IN THE COURT OF CHAN CERY OF THE STATE OF DELAWARE DEBORAH PETTRY and GAIL FRIEDT, Plaintiffs,

v. GILEAD SCIENCES, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2020

- 0132

- KSJM

RICHARD C. COLLINS, Plaintiff,

v. GILEAD SCIENCES, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2020

- 0138

- KSJM

HOLLYWOOD POLICE OFFICERS’ RETIREMENT SYSTEM, Plaintiff,

v. GILEAD SCIENCES, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2020

- 0155

- KSJMANTHONY RAMIREZ, Plaintiff,

v. GILEAD SCIENCES, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2020

- 0173

- KSJM

MEMORANDUM OPINION Date Submitted: August 26, 2020 Date Decided: November 24 , 2020 Blake A. Bennett, COOCH AND TAYLOR, P.A., Wilmington, Delaware; Brian J. Robbins, Stephen J. Oddo, Eric M. Carrino, ROBBINS LLP, San Diego, California; Counsel for Plaintiffs Deborah Pettry and Gail Friedt

. Kurt M. Heyman, Gillian L. Andrews, HEYMAN , ENERIO , GATTUSO & HIRZEL LLP, Wilmington, Delaware; Gustavo F. Bruckner, Daryoush Behbood , POMERANTZ LLP, New York, New York; Counsel for Plaintiff Richard C. Collins

. Gregory V. Varallo, BERNSTEIN , LITOWITZ , BERGER & GROSSMANN LLP, Wilmington, Delaware; David Wales, Alla Zayenchik, BERNSTEIN , LITOWITZ , BERGER & GROSSMANN LLP, New York, New York; Robert D. Klausner, KLAUSNER , KAUFMAN , JENSEN , & LEVINSON; Counsel for Plaintiff Hollywood Police Officers’ Retirement System

. Gregory V. Varallo, BERNSTEIN , LITOWITZ , BERGER & GROSSMANN LLP, Wilmington, Delaware; Francis A. Bottini, Jr., Anne B. Beste, BOTTINI & BOTTINI, INC., La Jolla, California; Mark C. Molumphy, Tyson C. Redenbarger, Noorjahan Rahman, COTCHETT, PITRE & MCCARTHY, LLP; Counsel for Plaintiff Anthony Ramirez

. Brian C. Ralston, Aaron R. Sims, David M. Hahn, POTTER , ANDERSON & CORROON LLP, Wilmington, Delaware; John C. Dwyer, Shannon M. Eagan, Tijana Brien, Christopher Vail, COOLEY LLP, Palo Alto, California; Counsel for Defendant Gilead Sciences, Inc. McCORMICK, V.C.Each of t he five stockholder plaintiffs seek s to inspect books and records of Gilead Science s , Inc. (“Gilead” or the “Company”) . The stated purpose o f their respective inspection s is to investigate possible wro ngdoing in connection with the C ompany’s development, marketing, and sale of HIV drugs

. 1 When a stockholder seeks inspection
f

or the purpose of investigating wrongdoing, the stockholder must demonstrate a credible basis to suspect possible wrongdoing. To demonstrate a credible basis, t he complaint tells a story as replete with in e quity

as the biblical verse that the Company’s namesake brings to mind. 2 In 2001, Gilead received FDA approval for tenofovi r disoproxil fumarate ( “TDF” ), a life

- saving medication for persons living with HIV. TDF has g enerated billions in revenue for
G ilead year after year . T he se revenues incent iviz ed Gilead to protect the market for TDF by forestalling the market entry of generic TDF and delaying the development of Gilead’s safer TDF

- substitute drug called tenofovir alafenamide ( “TAF” ). The plaintiffs say that there is a credible basis to suspect that Gilead violated antitrust laws, committed mass torts, infringed on government patents, and defrauded government programs in its efforts to protect the TDF market.
In stating their credible basis, t he plaintiffs join in chorus with a host of other

accusers . Gilead’s activities have drawn lawsuits and investigations from persons living

1 There are two forms of HIV, HIV

- 1 and HIV

- 2, and both can develop into the most severe phase of HIV infection, AIDS. While acknowledging that these are extremely important distinct ions, this decision describes Gilead’s products as “HIV” drugs or treatments to avoid overcomplicating an already complex set of facts.
2 See, e.g. , Hosea 6:8.2 with HIV , activists, regulatory agencies, the Department of Justice, and Congress. As just one example, i n 2019, activi s ts and union benefit funds filed a class action complaint in federal court alleging that Gilead and its competitors vio lated federal and state antitru st laws by engaging in anticompetitive conduct to prevent competition in the market for
TDF

- based drugs. The plaintiffs in that case seek billions of dollars in damages. In March 2020 , the federal court partially denied a motion to dismiss , allowing portions of the case to move forward

. T he credible basis standard is widely described as the “lowest possible burden of proof ” under Delaware law, 3 and Gilead does not meaningfully atta ck the plaintiffs’ credible basis

. Gilead half

- heartedly argues that the plaintiffs’ credible basis is merely an echo of unsubstantiated allegations made in other lawsuits and should be given no credence. But Gilead does not explain why a credible basis analysis should ignore allegations forming the basis of other lawsuits , and there is no principled ground f or categorically disregarding such information

. Gilead ’s main strategy is to launch a number of peripheral attacks designed to chip away at the plaintiffs’ proper purpose s . Gilead asserts a defense based on Wilkinson v. A. Schuman, Inc. , in which this court denied inspection where the defendant proved that the
p laintiff was a passive conduit in a purely lawyer

