation for federal income tax 

purposes if the U.S. corporation’s former stockholders owned less than 80% of the 

resulting foreign entity.54 

In the years leading up to the Proposed Inversion, several high-profile 

companies—most notably Pfizer55—had announced plans to pursue an inversion 

through a merger with a foreign company, reigniting “concerns about an erosion of 

the U.S. tax base” and cultivating a hostile political environment for these types of 

transactions.56 In fact, as AbbVie planned and pursued the Proposed Inversion into 

2014, the U.S. government was simultaneously openly exploring possible ways to 

deter inversions, through both legislative and administrative action.57 As pointed 

 

53 JX 13 at 3–5. In a naked inversion, a U.S. parent corporation could re-domicile in a foreign 

country simply by exchanging stock with a foreign subsidiary, creating a foreign parent 

corporation and a U.S. subsidiary. Id. at 2–3. The anti-inversion provision in the AJCA 

“eliminated” naked inversions by eliminating the underlying tax benefit, amending Section 7874 

of the Internal Revenue Code to “treat[] the inverted foreign parent company as a domestic 

corporation if it is owned by at least 80% of the former parent’s stockholders,” with a safe harbor 

exception for U.S. corporations that already had substantial business activities in the foreign 

country. Id. at 5. Of course, a U.S. corporation could still re-domicile through a naked 

inversion, but it would not receive the tax benefit. 

54 Id. at 5. 

55 See JX 18. 

56 JX 13 at 2, 5–7. 

57 See, e.g., id. at 7–11 (providing an overview of the policy options available to address the 

problem of merger-based inversions, including both reforming the U.S. corporate income tax and 

eliminating the tax benefits of merger-based inversions). 
17 

out by AbbVie in its preliminary proxy statement, numerous concrete proposals to 

eliminate these transactions’ tax benefits had surfaced by July 2014, including 

proposed legislation in both houses of Congress—The Corporate Inversion 

Prevention Act of 2014—which would be effective to any transaction completed 

after May 8, 2014, and a provision in the Obama administration’s 2015 budget 

proposals that would be effective to any transaction completed after December 31, 

2014.58

2. Skepticism that Government Would Act in the Short Term

Despite the heated anti-inversion rhetoric and development of specific antiinversion proposals throughout the first half of 2014, whether, when, and to what 

effect the government would implement any particular anti-inversion proposal was 

uncertain. Some prominent commentators and analysts found it unlikely that any 

legislative action to curb inversions would occur before 2015 and were doubtful 

that such action, if taken, would have retroactive effect. On April 29, 2014, the 

day before AbbVie’s board approved approaching Shire regarding the Proposed 

Inversion, The New York Times reported that “Congress is . . . unlikely to act [to 

 

58 JX 12 at 31. AbbVie explains in the preliminary proxy statement that these proposals would 

jeopardize the tax benefits of inversions, including the Proposed Inversion, by, 

among other things, treat[ing] a foreign acquiring corporation as a US corporation 

under Section 7874 of the [Internal Revenue] Code if the former shareholders of 

the US corporation own more than 50% of the shares of the foreign acquiring 

corporation after the transaction, or if the foreign corporation’s affiliated group 

has substantial business activities in the United States and the foreign corporation 

is primarily managed and controlled in the United States. 

Id.; see also JX 13 at 10–11.
18 

eliminate inversions] during this election year.”59 Likewise, on July 16, 2014, the 

day before AbbVie’s board voted to approve the terms of the Proposed Inversion, 

the Times reported: 

Lawmakers say they want to stop United States companies from 

reincorporating overseas to lower their tax bills, but the Obama 

administration and Congress appear unlikely to take any action to 

stem the tide of such deals anytime soon. 

On Tuesday, Treasury Secretary Jacob J. Lew sent letters to the top 

members of the House Ways and Means Committee and Senate 

Finance Committee, urging Congress to take immediate action to halt 

the rush of companies abroad. Yet the wave of so-called inversions 

looks set to continue unabated as a partisan Congress remains 

gridlocked, and Wall Street advisors continue encouraging companies 

to strike such deals while they still can.60

The Times’s view on Wall Street’s then-encouraging short-term outlook on 

inversions is supported by a July 25, 2014 analyst report on AbbVie by BMO 

Capital Markets, which opined: 

Despite the heated rhetoric coming out of Washington, we continue to 

believe that legislation targeting tax inversions remains unlikely in the 

near term, given the current political landscape. Tax inversion is 

more likely to be addressed as part of comprehensive tax reform 

rather than a piecemeal provision, and the earliest that could likely 

happen is 2015. AbbVie expects to close the deal in 4Q14, and the 

consensus seems to be that such legislation would not be retroactive.61

 These same commentators expressed skepticism that the Obama 

administration would step in to address inversions in the interim while legislative 

 

59 JX 34. 

60 JX 21. 

61 JX 35. 
19 

progress lagged,62 a skepticism that was shared by key officials within the 

administration. An April 30, 2014 Bloomberg BNA Daily Tax Report article, 

released the same day the AbbVie board approved approaching Shire about the 

Proposed Inversion, quotes the Commissioner of the IRS, John Koskinen, as 

saying, “We’ve done, I think, probably all we can [to stop inversions] within the 

statute”; the article interprets these remarks to “show the limits of the 

government’s ability to respond without Congress and suggest that the Obama 

administration won’t make a regulatory move to stop or limit so-called corporate 

inversions.”63 Similarly, in an interview given on July 16, 2014—the day before 

the AbbVie board voted to approve the terms of the Proposed Inversion—Secretary 

of the Treasury Jack Lew, commenting on his letter to Congress alluded to in the 

July 16 Times article, stated: 

 We have looked at the tax code. There are a lot of obscure 

provisions that we do not believe we have the authority to address this 

inversion question through administrative action. If we did, we would 

be doing more. 

That’s why legislation is needed. That’s why we proposed it in our 

budget. That’s why I wrote the letter last night. There are limits to 

what we can do without legislative action.64

 

62 See JX 34 (“Although President Obama has proposed rules that would almost eliminate 

inversions, his proposal stands little chance of becoming law.”); JX 21 (“Lawmakers say they 

want to stop United States companies from reincorporating overseas to lower their tax bills, but 

the Obama administration and Congress appear unlikely to take any action to stem the tide of 

such deals anytime soon.” (emphasis added)). 

63 JX 36. 

64 JX 37. 
20 

3. Treasury Implements an Administrative Fix

Whatever confidence existed in the summer of 2014 that the U.S. 

government could not or would not act in the short term to deter inversions was 

shattered on August 5, 2014, less than a month after AbbVie’s board approved the 

Proposed Inversion, when the Treasury Department announced it was “reviewing a 

broad range of authorities for possible administrative actions to limit inversions as 

well as approaches that could meaningfully reduce the tax benefits after inversions 

took place.”65 Secretary Lew confirmed the Treasury’s anti-inversion initiative a 

month later in a speech at a Washington think tank, stating that, while he still 

believed only Congress could permanently solve the inversion problem, given 

lawmakers’ inability to move quickly, “the Treasury Department is completing an 

evaluation of what we can do to make these deals less economically appealing, and 

we plan to make a decision in the very near future.”

66 On September 21, 2014, 

Secretary Lew removed all doubt that the Treasury Department would imminently 

act, revealing in a press conference that “Treasury is completing its work on 

 

65 JX 44 (internal quotation marks omitted); see also Rizzolo Pre-Trial Stip. Ex. vv (Bloomberg 

article dated August 7, 2014, by Richard Rubin, entitled, “Treasury’s Tax Powers Could Limit 

Benefits of Inversions”) (“The policy landscape on inversions has shifted significantly since last 

week, when lawmakers—deadlocked on tax policy—left Washington for a five-week break. The 

lack of congressional action and the Obama administration’s reluctance to move on its own had 

give companies and investors confidence that pending deals wouldn’t be affected by government 

action. . . . With one statement this week, Treasury changed the market assumption that the 

government wouldn’t act without Congress to stem inversion transactions. On Aug. 5, Treasury 

said that it was examining regulatory changes that would amount to a ‘partial fix’ while the 

administration keeps pushing Congress to curb inversions.”). 

66 JX 45. 
21 

administrative action to use our existing authority to limit the economic benefits of 

inversion.”67

 

G. Stranded at the Alter: The Treasury Notice and the Termination 

Agreement 

On September 22, 2014, the Treasury Department and IRS announced their 

intent to issue regulatory guidance under various sections of the Internal Revenue 

Code to eliminate certain tax advantages of merger-based inversions (the 

“Treasury Notice”).68 The new regulations described in the Treasury Notice would 

prevent U.S. corporations from utilizing several types of transactions and 

calculations that were necessary to realize the tax benefits of a merger-based 

inversion.69 The Treasury Notice provided that these regulations, when passed, 

would apply retroactively to any transaction completed on or after the date of the 

Treasury Notice,70 and further indicated that “[t]he Treasury Department and the 

IRS expect to issue additional guidance to further limit inversion transactions that 

 

67 JX 46. 

68 JX 8. 

69 See JX 2 (“Treasury is taking action to reduce the tax benefits of—and when possible, stop—

corporate tax inversions. This action will significantly diminish the ability of inverted 

companies to escape U.S. taxation. For some companies considering mergers, today’s action 

will mean that inversions no longer make economic sense. Specifically, the [Treasury] Notice 

eliminates certain techniques inverted companies currently use to access the overseas earnings of 

foreign subsidiaries of the U.S. company that inverts without paying U.S. tax.”). 

70 See JX 8, § 4. 
22 

are contrary to the purpose of section 7874 and the benefits of post-inversion tax 

avoidance transactions.”71

In the weeks following the Treasury Notice, AbbVie engaged in a “detailed 

consideration of the U.S. Department of Treasury’s unilateral changes to the tax 

rules.”72 Ultimately, after this review, the board determined: 

The breadth and scope of the changes, including the unexpected nature of 

the exercise of administrative authority to impact longstanding tax 

principles, and to target specifically a subset of companies that would be 

treated differently than either other inverted companies or foreign domiciled 

entities, introduced an unacceptable level of uncertainty to the [Proposed 

Inversion].73

Further, AbbVie’s board indicated that the Treasury’s forthcoming anti-inversion 

regulations had found their mark with regard to the tax benefits of the Proposed 

Inversion: 

[T]he changes eliminated certain of the financial benefits of the 

[Proposed Inversion], most notably the ability to access current and 

future global cash flows in a tax efficient manner as originally 

contemplated in the [Proposed Inversion]. This fundamentally 

changed the implied value of Shire to AbbVie in a significant 

manner.

74

 

71 Id. § 5. 

72 JX 26, Ex. 99.1, at 1. 

73 Id.

74 Id. Specifically, the regulations prevent AbbVie from accessing foreign earnings without 

incurring a dividend tax through the use of loans from AbbVie’s foreign subsidiaries to New 

AbbVie, known as “hopscotch loans.” JX 2. The Treasury regulations eliminated the tax benefit 

of these hopscotch loans by treating the loans as U.S. property taxable as a dividend, id., not only 

decreasing the overall tax benefit of the Proposed Inversion but also directly affecting AbbVie’s 

plan to finance the Arrangement. See, e.g., JX 29. 
23 

Consequently, on October 15, 2014, the AbbVie board withdrew its favorable 

recommendation of July 18, 2014 and replaced it with a recommendation that the 

AbbVie stockholders vote against the Proposed Inversion.75

 The AbbVie board’s change of recommendation triggered the first prong of 

the Break Fee. A few days later, on October 20, 2014, the Company triggered the 

second prong when, acknowledging “that there is little prospect of the Proposed 

[Inversion] being consummated” following the board’s change in recommendation, 

it entered into an agreement with Shire to terminate the Co-Operation Agreement 

(the “Termination Agreement”).76 In the Termination Agreement, AbbVie agreed 

to pay Shire the Break Fee of approximately $1.635 billion.77

H. The Section 220 Demands 

1. The SEPTA Demand

Plaintiff SEPTA made a written demand on AbbVie for inspection of certain 

books and records pursuant to Section 220 on November 3, 2014 (the “SEPTA 

Demand”).78 In it, SEPTA demands inspection of ten categories, including thirty 

sub-categories, of documents,79 the stated purposes for which are: 

 

75 JX 26, Ex. 99.1, at 1. I note that the AbbVie board’s recommendation of July 18, 2014 was 

limited to the stockholders’ adoption of the Merger Agreement, but that the board’s change in 

recommendation of October 15, 2014 addressed the Proposed Inversion as a whole.