- driven inspection effort

. 4 As multiple subsequent decisions of this court have made clear, Wilkinson involved extreme facts ,

3 See, e.g. , Seinfeld v. Verizon Comm’ns, Inc. , 909 A.2d 117, 123 (Del. 2006).
4 See 2017 WL 5289553, at *3

– 4 (Del. Ch. Nov. 13, 2017).3 and Gilead’s argument that five separate plaintiffs represented by four separate sets of counsel committed the same blunder s found in Wilkinson borders on absurd. A corporation is entitled to assert defenses in a Section 220 action and probe the bona fides of a plaintiff’s stated purpose. In this case, however, Gilead’s pursuit of the Wilkinson
defense raises more questions about Gilead’s purpo se s than the plaintiffs ’

. Gilead asserts myriad other defenses, arguing that the plaintiffs should be denied inspection because any follow

- on derivative claims they might pursue would not pass the pleading stage . Gilead peddles these points as “ standing ” arguments , presumably because this c ourt recently rejected a series of nearly identical points when framed as “proper purpose” deficiencies

. 5 This semantic sleight of hand is unsuccessful , and Gilead’s so

- called “standing” argument s fa r e no better. As a fallback, Gilead makes a series of arguments concerning the scope of inspection, contending that inspection should be limit ed to formal board materials. This decision rejects those arguments because multiple other categories of docum ents are

necessar y and essential to the plaint if fs’ stated purposes. Regrettably, Gilead’s overly aggressive defense strategy e pitomizes a trend . As described recently by a group of scholars , defendants are increasingly treating Section 220 actions as “surrogate proceedin g [ s ] to litigate the possible merits of the suit ” and

“ place obstacles in the plai n t iffs’ way to obstruct them from employing it as a quick and

5 See Lebanon Cnty. Emps. Ret. Fund v. AmerisourceBergen Corp. , 2020 WL 132752, at *6

– 24 (Del. Ch. Jan. 13, 2020).4 easy pre - filing discovery tool.” 6 Defendants like Gilead adopt this strategy with the apparent belief that there is no real downside to doing so , ignoring that this court has the power to shift fees as a tool to deter abusive litigation tactics

. Gilead’s approach might call for fee shifting in this case, and the plaintiffs are granted leave to move for their expenses, including attorneys’ fees , incurred in connection with their efforts to obtain books and records

. I. FACTUAL BACKGROUND The facts are drawn from the factual stipula tions in the parties’ pre

- trial order , t he testimony of each plaintiff ( all by deposition and one also at trial ), and the 262 joint trial exhibits submitted by the parties. 7
A. Gilead’s HIV Treatments For more than a decade , Gilead has been a leader in the discovery, development,
and commercialization of ant iretroviral therapy for HIV

. 8 Some estimate that Gilead controls approximately 75% of the HIV drug market. 9 M illions of people depend on

6 James D. Cox et al., The Paradox of Delaware’s “Tools at Hand” Doctrine: An Empirical Investigation , 75 Bus. Law. 2123, 2150 (2020).
7 Unless otherwise noted, pleadings are cited by reference to items docketed in C.A. No. 2020

- 0173

- KSJM (“Dkt.”). Factual citations are to: the Amended Pre

- Trial Stipulation and Order, Dkt. 101 (“PTO”); Tran scripts of Depositions of Richard C. Collins, Gail Friedt, Deborah Pettry, Anthony E. Ramirez, and Hollywood’s Rule 30(b)(6) Representative, David M. Williams, Dkt. 82 (cited using the deponent’s last name and “Dep. Tr.”); the Trial Transcript, Dkt. 97 (“T rial Tr.”); and Joint Trial Exhibits (cited by “JX” number). 8 JX

- 213. 9 See, e.g. , JX

- 250 at 2.5 Gilead’s HI V treatments for their survival. 10 The corollary is that Gilead depends on the sale of HIV treatments for much of its financial survival. In 2019 , for example, the sale of HIV treatments produced more than $16.4 billion in revenue or 73 % of its top

- line

. 11 A brief history of the development and commercialization of Gilead’s HIV treatments lays the backdrop fo r this lawsuit . Gilead received Food and Drug Administration (“FDA”) approval for its ground

- breaking HIV treatment

— TDF

— in
2001. 12 I nitially sold commercially as Viread, TDF was a significant improvement over other drugs. 13 After TDF was approved , Gilead shifted its efforts toward reducing the number of pills a persons infected with HIV would take daily. Gilead developed a combined formulation of TDF and a drug called emtrici tabine that could be administered as a fixed

- dose, once

- daily tablet. 14 The resul t, Truvada, was approved as an HIV
treatment in 2004. 15 Truvada was later approved for use by high

- risk, uninfected adults as part of a n HIV

- preventative strategy called pre

- exposure prophylaxis (“PrEP”). 16 In addition to Viread and Truvada, the FDA approved three of Gilead’s other TDF

- based
HIV treatments: Atripla in 2006, Complera in 2011, and Stribild in 2012. 17

10 See JX

- 213.
11 See JX

- 135 at 34.
12 JX

- 77 at 3. 13 See id.
14 Id. at 4. 15 JX

- 3 at 1. 16 JX

- 26 at 1. 17 JX

- 27 at 1.6 TDF poses safety risk s for the patients’ kidneys and bones. 18 In 2007, Gilead scientists published an article discussing TDF safety issue s , which identified the most

common adverse events as including renal failure, Fanconi syndrome, and serum creatinine increase

. 19 In 2007 , Gilead updated its labeling to recognize that TDF

associated renal damage also causes bone softening in patients. 20 A high do s e of TDF is typically required to achieve the desired therapeutic effect