76 JX 9, Ex. 10.1, at Recital C. 

77 Id., Ex. 10.1, § 2. 

78 SEPTA Compl. ¶ 3. 

79 See JX 1, Ex. C. 
24 

(1)to investigate possible breaches of fiduciary duties and 

mismanagement by the Board and officers of AbbVie in 

connection with approving the Break Fee; 

(2) to investigate possible breaches of fiduciary duties and 

mismanagement by the Board and officers of AbbVie in 

connection with the Board’s Change in Recommendation 

announced on October 15, 2014; 

(3)to investigate possible breaches of fiduciary duties and 

mismanagement by the Board and officers of AbbVie in 

connection with AbbVie’s entry into the Termination Agreement; 

(4)to investigate possible waste of corporate assets and breaches of 

fiduciary duties by the Board and officers of AbbVie in connection 

with AbbVie’s payment of the $1.64 billion Break Fee; and 

(5) to investigate the ability of the Board to consider a demand to 

initiate and maintain litigation related to any breaches of fiduciary 

duty prior to commencing any derivative litigation.80

2. The Rizzolo Demand

Plaintiff Rizzolo made a written demand on AbbVie for inspection of certain 

books and records pursuant to Section 220 on November 17, 2014 (the “Rizzolo 

Demand”).81 In it, Rizzolo demands inspection of five categories, including twelve 

sub-categories, of documents,82 for purposes of: 

(i) investigating possible wrongdoing, self-dealing and breaches of 

fiduciary duties by the directors and officers of the Company in 

connection with the termination of the [Proposed Inversion] and the 

Company’s obligation to pay the [Break Fee] to Shire and (ii) 

investigating possible aiding and abetting by [J.P. Morgan] 

 

80 Id. at 6–7. 

81 Rizzolo Compl. ¶ 9. 

82 See JX 11, Ex. A, at 10–12. 
25 

concerning the breaches of fiduciary duty of AbbVie’s Board and 

senior management.83

I. Procedural History 

AbbVie countered each of the SEPTA and Rizzolo demands with a letter 

rejecting the demand for failure to state a proper purpose.

84 In response, SEPTA 

filed its Section 220 Complaint on November 19, 2014, and Rizzolo filed its 

Section 220 Complaint on December 1, 2014. Since the two actions stem from the 

same event, the parties in both actions agreed to coordinate their briefing and 

argument. However, because the stated purposes and documents sought are not 

identical between the two actions, the cases were not consolidated.85

 

A coordinated, one-day trial on the papers in both actions was held on 

February 11, 2015. On April 7, 2015, for the sake of efficiency and clarity, the 

parties in both actions stipulated to a comprehensive, joint record to be entered in 

both actions, as well as consented to the Court utilizing this single Memorandum 

Opinion to deliver its decisions. 

 

83 Id. at 12. 

84 See JX 10; JX 40. 

85 I note that Rizzolo filed a Motion to Consolidate, but that SEPTA resisted that Motion. 
26 

II. ANALYSIS 

A. Inspection Right 

“Stockholders of Delaware corporations enjoy a qualified right to inspect the 

corporation’s books and records.”86 Originally a creature of common law, the 

inspection right is now codified in Section 220 of the Delaware General 

Corporation Law.87 The right to inspection is qualified out of considerations that 

are practical, rather than equitable; if a stockholder were permitted to inspect 

records out of a sense of mere curiosity, or to satisfy a desire to oversee matters 

properly within the province of corporate management or the corporate board, a 

considerable expense and distraction would be foisted upon the company and its 

(less curious) stockholders, with likely little value in return. A stockholder is 

entitled to inspect books and records under Section 220, therefore, only for a 

proper purpose, defined in the statute as “a purpose reasonably related to such 

person’s interest as a stockholder.”88 In an action to enforce the Section 220 

inspection right, the plaintiff stockholder has the burden to demonstrate a proper 

purpose by a preponderance of the evidence.89

 

86 Central Laborers Pension Fund v. News Corp., 45 A.3d 139, 143 (Del. 2012). 

87 Id. 

88 8 Del. C. § 220(b). 

89 Id. § 220(c); Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 121 (Del. 2006). 
27 

Even if a stockholder establishes a proper purpose under Section 220, “the 

scope of the stockholder’s inspection is limited to those books and records that are 

necessary and essential to accomplish the stated, proper purpose.”90

B. Proper Purpose 

Both SEPTA and Rizzolo seek books and records for the purpose of 

investigating potential breaches of fiduciary duties, mismanagement, wrongdoing, 

and waste91 by AbbVie’s directors and officers in connection with AbbVie’s 

obligation to pay the $1.635 billion Break Fee contained in the Co-operation 

Agreement. In addition, SEPTA separately seeks books and records for the 

purpose of investigating demand futility,92 and Rizzolo separately seeks books and 

records to investigate aiding and abetting by J.P. Morgan. 

 

90 Saito v. McKesson HBOC, Inc., 806 A.2d 113, 116 (Del. 2002). 

91 For simplicity sake, I will use the shorthand “corporate wrongdoing.” 

92 As SEPTA acknowledged at trial, see Trial Tr. 19:7–14, investigating demand futility is a 

proper purpose only if the plaintiff has established a credible basis to investigate corporate 

wrongdoing that ultimately could form the basis of a derivative suit. La. Mun. Police Emps.’ Ret. 

Sys. v. Hershey Co., 2013 WL 6120439, at *7 n.58 (Del. Ch. Nov. 8, 2013); see also Norfolk 

Cnty. Ret. Sys. v. Jos. A. Bank Clothiers, Inc., at *10 (Del. Ch. Feb. 12, 2009) (finding that 

investigating demand futility does not state a purpose “beyond investigating the possibility of 

bringing a derivative action”). Because I find below that SEPTA has failed to show a credible 

basis supporting an investigation into corporate wrongdoing among AbbVie’s directors and 

officers, its stated purpose to investigate demand futility is moot. 
28 

1. Investigating Potential Corporate Wrongdoing by AbbVie’s 

Directors and Officers

a. Reason for Investigation 

It is well established that investigation of potential corporate wrongdoing is 

a proper purpose for a Section 220 books and records inspection.93 However, it is 

also well established that “a stockholder ‘must do more than state, in a conclusory 

manner, a generally acceptable proper purpose’—the investigation of corporate 

mismanagement ‘must be to some end.’”94 “In other words, [the] plaintiff ‘must 

state a reason for the purpose, i.e., what it will do with the information or an end to

which that investigation will lead.’”95 There are a number of acceptable reasons 

why stockholders may seek to investigate corporate wrongdoing—“they may seek 

to institute possible derivative litigation, or ‘they may seek an audience with the 

board to discuss reforms or, failing in that, they may prepare a stockholder 

resolution for the next annual meeting, or mount a proxy fight to elect new 

directors.’”96 Here, however, neither SEPTA nor Rizzolo expressly state in its 

demand letter why it is investigating corporate wrongdoing at AbbVie.

 

93 Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026, 1031 (Del. 1996); see also Melzer 

v. CNET Networks, Inc., 934 A.2d 912, 917 (Del. Ch. 2007) (“There is no shortage of proper 

purposes under Delaware law, but perhaps the most common ‘proper purpose’ is the desire to 

investigate potential corporate mismanagement, wrongdoing, or waste.” (internal citations 

omitted)).

94 Graulich v. Dell Inc., 2011 WL 1843813, at *5 (Del. Ch. May 16, 2011) (quoting West Coast 

Mgmt. & Capital, LLC v. Carrier Access Corp., 914 A.2d 636, 646 (Del. Ch. 2006)). 