. 21 T he higher the dose of
TDF , the greater are its toxic effects. 22 Before the FDA approved Gilead’s first TDF

- based drug in 2001, Gilead had discovered another way of admin istering tenofovir

— TAF

. 23 TDF and TAF both deliver tenofovir to the target blood cells, but TAF delivers tenofovir more efficiently, which allows for a dose of l ess than one

- tenth that of TDF

. 24 The lower dosage in turn reduces toxicity levels and makes TAF safer than TDF. 25 Gilead highlighted the benefits of TAF

based drugs over its TDF

- based drugs in a 2001 10

- K, 26 and Gilead continued testing

18 JX

- 244 ¶ 215. 19 JX

- 68 ¶ 221. 20 Id. ¶ 224.
21 Id. ¶ 212.
22 Id. 23 Id. ¶ 194.
24 JX

- 68 ¶ 195; JX

- 41 at 1

– 2. 25 See id. 26 JX

- 68 ¶ 243 (citing Gilead Sciences, Inc., Form 10

- K 13, https://www.sec.gov/Archives/edgar/data/882095/000091205702011690/a2073842z10

- k.htm).7 TAF through 2004, frequently touting positive results from clinical s tudies on the market. 27 Despite its safety benefits, Gilead shelved the development of TAF

- based drugs in
Octo ber 2004 , attributing the decision to patient s ’ increasing use of TDF

- based Viread
and the FDA approval of TDF

- based Truvada, among other things. 28 Gilead did not renew development of TAF

- based drugs until 2010, six years after it shelved the project. 29 Gilead did not submit a new drug a pplication for a TAF

- based drug until November 2014. 30 When rolling out its TAF products, Gilead repeatedly markete d TAF as a safer replacement for TDF. 31

27 Id. ¶¶ 244

– 48. 28 Id. ¶ 249 (quoting Pre ss Release, Gilead, Gilead Discontinues Development of GS 9005 and GS 7340; Company Continues Commitment to Research Efforts in HIV (Oct. 21, 2004), https://www.gilead.com/news/press

- releases/2004/10/gilead

- discontinues

- development

of

- gs - 9005

- and

- gs - 7340

- c ompany - continues

- commitment

- to

- research

- efforts

- in

- hiv). 29 Id. ¶ 255. 30 JX

- 35 at 1. 31 See, e.g. , JX

- 40 (describing TAF as a product for patients who wanted to “replace their current antiretroviral treatment regimen” and touting the “safety and efficacy” of TAF, despite acknowledging that “TAF

- based regimens are investigational products and have not been determined to be safe or efficacious”); JX

- 42 at 2 (Gilead’s then

- EVP of Commercial Operations, Paul Carter, stating that “[Genvoya] has been launched in th e context of HIV patient around the world who are getting older and older. And the average age in the US now is actually over 50 years, for an HIV patient. And HIV in itself causes renal issues and can have impact on bone density. And so, I think everyo ne is very happy to see that we now have a new generation of HIV single

- tablet regimens which have a much better safety profile and tolerability and can be used for many, many years.”); id. (stating that Genvoya would replace Truvada as the “backbone” comp onent of the combination therapies); JX

- 58 at 2 (Gilead’s President and CEO, John Milligan, stating that he hopes TAF will be the “safest gentlest, yet most powerful option” available to HIV patients).8 Gilead expand ed its TAF franchise through 2015, submitting new drug applications for a fixed

- dose combination of emtricitabine and TAF and a single

- table t TAF regimen in April and July 2015, respectively. 32 The F DA approved Gilead’s TAF

based treatment , Genvoya , in November 2015. 33 Within two weeks of Gen v oya’s
ap proval, TAF became listed as a preferred treatment option under the U.S. Department of Health and Human Services guidelines. 34 Gilead later received approval for the TAF

based drugs Odefsey, Descovy , and Biktarvy

. 35
B. Criticisms of Gilead’s Development and Commercialization of HIV Treatments Gilead’s development and commercialization of its HIV treatments has drawn extensive critic ism from persons living with HIV, regulatory agencies, HIV activists , the Depa rtment of Justice (the “DOJ”) , and Congress. Gilead has faced antitrust lawsuits , mass tort claims , patent infringement litigation, and False Claims Act investigations

. 1. Anticompetitive Activities Gilead is accused of delaying the launch of generic versions of its TDF

- based HIV treatments by entering into anticompetitive licensing agreements with several brand ed

32 See JX

- 39 (fixed

- dose combination TAF); JX

- 40 (sin gle

- tablet TAF regimen). 33 JX

- 41 at 1. 34 See JX

- 42 at 2 (noting that becoming listed that quickly as a preferred treatment option was “unprecedented”). 35 See JX

- 47 at 1 (Odefsey); JX

- 49 at 1 (Descovy); JX

- 64 at 1 (Biktarvy); see also JX

- 90 at 1 (press rele ase announcing approval of Descovy for PrEP use). Gilead also received approval for certain TAF

- based drugs used to treat Hepatitis B. In January 2016, Gilead submitted an application for TAF to treat chronic Hepatitis B. JX

- 45 at 1. In November 2016, the FDA approved Vemlidy, a TAF

- based regimen, for the treatment of chronic Hepatitis B. JX

- 55 at 1.9 drug manufacturers and collusive settlement agreements with generic drug manufacturers

. 36 Gilead is regulated by multiple agencies, including the FDA

. 37 After a new drug is approved, f ederal law provide s certain exclusivity benefits to pharmaceutical companies, such as a five

- year new chemical exclusivity

. 38 After four years of exclusivity , a generic manufacturer can file an Abbreviated New Drug Application (“ANDA”) showing, among other things, that the generic drug cont ains the same active ingredients as the branded drug and does not infringe on the brand ed drug’s patent

. 39 If the brand ed drug manufacturer brings a claim against the generic drug manufacturer for patent infringement within the first 45 days after the filing of the ANDA, the n the FD A stays the ANDA until the earlier of (a) the passage of 30 mo nths running from date that exclusivity ends , or (b) the issuance of a decision holding that the patent is invalid or there was no infringement

. 40 Thus, seven and a half years is usually the longest that a new chemical exclusivity period will run.