95 Id. (quoting West Coast Mgmt. & Capital LLC, 914 A.2d at 646). 

96 Id. (quoting Saito, 806 A.2d at 117). 
29 

This Court has cautioned stockholders in the past of the importance of 

specificity in stating the purpose for their demands: 

[T]o warrant relief, a demand for books and records must be 

sufficiently specific to permit the court (and the corporation) to 

evaluate its propriety. . . . “[U]nless a demand in itself unspecific as 

to purpose can in some way successfully be given an expanded 

reading viewed in the light of surrounding circumstances[,] a vague 

demand without more must a fortiori be deemed insufficient.”97

More pointedly, the Court has explicitly warned that a plaintiff who states a 

purpose to investigate corporate wrongdoing, without elaboration as to why that 

investigation is relevant to its interest as a stockholder, has not stated a proper 

purpose at all: 

[T]he nature of section 220 as an independent right does not eliminate 

the proper purpose requirement. The plaintiff states its purpose is 

“. . . to investigate potential breaches of fiduciary duty by the 

Company’s officers and directors.” This demand states no purpose. 

Although investigating wrongdoing is a proper purpose, it must be to 

some end. Delaware law does not permit section 220 actions based on 

an ephemeral purpose, nor will this court impute a purpose absent the 

plaintiff stating one.98

Although the failure of both SEPTA and Rizzolo to specify the “end” to which 

their investigations will lead could be read as a failure to state a purpose at all, I 

find it apparent enough from the Plaintiffs’ statements at oral argument to infer that 

 

97 Norfolk Cnty. Ret. Sys. v. Jos. A. Bank Clothiers, Inc., 2009 WL 353746, at *11 (Del. Ch. Feb. 

12, 2009) (quoting Weisman v. W. Pac. Indus., Inc., 344 A.2d 267, 269 (Del Ch. 1975)) (citing 

Northwest Indus., Inc. v. B.F. Goodrich Co., 260 A.2d 428, 429 (Del. 1969)). 

98 West Coast Mgmt. & Capital LLC, 914 A.2d at 646 (emphasis added). 
30 

both Plaintiffs seek an investigation to aid in future derivative litigation.99 

However, as neither Plaintiff has mentioned—in briefing or at argument—an 

intention to take any other proper action with the books and records sought, I find 

that litigation is the sole motivation for the Plaintiffs’ investigations into corporate 

wrongdoing among AbbVie’s directors and officers.100

b. Effect of Exculpatory Provision 

SEPTA and Rizzolo’s claim of a proper purpose to investigate corporate 

wrongdoing by AbbVie’s directors and officers must be evaluated in light of the 

fact that AbbVie’s Certificate of Incorporation exculpates AbbVie directors from 

liability for breach of the duty of care pursuant to Section 102(b)(7) of the 

DGCL.101 According to the Company: “Because plaintiffs have no potential 

remedy against the directors in a derivative claim for breach of the duty of care, 

 

99 See, e.g., Trial Tr. 7:19–24. In addition, I note that, aside from an investigation into corporate 

wrongdoing, SEPTA also states a purpose to investigate the AbbVie board’s ability to “consider 

a demand to initiate and maintain litigation related to any breaches of fiduciary duty prior to 

commencing any derivative litigation,” indicating that it will use the results of its investigation to

pursue litigation against AbbVie’s directors. JX 1 at 7. 

100 See Graulich v. Dell Inc., 2011 WL 1843813, at *7 (Del. Ch. May 16, 2011) (“[T]he 

Amended Demand letter states that plaintiff’s purpose is to commence an ‘appropriate suit’ if it 

is found that the directors breached their fiduciary duties; it does not say that plaintiff’s purpose 

includes taking any other ‘appropriate action.’ Thus, plaintiff has no additional stated purposes 

and none can be reasonably inferred—the only purpose that can be fairly read out of plaintiff’s 

demand is that he seeks to investigate ‘whether there was a systematic failure by the Board to 

supervise’ in order to determine whether there is a basis to file a derivative suit.” (citation 

omitted)); cf. Norfolk Cnty. Ret. Sys., 2009 WL 353746, at *11 (noting that “Norfolk has not 

stated anywhere that it intends to engage in a proxy contest, or communicate directly with the 

board, or take some specific action other than evaluating the actions of the board for a potential 

derivative suit,” but allowing an inference that such an alternate purpose exists on a motion for 

summary judgment because plaintiff stated in its demand that it would take “appropriate action” 

if the defendants did not properly discharge their fiduciary duties). 

101 JX 41, art. IX. 
31 

investigating any such breach is futile and not a proper purpose for a Section 220 

demand.”102 SEPTA and Rizzolo disagree, arguing that consideration of an 

exculpatory provision is improper in the context of a Section 220 action, because 

Section 220 is meant only to be a preliminary fact-finding tool to unearth corporate 

wrongdoing and an exculpatory provision does not actually eliminate the duty of 

care of a breach thereof, only a director’s ultimate liability in a plenary action.103

This Court has not squarely addressed the issue of whether, when a 

stockholder seeks to investigate corporate wrongdoing solely for the purpose of 

evaluating whether to bring a derivative action, the “proper purpose” requirement 

under Section 220 is limited to investigating non-exculpated corporate 

wrongdoing. However, analogous decisions interpreting Section 220 support the 

conclusion that such a limitation should exist. Specifically, this Court has found 

that, although “investigating the possibility of pursuing a derivative action based 

on perceived wrongdoing by a corporation’s officers or directors represents a 

proper purpose for a Section 220 demand,” “[i]f the filing of such a future 

derivative action would be barred by claim or issue preclusion, . . . a [Section] 220 

demand may be denied as a matter of law.”104 Likewise, the Court has denied a 

 

102 AbbVie’s Consolidated Response to Pls.’ Opening Trial Brs. at 22. 

103 See SEPTA’s Reply Trial Br. at 18–20; Rizzolo’s Reply Trial Br. at 7–9. 

104 Norfolk Cnty. Ret. Sys., 2009 WL 353746, at *6 (citing Seinfeld v. Verizon Commc’ns, Inc., 

909 A.2d 117, 121 (Del. 2006), Saito v. McKesson, HBOC, Inc., 806 A.2d 113, 115 (Del. 2002), 

and Sec. First Corp. v. U.S. Die Casting and Dev. Co., 687 A.2d 563, at 567–68 (Del. 1997)); 
32 

stockholder the ability to inspect books and records solely to investigate bringing 

litigation where the stockholder would lack standing in the underlying suit105 or the 

underlying suit would be time-barred.106 These holdings, and the necessity of 

proper balance of the benefits and burdens of production under Section 220, 

illustrate that the proper purpose requirement under that statute requires that, if a 

stockholder seeks inspection solely to evaluate whether to bring derivative 

litigation, the corporate wrongdoing which he seeks to investigate must necessarily 

be justiciable.107 Because a Section 102(b)(7) exculpatory provision serves as a 

 

see also Fuchs Family Trust v. Parker Drilling Co., 2015 WL 1036106, at *5–7 (Del. Ch. Mar. 