36 See JX

- 244. 37 JX

- 135 at 20 ( “Our operations depend on compliance with complex FDA and comparable international regulations. Failure to obtain broad a pprovals on a timely basis or to maintain compliance could delay or halt commercialization of our products.”). 38 JX

- 244 at ¶¶ 88

– 91 (citing 21 U.S.C. §§ 355(j)(5)(F)(ii), 355(c)(3)(E)(ii); 21 C.F.R. § 314.108(b)(2)). During this period, no other drug usin g that chemical as an active ingredient can obtain FDA approval. 39 Id. ¶¶ 73

– 76 (citing 21 U.S.C. § 355(j)(8)(B))

. 40 See id. ¶¶ 78, 88

– 91, 280 (citing 21 U.S.C. § 355; 21 C.F.R. § 314.108(b)(2)).10 Generally, the introduction of a generic drug on the market causes price declines and sales erosion of branded drugs

. 41 Brand ed drug manufacturers therefore have incentiv es to restrict and impede generic s from entering the market

. Between 2004 and 2011, Gilead entered into a number of agreements with
brand ed drug manufacturers , including Bristol

- Myers Squibb Company (“B ristol

Myers ”), Japan Tobacco, Inc. (“Japan Tobacco”), and Janssen R&D Ireland (“Janssen”),
to create combination therapies that have multiple active ingredients or to license certain compounds for exclusive commercialization

. 42 The agreements allegedly i ncluded “No

-

41 A Federal Trade Commission study found that, on average, within one year of generic entry into the market, generics capture 90% of sales and prices decrease 85%. Id. ¶ 93 (citing FTC, Pay

- for

- Delay: How Drug Company Pay

- Offs Cost Consumers Billions at 8 (January 2010), https://www.ftc.gov/sites/default/files/documents/reports/pay

- delay

- how

drug

- company - pay - offs

- cost

- consumers - billions

- federal

- trade

- commission

- staff

study/100112payfordelayrpt.pdf). Gilead has recognized the potential for sales erosion in its public filings. See, e.g. , JX

- 135 at 12 (“[A]s new branded or generic products are introduced into major markets, our ability to maintain pricing and market share may be affected.”).
42 In December 2004, Gilead and Bristol

- Myers formed a joint venture to develop and commercialize a once

- daily, fixed

- dose combination HIV treatment regimen later named Atripla. See JX

- 6 at 1; JX

- 74 ¶¶ 114

– 18. In March 2005, Gilead and Japan Tobacco entered into a licensing agreement that gave Gilead the exclusive right t o develop and commercialize a novel HIV integrase inhibitor in all countries except Japan. JX

- 7 at 1. In July 2009 and June 2011, Gilead entered into licensing agreements with Janssen to develop and commercialize once

- daily fixed

- dose combination antiret roviral products. See JX

- 12 at 1 (press release announcing 2009 licensing agreement); JX

- 21 at 1 (press release announcing 2011 licensing agreement). (Janssen was formerly known as “Tibotec Pharmaceuticals.” See, e.g. , JX

- 12; JX

- 21.) In December 2014, Gilead expanded its agreements with Janssen to allow for the development and commercialization of a new once

- daily, single tablet regiment containing Gilead’s TAF and emtricitabine, and Janssen’s rilpivirine. JX

- 36 at 1. The agreement provided that the n ew product would be distributed by Janssen in “approximately 17 markets” and by Gilead in all other markets. Id. In October 2011, Gilead entered into a licensing agreement with BMS to develop and commercialize a fixed

- dose combination of BMS’s REYATAZ an d Gilead’s cobicistat

— later named Evotaz. See JX

- 24 at 1; JX

- 242 at 23.11 Generics Restraints ” barring the creation of competing versions of the combination therapies that use generic TDF. 43
In 2013, Gilead entered into a settlement agreement with the largest generic manufacturer in the world, Teva Pharmaceutical Industries Ltd. (“Teva”). 44 Under the terms of the settlement, Teva would be prevented from launching a generic version of Truvada until December 2017. 45 The settlement also reduced the incentives for ANDA second

- filers to enter the market before December 2017 because the settlement allowed Teva to enter the market should a second

- filer gain market entry

. 46 In 2017, a group of promine nt HIV activist s , including Peter Staley , implored the New York attorney general to investigate the Teva settlement and other agreements with generic drug manufacturers concerning the generic production of Truvada. 47 The

43 JX

- 74 ¶¶ 89

– 112.
44 See JX

- 29. In 2008, Teva submitted an ANDA requesting permission to manufacture and commercialize a generic version of Truvada. JX

- 10. Teva alleged that two of the patents associated with Truvada were invalid, unenforceable, or would not be infringed by Teva’s manufacture of the product described in its ANDA. Id. If Gilead agreed, then Teva could begin producing its generic product immediately. If Gilead sued for patent infringement within 45 days, however, Teva would be unable to produce its generic product until the earlier of 30 months or a district court decision that is adverse to Gilead. Id. Gilead sued Teva for patent infringement less than 45 days after Teva submitted its ANDA. See JX

- 11. In 2012, Lupin Limited (“Lupin”) and Cipla Ltd. (“Cipla”) both submitted an ANDA to manufacture and commercialize generic versions of Truvada and Viread, respectively. JX

- 32 at 23. Gilead filed patent infringement lawsuits in response to those ANDA submissions as well. Id. 45 See JX

- 29. 46 See JX

- 74 ¶¶ 321

– 55. 47 JX

- 59; JX

- 60.12 activists accused Gilead of paying generic drug manufacturers to delay launching generics. 48
In May 2019, Staley and others filed a thirteen count class action complaint against Gilead and other companies in the United States District Court for the Northern District of California (the “ Staley Action”)

. 49 The complaint alleges that Gilead and other brand ed drug manufacturers violated federal and state antitrust laws by engaging in anticompetitive conduct in the market for Gilead’s TDF

- based drugs. 50 Several additional class action lawsuit s followed, and they were subsequently consolidated into the Staley Action

. 51
T he plaintiffs in the Staley Action seek billions of dollars in damages on behalf of a class of persons who purchased or reimbursed purchasers of HIV treatments sold by

48 JX

- 59; JX

- 60. 49 JX

- 74. On the same day that the Staley Action was filed, the House Committee on Oversight and Reform announced that it would hold a hearing to examine Gilead’s pricing of Truvada. See JX

- 75. Gilead Chairman and CEO Daniel O’Day testified at the hearing on May 16, 2019. See JX

- 77. After discussing Gilead’s contribution to the de velopment of Truvada and related patents for PrEP, O’Day testified: “We priced Truvada, when it was originally approved, based on the price of its two component drugs, without adding a premium. We have increased its list price over the years at a rate co nsistent with average price increases in the industry.” JX

- 77, at 2, 7

– 8. An expert later testified that “Gilead insisted on valuing drug shipments based on the commercial price in the United States, rather than the cost of manufacturing, which was at le ast 300 times less. . . . PrEP [treatments] can be manufactured and distributed, including a profit, for about $6 per person per month. Gilead charges more than $2100 per person per month, a 35000% markup.” JX

- 76 at 3, 2

– 5. On June 26, 2019, the commit tee sent Gilead requests for documents and information regarding its pricing of Truvada. JX

- 81. 50 JX

- 74. 51 See JX

- 255.13 Gilead and the other defendants

. 52 On March 3, 2020, the United States District Court (the “District Court”) in the Staley Action granted in part and denied in part Gilead’s motion to dismiss, and granted leave to amend certain of the claims that were dism issed. 53 In relevant part , the District C ourt dismissed wi th leave to amend the claims that there was an overarching conspiracy among Gilead, B ristol

- Myers , Japan Tobacco, and
Janssen. 54 The court dismissed with prejudice the claims based on the Gilead/Japan Tobacco licensing agreement because the plaintiffs did not plead any specific allegations that “the exclusive license would be used in an anticompetitive way.” 55
The District Court denied the motion to dismiss as to claims based on : the No

Generics Restraints in the Gilead/B ristol

- Myers and Gilead/Ja nssen agreements ; the Teva settlement agreement ; and Gilead’s commercialization of TAF. 56 As to the Gilead/B ristol

- Myers and Gilead/Janssen agreements, the court found that a question of fact existed as to whether the No

- Generics Restraints had sufficient anticompetitive effect
to constitute an antitrust violation. 57 As to the Teva settlement agreement, the court cited

52 See JX

- 74 ¶ 429; see also PTO ¶ 4 (“ If plaintiffs are successful in their claims, [Gilead] could be required to pay significant moneta ry damages or could be subject to permanent injunctive relief.”). 53 JX

- 242 at 85

– 87. 54 Id. at 15

– 16. 55 Id. at 32, 31

– 33. 56 Id. at 85

– 86. 57 Id. at 26.14 several “yellow flag[s]” that could give rise to a finding of anticompetitive conduct. 58 As to Gilead’s delayed commercialization of TAF, t he District C ourt found that the plaintiff s have “a plausible argument that there is no procompetitive justification for” it. 59 In January 2020, a group of healthcare insurers filed a class action against Gilead and other companies in a Florida federal court, asserting claims substantially similar to those in the Staley A ction. 60
2. Mass Tort s Gilead is accused of intentionally withholding from the market its safer and potentially more effective TAF

- based HIV treatments in order to extend the sales window for its more dangerous and less effective TDF

- based treatments. 61 As discussed above, mul tiple parties have alleged that Gilead shelved the development of TA F after receiving approval for Truvada, even though Gilead knew that TAF was a safer product

. 62 Gilead then allegedly waited to resume development and

58 Id. at 41, 38

– 42. 59 Id. at 46. On April 21, 2020, the plaintiffs in the Staley Action filed an amended complaint, and on May 4, Gilead filed a motion to dismiss the amended complaint. See JX

- 175 (motion to dismiss amended complaint); JX

- 244 (amended complaint). 60 See JX

- 117; see also JX

- 118 at 3 (“The allegations are similar to those made in four consoli dated class actions against Gilead pending in the Northern District of California.”). 61 See JX

- 252; see also PTO ¶ 4 (noting that “Gilead has been named as a defendant in product liability lawsuits related to Gilead’s HIV medications”). 62 See, e.g. , JX

- 244 ¶¶ 236

– 98; JX

- 252.15 commercialization of TAF

- based products until the introduction of generic TDF

- based treatments was immine nt. 63
Gilead is the subje ct of at least 250 tort actions pending in state and federal courts in Cal ifornia, Delaware, and Florida. The actions involve more than 15,000 plaintiffs
claim ing that Gilead’s TDF