4, 2015). 

105 See Graulich v. Dell Inc., 2011 WL 1843813, at *5 (Del. Ch. May 16, 2011) (“If plaintiff 

would not have standing to bring suit, plaintiff does not have a proper purpose to investigate 

wrongdoing because it stated purpose is not reasonably related to its role as a stockholder.”); 

West Coast Mgmt. & Capital, LLC v. Carrier Access Corp., 914 A.2d 636, 641 (Del. Ch. 2006) 

(“If a books and records demand is to investigate wrongdoing and the plaintiff’s sole purpose is 

to pursue a derivative suit, the plaintiff must have standing to pursue the underlying suit to have 

a proper purpose.”); Polygon Global Opportunities Master Fund v. West Corp., 2006 WL 

2947486, at *5 (Del. Ch. Oct. 12, 2006) (holding that the plaintiff’s purpose to investigate claims 

of corporate wrongdoing solely to determine whether the board members had breached their 

fiduciary duties was not proper because “[t]his purpose is not reasonably related to [the 

plaintiff’s] interest as a stockholder as it would not have standing to pursue a derivative action 

based on any potential breaches”). 

106 See Graulich, 2011 WL 1843813, at *6 (“As this Court has held, in a factual setting, a time 

bar defense or a claim or issue preclusion defense would eviscerate any showing that might 

otherwise be made in an effort to establish a proper shareholder purpose.” (internal quotation 

marks omitted)). 

107 See La. Mun. Police Emps.’ Ret. Sys. v. Lennar Corp., 2012 WL 4760881, at *2 (Del. Ch. 

Oct. 5, 2012) (“[S]tockholders are only permitted to investigate those issues that affect their 

interests as stockholders. In other words, if a stockholder seeks to use Section 220 to investigate 

corporate wrongdoing for which there is no remedy, or if the stockholder would not have 

standing to seek a remedy, then that stockholder has not stated a proper purpose.” (citation 

omitted)). But see Amalgamated Bank v. UICI, 2005 WL 1377432, at *2 (Del. Ch. June 2, 2005) 

(stating that affirmative defenses “solely” may not “bar a plaintiff under Section 220”). 

Rizzolo relies on this Court’s recent decision in In re Rural Metro Corp. Stockholders 

Litigation to argue that an exculpatory provision should not affect the proper purpose analysis, 
33 

bar to stockholders recovering for certain director liability in litigation, a 

stockholder seeking to use Section 220 to investigate corporate wrongdoing solely 

to evaluate whether to bring derivative litigation has stated a proper purpose only 

insofar as the investigation targets non-exculpated corporate wrongdoing. Here, 

that means that SEPTA and Rizzolo’s stated purpose to investigate corporate 

wrongdoing is proper only to investigate whether AbbVie’s directors breached 

their fiduciary duty of loyalty.108 I stress that this burden, as explained below, 

 

because such a provision “does not eliminate the underlying duty of care or the potential for 

fiduciaries to breach that duty.” 88 A.3d 54, 85 (Del. Ch. 2014). Rizzolo’s argument is 

misplaced: He seeks records solely in aid of derivative litigation; when the sole purpose is 

litigation-driven, the appropriate focus is whether the underlying litigation is justiciable; 

otherwise, the stockholder’s purpose is eviscerated, and the stockholder has failed to meet its 

statutory burden to show a purpose reasonably related to its interest as a stockholder. However, 

nothing in this Memorandum Opinion should be read to hold that directors’ breaches of 

exculpated duties can never be a basis to support a Section 220 request on grounds other than 

pursuit of derivative litigation. 

108 I note that both SEPTA and Rizzolo state that they wish to investigate corporate wrongdoing 

among AbbVie’s directors and officers. Since an exculpatory provision pursuant to Section 

102(b)(7) only applies to directors, the limitation on Section 220 demands imposed by an 

exculpatory provision described in this section would not apply to officers. Cf. Gantler v. 

Stephens, 965 A.2d 695, 708–09 & n.37 (Del. 2009) (holding that “officers of Delaware 

corporations, like directors, owe fiduciary duties of care and loyalty, and that the fiduciary duties 

of officers are the same as those of directors,” but noting: “That does not mean, however, that the 

consequences of a fiduciary breach by directors or officers, respectively, would necessarily be 

the same. Under 8 Del. C. § 102(b)(7), a corporation may adopt a provision in its certificate of 

incorporation exculpating its directors from monetary liability for an adjudicated breach of their 

duty of care. Although legislatively possible, there currently is no statutory provision 

authorizing comparable exculpation of corporate officers.”). In other words, a stockholder could 

state a proper purpose to investigate breaches of the fiduciary duty of care by a corporation’s 

officers solely for the purpose of pursuing derivative litigation, despite the existence of an 

exculpatory provision in the corporation’s articles of incorporation. Here, however, officers are 

included in the Plaintiffs’ stated proper purposes in name only; SEPTA and Rizzolo have failed 

to meet their burden to show a credible basis from which the Court can infer any corporate 

wrongdoing on the part of AbbVie’s non-exculpated officers. Both Plaintiffs’ briefs are almost 

entirely directed towards the actions taken by AbbVie’s board in connection with the Proposed 

Inversion and Break Fee. The only officer specifically mentioned by either Plaintiff is AbbVie’s 
34 

remains among the lightest burdens recognized in our jurisprudence; the plaintiff 

need only develop a “credible basis” from which I may infer actionable corporate 

wrongdoing, and “documents, logic, testimony,” or other evidence109 from which I 

may infer both potentially exculpated and actionable wrongdoing, obviously, are 

sufficient for that purpose under Section 220. While, with regard to Plaintiffs’ 

demands here, the focus must be on actionable corporate wrongdoing, the hurdle is 

still a low one to clear. 

c. Credible Basis 

SEPTA and Rizzolo have stated a proper purpose in investigating nonexculpated corporate wrongdoing in aid of potential litigation, but merely stating 

this purpose is not sufficient; a stockholder seeking inspection to investigate 

corporate wrongdoing must demonstrate “a ‘credible basis’ from which a court can 

infer that mismanagement, waste or wrongdoing may have occurred.”110 The 

“credible basis” standard “reflects judicial efforts to maintain a proper balance 

between the rights of stockholders to obtain information based upon credible 

allegations of corporate wrongdoing and the rights of directors to manage the 

 

CEO Richard Gonzalez, who also serves as the Chairman of AbbVie’s board, under the 

protection of AbbVie’s exculpatory provision for acts in his capacity as a director. The 

Plaintiffs’ focus is on the actions of the board in entering the Proposed Inversion, then 

withdrawing, not on the actions of the officers in developing the deal or negotiating its terms. 

Therefore, I proceed by considering only whether there is a credible basis to infer that AbbVie’s 

directors have breached their fiduciary duty of loyalty. 