- based HIV medications caused them to suffer personal injury and economic loss. 64 If those claims ar e successful, Gilead “ could be required to pay significant monetary damages.” 65
3. Patent Infringement Gilead is accused o f infringing on government pat ents in the sales of its HIV Pr EP
treatments. The U.S. government claims that w hen administered as a PrEP treatment, Truvada and Descovy rely on patents developed by the Centers for Disease Control and Prevention (“CDC”) and owned by the U.S. government. 66 During a May 2019 hearing before the U.S. House Committee on Oversight and Reform, an expert in HIV research and clinical care testified: The US Government is by far the majority funder of PrEP research. PrEP regimen selection was guided by research conducted by scientists at the CDC who demonstrated that adding emtricitabine to a tenofovi r regimen increased protection.

. . . The critically important research done by scientists at the CDC led to a US Government patent on the

63 See JX

- 244 ¶¶ 236

– 98; JX

- 252. 64 See JX

- 134 at 80; JX

- 255 at 2. 65 PTO ¶ 4; JX

- 134 at 80.
66 JX

- 73 at 1.16 combined use of emtricitabine and tenofovir esters for PrEP.

. . . Gilead Sciences did not provide leadership, innovation, or funding for these projects ; Gilead’s role was limited to donating study medication and placebos. Our protocols were shared with Gilead, in accordance w ith an agreement between the [National Institutes of Health] and Gilead; I do not recall receiving any comments. 67 On November 6, 20 19, the U.S. government filed suit against Gilead. 68 The complaint alleges that Gilead has wrongfully denied the validity of the CDC’s patents and refused to obtain a license from the CDC to use the patented regimens. 69 In February 2020, the Patent Trial and Appeals Board declined to institute Gilead’s petitions for inter partes review of the four U.S. government

- held patents , finding that Gilead “has not demonstrated a reasonable likelihood of prevailing

. ” 70
In April 2 020, Gilead filed a lawsuit against the U.S. government related to the use of the same anti

- HIV regimens

. 71 Gilead’s complaint alleges that the CDC breached the

67 JX

- 76 at 2. The expert, Professor Robert M. Grant, is a credible source. As he explained to the committee, he had decades of exp erience “with research and clinical care related to HIV,” “pioneered research on PrEP that led to FDA approval in 2012 [and] recommendations from the CDC in 2014 , ” and “devoted . . . 20 years of [his] career to the development of PrEP.” Id. 68 JX

- 98; see a lso JX

- 99 (11/8/19 New York Times article discussing the lawsuit); JX

102 (11/8/19 Science Magazine article discussing the lawsuit).
69 Id. ¶¶ 8

– 9. 70 JX

- 246 at 21; JX

- 247 at 12. 71 JX

- 170, Gilead Scis., Inc. v. United States , 1:20

- cv - 00499

- CFL (Fed. Cl. Apr. 24, 2020).17 agreements between the parties and the government’s patents are therefore invalid and unenforce able. 72
4. False Claims Act Violations Gilead is curr ently facing a federal investigation and civil litigation related to alleged violation s of the False Claims Act. 73 Under federal law, drug companies cannot provide direct copayment assistance to patients covered by Medicare. 74 Drug companies are permitted to donate to charities that help Medicare patients, so long as the companies ’ donations do not exert sway over the nonprofit’s operations. 75 If a drug company uses donations to encourage a nonprofit to promot e the company’s products, however, that conduct m ay violate anti

- kickback laws. 76 On May 27, 2016, Gilead received a subpoena from the U.S. Attorney for the District of Massachusetts seeking documents related to the Company’s relationship with nonprofits that provide financial assistance to patients. 77 Corporate disclosures “describe an expanding investigation by the U.S. Attorney’s Office” into Gilead and other

72 Id. ¶¶ 1

– 21. 73 See JX

- 50; JX

- 88. 74 JX

- 51 at 1. 75 Id.
76 Id.
77 JX

- 50.18 pharmaceutical companies’ potential kickback violati ons. 78 In December 2017, one of the companies agreed to pay $210 million to resolve the Justice Department ’s claims

. 79
C. The Inspection Demands The plaintiffs are Deborah Pettry, Gail Friedt, Rich ard C. Collins, Hollywood Police Officers’ Retirement System (“Hollywood”) , and Anthony Ramirez ( collectively , “Plaintiffs”). Each Plaintiff made a written demand on Gilead to inspect and copy certain books and records of the Company pursuant to Section 220 (collectively , the “Demands”)

. 80 T he D emands sought to in vestigate possible wrongdoing in connection with aspects of the development and commercialization of Gilead’s HIV treatments. 81

78 JX

- 51. 79 JX

- 61. Gilead is also facing a qui tam action alleging False Claims Act violations related to the Company’s TDF

- and TAF

- based Hepatitis

- B treatments. JX

- 88. On September 19, 2019, a group of plaintiffs filed a second amended qui tam complaint against Gilead in Pennsylvania federal court, alleging multiple violations of the anti

kickback provisions of the False Claims Act. See id. ¶¶ 1, 12

– 13. The complaint all eges that Gilead used its speaker program and other methods to encourage healthcare providers to write prescriptions for Gilead’s name

- brand drugs as opposed to generics. Id. ¶¶ 1

– 6. In particular, the complaint alleges that Gilead used illegal kickbacks to encourage healthcare providers to transition patients from Viread, a TDF

- based drug that was about to face generic competition, to Vemlidy, its new TAF

- based drug. Id. ¶¶ 30

– 35. 80 See JX

- 103 (Collins’s 12/2/19 inspection demand); JX

- 114 (Collins’s 1/13/20 reply to Gilead’s initial response); JX

- 128 (Collins’s 2/18/20 supplemental demand); JX

- 108 (Pettry’s 12/30/19 inspection demand); JX

- 113 (Friedt’s 1/8/20 inspection demand); JX

120 ( Pettry and Friedt’s 1/29/20 consolidated reply to Gilead’s initial response); JX

- 123 (Ramirez’s 2/4/20 inspection demand); JX

- 136 (Ramirez’s 2/27/20 reply to Gilead’s initial response); JX

- 124 (Hollywood’s 2/10/20 inspection demand). 81 See infra note 95 and accompanying text.19 Gilead declined to provide even a single doc ument in response to any of the
D emands , taking the position that each D emand was unfounded and deficient. 82
D. This Litigation Each Plaintiff filed suit under Section 220 to enforce their inspection rights , with Pettry and Friedt filing a joint complaint

. 83 Gilead answered the complaints. 84 Gilead requested that the court enter and order requiring Plaintiffs to coordinate their efforts, 85 and t he parties stipulated to a coordinated schedule and approach to discovery. 86
Gilead served interrogatories on, sought d ocuments from, and move d to compel discovery from P laintiffs. 87 Gilead also deposed each P laintiff. 88

82 See JX

- 106 (Gilead’s 12/10/19 response to Collins’s initial demand); JX

- 130 (Gilead’s 2/25/20 response to Collins’s supplemental demand); JX

- 115 (Gilead’s 1/15/20 response to Pettry’s demand); JX

- 116 (Gilead’s 1/15/20 response to F riedt’s demand, containing multiple mistaken references to “Ms. Pettry” as opposed to “Ms. Friedt”); JX

- 126 (Gilead’s 2/14/20 response to Pettry and Friedt’s 1/29/20 communication); JX

- 125 (Gilead’s 2/11/20 response to Ramirez’s 2/4/20 demand); JX

- 139 (Gil ead’s 3/2/20 response to Ramirez’s 2/27/20 communication); JX

- 127 (Gilead’s 2/18/20 response to Hollywood’s demand); JX

- 131 (Gilead’s 2/25/20 rejection of Hollywood’s invitation to meet and confer). 83 See JX

- 132; JX

- 137; JX

- 140; JX

- 141; see also JX

- 129. 84 JX

- 142; JX

- 144; JX

- 261; JX

- 262. 85 Dkt. 5, Def.’s Resp. to Pls.’ Mots. for Expedited Proceedings at 5

– 6 (“Gilead respectfully submits that the Court should enter an order coordinating the actions.”). 86 Dkt. 8, Stipulation and Appointment of Counsel and Case Scheduling Order. 87 See JX

- 147 (Def.’s First Set of Interrogs. Directed to Pls.); JX

- 148 (Def.’s First Set of Reqs. for Produc. of Docs. Directed to Pls.); Dkt. 38, Def.’s Mot. to Compel Disc. from P ls. Plaintiffs provided Defendants with responses and supplemental responses to these requests. See JX

- 155; JX

- 156; JX

- 157; JX

- 158; JX

- 159; JX

- 160; JX

- 161; JX

- 162; JX

163; JX

- 167; JX

- 169.20 Gilead fought discovery directed to it and moved for a protective order, which the

c ourt denied. 89
The court held trial on June 23 , 2020, and the parties completing post

- trial briefing on August 26, 2020

. II. LEGAL ANALYSIS To inspect books and records under Section 220, a plaintiff must establish by a preponderance of the evidence that the plaintiff is a stockholder, has complied with the statutory form and manner requirements for making a demand, and has a proper purpose for conducting the inspection. 90 If a stockholder meets these requirements, the stockholder must then establish “that each category of the books and records requested is essential and sufficient to the stockholder’s stated purpose.” 91
Gilea d disputes two of these requirements , arguing that Plaintiffs lack proper purposes and have failed to justify the scope of the ir inspection s . Gilead also raises what it refers to as “standing” issues, arguing that Plaintiffs must overcome defenses to anti cipated derivative claims in order to have standing to enforce their rights in this

88 See Dkt. 82. 89 See Dkt. 17, Def.’s Mot. for Protective Order; D kt. 65, May 8, 2020 Oral Arg. re Def.’s Mot. for Protective Order and the Ct.’s Ruling; see also JX

- 164 (Def’s. Responses and Objs. to Pls.’ Am. First Set of Interrogs. Directed to Def. Gilead Sciences, Inc.); JX

- 149 (Pls.’ Am. Notice of Rule 30(b)(6) Dep. of Def. Gilead Sciences, Inc.). 90 See 8 Del. C. § 220(c) ; Cent. Laborers Pension Fund v. News Corp. , 45 A.3d 139, 144 (Del. 2012); Amalgamated Bank v. Yahoo! Inc. , 132 A.3d 752, 775 (Del. Ch. 2016) , abrogated on other grounds by Tiger v. Boast Apparel, Inc. , 214 A.3d 933 (Del. 2019). 91 Thomas & Betts Corp. v. Leviton Mf g. Co. , 681 A.2d 1026, 1035 (Del. 1996) (citing Helmsman Mgmt. Servs., Inc. v. A & S Consultants, Inc. , 525 A.2d 160, 167 (Del. Ch. 1987)).21 Section 220 action . Gilead’s so - called “standing” arguments in substance speak to Plaintiffs’ proper purposes and this decision addresses the arguments in that context