109 Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 568 (Del. 1997). 

110 Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 118 (Del. 2006). 
35 

business of the corporation without undue interference from stockholders.”111 As 

addressed above, the Plaintiffs here must show a credible basis from which I can 

infer that the Company’s directors engaged in justiciable corporate wrongdoing, 

specifically—in light of the applicable exculpation provision—whether they 

breached their fiduciary duty of loyalty. Neither Plaintiff bases its investigation 

into corporate wrongdoing at AbbVie on allegations that AbbVie’s directors were 

interested or lacked independence from interested parties in the Proposed 

Inversion; rather, the Plaintiffs112 allege that the directors breached their duty of 

loyalty by acting in bad faith—that is, “acted with scienter . . . ‘an ‘intentional 

dereliction of duty’ or a ‘conscious disregard’ for their responsibilities”113—or by 

committing corporate waste.114 In addition, Rizzolo argues, based on this Court’s 

 

111 Id. at 122. 

112 Although Rizzolo forewent making any argument in its briefing that there exists a credible 

basis to infer that AbbVie’s directors engaged in non-exculpated corporate wrongdoing, instead 

arguing that the Court should consider corporate wrongdoing amounting to a breach of the duty 

of care, see Rizzolo’s Reply Trial Br. at 7–10, 12–21, I assume for the purposes of this 

Memorandum Opinion that Rizzolo adopted SEPTA’s arguments in this regard at the 

coordinated oral argument. 

113 In re Goldman Sachs Grp., In. S’holder Litig., 2011 WL 4826104, at *12 (Del. Ch. Oct. 12, 

2011) (quoting In re Walt Disney Co. Derivative Litig., 907 A.2d 693, 755 (Del. Ch. 2005)). 

114 This Court has found that, doctrinally, waste is a subset of good faith under the umbrella of 

the duty of loyalty (and thus is not protected by a Section 102(b)(7) exculpation provision). See, 

e.g., In re Walt Disney Co. Derivative Litig., 907 A.2d 693, 749 (Del. Ch. 2005) (“The Delaware 

Supreme Court has implicitly held that committing waste is an act of bad faith.” (citing White v. 

Panic, 783 A.2d 543, 553–55 (Del. 2001))). While that seems to me the appropriate theoretical 

framework, I note the existence of an academic debate as to whether that issue is truly settled. 

See, e.g., Jamie L. Kastler, Note, The Problem with Waste: Delaware’s Lenient Treatment of 

Waste Claims at the Demand Stage of Derivative Litigation, 95 Minn. L. Rev. 1899, 1911–14 

(2011) (arguing that this Court has not “officially rule[d] on whether waste falls under the duty 

of care (exculpable) or the duty of loyalty (nonexculpable),” but summarizing recent cases 

indicating that “waste falls under the duty of loyalty through the duty of good faith”); Joseph K. 
36 

ruling in U.S. Die Casting and Development Company v. Security First 

Corporation,

115 that “investigation of potential mismanagement relating to a failed 

merger is a proper purpose for a Section 220 books and records inspection.”116

 I first consider whether there is a credible basis to infer that the directors 

acted in bad faith. The Plaintiffs argue that, in approving and eventually triggering 

a 3% reverse termination fee that did not carve out a contingency for the U.S 

government taking action to deter merger-based inversions, the directors either 

failed to consider or ignored what the Plaintiffs describe as the near-certainty that 

such government action would occur and would have a deal-breaking impact on 

the Proposed Inversion.117 To support the credibility of these allegations, the 

Plaintiffs point out that “[t]he AbbVie Board approved and recommended an 

inversion transaction with Shire with knowledge that the federal government was 

focused on retroactively eliminating the tax benefits of inversion deals;” that the 

Co-Operation Agreement included an “enormous” Break Fee lacking any 

 

Leahy, Are Corporate Super PAC Contributions Waste or Self-Dealing? A Closer Look, 79 Mo. 

L. Rev. 283, 308–09 (2014) (noting that the issue may not be settled, but arguing that the 

doctrinal underpinnings of waste illustrate that “waste apparently constitutes a breach of a 

director’s duty of loyalty”). I assume for the purposes of this Memorandum Opinion that waste 

constitutes non-exculpated corporate wrongdoing that could form the basis for a proper Section 

220 inspection under these circumstances. 

115 711 A.2d 1220 (Del. Ch. 1996), aff’d in part, rev’d in part, 687 A.2d 563 (Del. 1997), 

116 Rizzolo’s Opening Trial Br. at 18. 

117 See, e.g., Trial Tr. 13:6–18:16; Rizzolo’s Opening Trial Br. at 17 (“Plaintiff’s Demand 

expressly stated a proper purpose. Specifically, Plaintiff requested from AbbVie books and 

records to further Plaintiff’s investigation into possible breaches of fiduciary duty in connection 

with the Board’s reckless decision to enter into the Proposed Inversion resulting in the 

Company’s obligation to pay the $1.635 billion Termination Fee absent of any meaningful 

attempt by the Board to negotiate a fiduciary-out or lower fee.”). 
37 

contingency permitting the board to change its recommendation in case the 

government acted to curb inversions; that the Company’s preliminary proxy 

statement did not identify the tax benefit as the only or key benefit of the Proposed 

Inversion; and that, following the Treasury Notice, the board nonetheless changed 

its recommendation, triggering the Break Fee.118 According to SEPTA: 

The fact that the AbbVie Board determined that it could no longer 

recommend the [Proposed Inversion] after the [Treasury Notice] 

raises a credible basis under the circumstances to infer that the 

AbbVie Board may have breached its fiduciary duties in originally 

approving and recommending the [Proposed Inversion] on the terms 

provided. . . . 

Further, the numerous benefits touted by the AbbVie Board in 

support of its approval and recommendation of the [Proposed 

Inversion] casts question on the Board’s decision to make the Change 

in Recommendation and enter into the Termination Agreement when 

only one of the numerous benefits was eliminated pursuant to the 

fruition of a known and palpable risk. 

... 

Moreover, the enormous magnitude of the Break Fee supports 

SEPTA’s credible basis under the circumstances.119

Contrary to the Plaintiffs’ position, I do not find that the record establishes a 

credible basis to doubt that AbbVie’s directors acted in good faith in connection 

with the approval or subsequent termination of the Proposed Inversion. I first note 

that the Break Fee is “enormous,” to use SEPTA’s phrasing, in the abstract, but not 

in the context of the equally enormous value of the transaction itself: Agreeing to a 

 

118 SEPTA’s Reply Trial Br. at 3–9. 

119 Id. at 7–9. 
38 

3% termination fee is not intrinsically unusual,120 let alone a credible indication of 

bad faith. Rather, if AbbVie’s agreement to the Break Fee is evidence of bad faith, 

it must be because the risk of termination was so clear that agreeing to the Break 

Fee entailed a willful and wrongful decision to disregard the corporate interest; it 

cannot rest simply on the amount of the Break Fee. 

Turning to that issue, while the record does reflect that there was a hostile 

political environment for inversions during the time the Company pursued the 

Proposed Inversion, it also reflects that the board was informed of this risk and had 

factored it into their decision to approve the deal. Specifically, the preliminary 

proxy statement explicitly states that the tax savings would be a benefit of the deal, 

but that the Company had weighed that benefit against the risk that the U.S 

government could change or reinterpret applicable tax law to eliminate that benefit, 

even explaining to stockholders in detail the concrete anti-inversion measures 

Congress and the Obama administration had already proposed.121 The record lacks 

any indication that the directors consciously chose to disregard that risk. Simply 

 

120 See, e.g., In re Pennaco Energy, Inc., 787 A.2d 691, 702 (Del. Ch. 2001) (noting that the 

defendant corporation “resisted [the buyer’s] request for a termination fee equal to 5% of the 

value placed on [the defendant’s] equity in the transaction, and had settled on a termination fee at 

the more traditional level of 3%”); La. Mun. Police Empls.’ Ret. Sys. v. Crawford, 918 A.2d 

1172, 1181 n.10 (Del. Ch. 2007) (listing cases involving termination fees at or above 3%). 

121 See supra Part I.E. Although it is not necessary to my determination here, I also note that, 

despite the government’s anti-inversion posture, the record illustrates that through the date 

AbbVie executed the Co-Operation Agreement the opinion of a number of commentators, 

analysts, and even government officials themselves was that the legislative branch would not, 

and the administrative branch could not, act to deter inversions in the short term. See supra Part 

I.F.2; note 65. 
39 

because the risk accepted by AbbVie’s directors to secure a deal with Shire came 

to fruition does not raise a credible basis to infer that AbbVie’s directors intended 

that adverse event to happen, or knew but were indifferent to that fact, to the 

Company’s detriment, so as to demonstrate a lack of good faith.122 Moreover, the 

record suggests that the $1.635 billion Break Fee was an actively negotiated 

provision by a reluctant merger target.123 Again, while a large dollar amount, it 

was a commonplace 3% of total value of that target.

Having not found a credible basis to infer that the directors acted in bad 

faith, I next turn to considering whether SEPTA has shown a credible basis to infer 

that AbbVie’s board committed corporate waste by paying the Break Fee. Our 

Supreme Court restated the well-developed judicial standard for corporate waste in 

Brehm v. Eisner: 

 

122 The Plaintiffs conceded at trial that misapprehension of risk alone is not actionable conduct, 

but attempted to distinguish these facts based on the Company’s public disclosures. Trial Tr. 

16:7–18:16, 30:15–33:7. Specifically, SEPTA argued that the Company’s failure to identify the 

tax benefit as a “deal breaker” in the preliminary proxy statement indicates that the Company 

ignored or was not cognizant of the repercussions of the tax benefit on the deal as a whole, see 

id. 17:3–18:16, and Rizzolo argued that, because AbbVie identified several reasons for pursuing 

the Proposed Inversion outside the tax benefit in the preliminary proxy statement and in public 

statements, yet abandoned the deal when the Treasury Notice was announced, the board either 

intentionally misled stockholders or acted against stockholder interest in terminating the deal. 

See id. 31:5–33:7. I do not find either argument persuasive. To the extent I understand SETPA’s 

argument, the most I can reasonably infer from the lack of disclosure regarding the “deal 

breaker” status of the tax benefit is that the directors negligently failed to take into account the 

effect of a single risk (the loss of the tax benefit) on the viability of the deal as a whole; if so, to 

my mind, this fails to prove a credible basis to demonstrate a breach of care, let alone loyalty. 

As to Rizzolo’s argument, it is entirely possible that a corporation could want to pursue a 

transaction for several reasons, the loss of any of which would make the transaction no longer 

financially or strategically tenable. 

123 See supra notes 31–33 and accompanying text. 
40 

Roughly, . . . waste entails an exchange of corporate assets for 

consideration so disproportionately small as to lie beyond the range at 

which any reasonable person might be willing to trade. Most often 

the claim is associated with a transfer of corporate assets that serves 

no corporate purpose; or for which no consideration at all is received. 

Such a transfer is in effect a gift. If, however, there is any substantial 

consideration received by the corporation, and if there is a good faith 

judgment that in the circumstances the transaction is worthwhile, there 

should be no finding of waste, even if the fact finder would conclude 

ex post that the transaction was unreasonably risky.124

The Brehm Court’s guidance is of particular relevance to these facts. The record 

illustrates that the AbbVie board entered into a deal that, if not for the change in 

tax law, would have created value for AbbVie’s stockholders. The Break Fee was 

one of the cogs in the Co-Operation Agreement that helped bring Shire into that 

deal. It is inappropriate for this Court to attempt, in retrospect and under the guise 

of the waste standard, to judge whether including the Break Fee was appropriate 

given the risk that government action might sink the deal, or to judge whether 

paying the Break Fee was better for the Company than forging ahead with the deal 

without the tax benefit: “Any other rule would deter corporate boards from the 

optimal rational acceptance of risk . . . . Courts are ill-fitted to attempt to weigh 

the ‘adequacy’ of consideration under the waste standard or, ex post, to judge 

appropriate degrees of business risk.”125 On the record created here, there is no 

credible basis from which I may infer waste. 

 

124 Brehm v. Eisner, 746 A.2d 244, 265 (Del. 2000). 

125 Id. 
41 

 Finally, I consider Rizzolo’s argument that, according to this Court’s ruling 

in U.S. Die Casting & Development Company v. Security First Corporation, “a 

plaintiff’s 220 demand to investigate the possibility of corporate mismanagement[] 

related to the circumstances of a defunct merger is a proper purpose under 

Delaware law.”126 In U.S. Die Casting, the defendant corporation, Security First 

Corp., entered into a merger agreement with Mid Am Inc. that required Security 

First Corp. to “pay a termination fee of $2 million, plus third party expenses not to 

exceed $250,000 contingent on the occurrence of certain events within one year 

after termination.”127 Prior to the merger closing, Security First Corp. terminated 

the agreement claiming there was a clash in “management philosophy and 

direction” and, despite that none of the events enumerated in the termination fee 

provision had been triggered, agreed to pay Mid Am Inc. $275,000 for expenses 

and an additional $2 million contingent on certain events occurring within one and 

a half years.128 In considering the plaintiff’s request to inspect books and records 

to investigate corporate wrongdoing, the U.S. Die Casting Court found a credible 

basis to infer wrongdoing because, despite having not breached the merger 

agreement, Security First Corp. had paid Mid Am Inc.’s expenses—$25,000 more 

than was even required by the merger agreement had a breach occurred—and 

 

126 Rizzolo’s Reply Trial Br. at 10 n.20 (internal quotations omitted). 

127 711 A.2d 1220, 1223 (Del. Ch. 1996). 

128 Id. at 1223–24. 
42 

agreed to extend the period covered by the termination fee by six additional 

months; the Court found that the company’s rationale for termination was “patent 

sophistry,” considering fundamental differences in management philosophy should 

have been apparent to the company upon reasonable investigation prior to entering 

the merger agreement, and that the termination could be reasonably interpreted, 

“[i]n the absence of full and open dissemination of information to shareholders,” as 

a “thinly veiled attempt at entrenchment.”129 On appeal, the Supreme Court upheld 

this Court’s finding of a credible basis to investigate mismanagement based on 

these facts.130

 I do not read U.S. Die Casting, as does Rizzolo, to hold that a failed merger 

in itself constitutes a credible basis from which I may infer corporate wrongdoing. 

U.S. Die Casting involved specific facts explicable as supporting improper 

entrenchment on the part of the directors in breach of their fiduciary duties. Unlike 

in U.S. Die Casting, here there was a material change in circumstances following 

AbbVie entering the Co-Operation Agreement—the loss of the tax benefits 

attending the Treasury Notice—that led the Company’s board to terminate the 

Proposed Inversion. Rizzolo does not suggest that AbbVie’s board was motivated 

by self-preservation, and the board’s legitimate business reason for terminating the 

Proposed Inversion, which the Company disclosed at length to its stockholders, 

 

129 Id. at 1225. 

130 See Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 568–69 (Del. 1997). 
43 

further belies any specter of entrenchment. In addition, the U.S. Die Casting 

Court’s suspicions surrounding Security First Corp.’s seemingly gratuitous 

agreement to extend the termination fee period and to pay expenses, including 

excessive expenses, are not present here, as the Plaintiffs do not dispute that 

AbbVie was obligated under the Co-Operation Agreement to pay the Break Fee. 

Therefore, U.S. Die Casting is not controlling here. 

 In sum, the Plaintiffs have shown, at most, that AbbVie’s directors were 

aware of the risk that the government would act to eliminate the tax benefits of 

inversions; that the directors intentionally took that risk and bet a tremendous 

amount of the stockholders’ money on the chance that the risk would not come to 

pass; and that the risk ultimately did come to pass, leading to a spectacular failure 

of the Proposed Inversion and a huge loss to the stockholders. These facts fail to 

show a credible basis that the Company’s directors have breached their duty of 

loyalty, and are not sufficient to sustain a Section 220 inspection under the 

circumstances. 

2. Investigating Aiding and Abetting by J.P. Morgan

Rizzolo also seeks certain books and records to investigate J.P. Morgan for 

aiding and abetting breaches of fiduciary duties by AbbVie’s directors. The parties 

dispute whether an investigation of a corporation’s third-party advisor for aiding 

and abetting breaches of fiduciary duties is a proper purpose under Section 220. 
44 

This Court has previously considered such a request on at least one occasion and 

found that the purpose was improper. In Saito v. McKesson HBOC, Inc. thenChancellor Chandler held that the plaintiff “failed to persuade the Court that using 

a § 220 action against a company in which he owns shares is a proper vehicle for 

examining the conduct of third-party advisors to the company with the ultimate 

view of filing separate actions against the third-party advisors.”131 On appeal, the 

Supreme Court remanded the case with the clarification that “[t]he source of the 

documents and the manner in which they were obtained by the corporation have 

little or no bearing on a stockholder’s inspection right” if the stockholder has 

shown that the documents are necessary and essential to satisfy the stockholder’s 

proper purpose; the Supreme Court acknowledged and left unmolested, however, 

Chancellor Chandler’s ruling that the plaintiff’s “interest in pursuing claims 

against [the defendant’s] advisors was not a proper purpose.”132

I see no reason to depart from this Court’s holding in Saito. Rizzolo has 

failed to show that investigating J.P. Morgan for aiding and abetting is reasonably 

related to his interest as a stockholder of AbbVie. Above, I have found that no 

credible basis exists to infer that AbbVie’s directors engaged in non-exculpated 

corporate wrongdoing, meaning that any aiding and abetting claim would have to 

 

131 2001 WL 818173, at *6 (Del. Ch. July 10, 2001), aff’d in relevant part, 806 A.2d 113 (Del. 

2002). 

132 Saito, 806 A.2d at 118. 
45 

be based on a breach of the AbbVie directors’ duty of care. Assuming for 

purposes of this analysis that Rizzolo has demonstrated a credible basis to find that 

such an underlying breach occurred, an aiding-and-abetting claim would have to 

exist as an independent action, as AbbVie’s directors are exculpated from liability 

pursuant to Section 102(b)(7). While it is true that J.P. Morgan could still be found 

liable to AbbVie’s stockholders for aiding and abetting exculpated corporate 

wrongdoing of AbbVie’s directors,133 that potential litigation is an asset of the 

Company. Rizzolo has failed to demonstrate a credible basis from which I may 

infer that AbbVie’s directors could not make a decision on behalf of the Company 

as to whether the Company should pursue an action against J.P. Morgan, given that 

the directors themselves would be exculpated from personal liability for the 

underlying breach.134 Without categorically finding that investigation of thirdparty liability may never represent a proper purpose, under these facts I do not find 

that Rizzolo has shown a proper purpose to inspect the Company’s books and 

records to investigate J.P. Morgan for aiding and abetting breaches of fiduciary 

duties by AbbVie’s directors and officers. 

 

133 See In re Rural Metro Corp. S’holder Litig., 88 A.3d 54, 86 (Del. Ch. 2014) (rejecting the 

argument of the defendant’s financial advisor that the defendant company’s exculpatory 

provision should apply equally to a party charged with aiding and abetting a breach of fiduciary 

duty, finding: “That is not what Section 102(b)(7) authorizes. The literal language of Section 

102(b)(7) only covers directors; it does not extend to aiders and abettors.”). 

134 Nothing prevents Rizzolo from making a demand on the Company’s board to consider an 

action against J.P. Morgan. Rizzolo has not sought documents in this action to determine 

whether such a demand would be futile. 
46 

III. CONCLUSION 

The Plaintiffs point out that AbbVie’s directors assumed a very substantial 

risk on behalf of the Company in connection with the Proposed Inversion with 

Shire, a risk that proved a very bad bet for the Company, indeed. Assessing such 

risk is a core directorial function; fulfilling that function poorly, without more, is 

not actionable under our law. For the foregoing reasons, I deny SEPTA’s and 

Rizzolo’s demands for inspection of books and records pursuant to Section 220.135 

The parties in each action should submit an appropriate form of order. 

 

135 Because I find that the Plaintiffs have failed to show a proper purpose for their inspections, I 

do not address the scope of the documents sought.