. A. Each Plaintiff Has Demonstrated a Proper Purpose. “The paramount factor in determining whether a stockholder is entitled to inspection of corporate books and records is the propriety of the stockholder’s purpose in seeking such inspection.” 92 A purpose is “proper” under Section 220 where it is “reasonably related” to the stockholder’s interest as a stockholder. 93 “In a section
220 action, a stockholder has the burden of proof to demonstrate a proper purpose by a preponderance of the evidence. ” 94 The Demands state that they are for the purpose of investigating possible mismanagement, wrongdoing , or waste in connection with aspects of the development and commercialization of Gilead’s HIV treatments, although each D emand use s slightly different verbiage to express this purpose. 95

92 CM & M Gp., Inc. v. Carroll , 453 A.2d 788, 792 (Del. 1982) (citing 8 Del. C. § 220(b); Gen. Time Corp. v. Talley Indus. , 240 A.2d 755 (Del. 1968); Skoglund v. Ormand Indus. , 372 A.2d 204, 207 (Del. Ch. 1976)). 93 8 Del. C. § 220(b). 94 Seinfeld , 909 A.2d at 121

. 95 Collins seeks to “[i]nvestigat[e] whether any member of the Board or the Company’s senior officers have mismanaged the Company and/or breached their fiduciary duties to the Company and its stockholders.” JX

- 103 at 5; JX

- 128 at 15. Friedt and Petty seek to “investigate potential corporate mismanagement, wrongdoing, and waste by fiduciaries of the Company, i ncluding the [Board].” JX

- 108 at 1; JX

- 113 at 1. Hollywood seeks to investigate “possible breaches of fiduciary duty,” “possible violations of positive law,” “possible corporate misconduct by members of the [Board] and/or management in connection with . . . core HIV products,” and “possible prolonged concealment of the misconduct described herein.” JX

- 124 at 1. Ramirez seeks to “investigate whether the22 A lthough a stockholder’s desire to investigate wrongdoing is a proper purpose under Delaware law, 96 a mere statement of that purpose without more will not entitle a stockholder to inspection. 97 T o inspect documents for the purpose of investigating mismanagement or wrong d oing, a stockholder “must present some evidence to suggest a credible basis from which a court can infer that mismanagement . . . or wrong d oing may have occurred.” 98

[Board] and certain senior Gilead executives may have breached their fiduciary duties to the Company b y engaging in massive and long

- standing wrongdoing in connection with the Company’s development, patenting, marketing of, and restraints related to, its antiviral HIV/AIDS drugs.” JX

- 89 at 4. Some of the demands also state that they are for the purpose o f assessing the independence and disinterestedness of the members of the Board with respect to the possible wrongdoing at issue, see JX

- 124 at 1; JX

- 103 at 5; JX

128 at 15, but Plaintiffs did not treat this as an independent purpose in briefing. See Dkt. 100, Pls.’ Corrected Combined Post

- Trial Br. (“Pls.’ Opening Br.”) at 3

– 45, 56; Dkt. 104, Pls.’ Combined Post

- Tr. Reply Br. at 3

– 24, 32. This decision treats Plaintiffs’ desire to investigate the independence and disinterestedness of Gilead’s Board member s as a component of its investigation into possible wrongdoing. See infra Section II.C.2.e.
96 E.g. , KT4 P’rs v. Palantir Techs. Inc. , 203 A.3d 738, 758 (Del. 2019) (“One of the most traditional proper purposes for a § 220 demand is the investigation of po ssible wrongdoing by management. When a stockholder has made a colorable showing of potential wrongdoing, inspecting the company’s books and records can help the stockholder to ferret out whether that wrongdoing is real and then possibly file a lawsuit if appropriate.” ); City of Westland Police & Fire Ret. Sys. v. Axcelis Techs., Inc. , 1 A.3d 281, 287 (Del. 2010) (“Our law recognizes investigating possible wrongdoing or mismanagement as a ‘proper purpose.’”); Seinfeld , 909 A.2d at 121 (“It is well establi shed that a stockholder’s desire to investigate wrongdoing or mismanagement is a ‘proper purpose.’ Such investigations are proper, because where the allegations of mismanagement prove meritorious, investigation furthers the interests of all stockholders a nd should increase stockholder return.”).
97 Seinfeld , 909 A.2d at 122 (quoting Helmsman , 525 A.2d at 166). 98 Id. at 118 (internal quotation marks omitted).23 Gilead argues that no Plaintiff has d emonstrated a credible basis to suspect possible wrongdoing. 99 Gilead further argues that each Plaintiff is acting as a Manchurian c andidate for a law firm such that none of Plaintiff s ’ stated purpose s are their

own. 100 Gilead additionally argues that legal defenses to a follow

- on lawsuit challenging the wrongdoing foreclose Plaintiffs’ ability to investigate possible wrongdoing under Section 220. 101
1. Plaintiffs Have Demonstrated a Credible Basis to Suspect Wrongdoing. The credible basis standard imposes “the lowest possible burden of proof.” 102 It does not require a stockholder to prove that the wrongdoing “actually occurred.” 103 Nor does it require a stockholder “to show by a preponderance of the evidence that wrongdoing is probable.” 104 Any such requirement “would completely undermine the purpose of Section 220 proceedings, which is to provide shareholders the access needed to make that determination in the first instance.” 105 Rather, a stockholder need only

99 Dkt. 102, Def. Gilead Sciences, Inc.’s Post

- Trial Answering Br. (“Def.’s Answering Br.”) at 5

– 15. 100 Id. at 22

– 36. 101 See id. at 36

– 44. 102 Seinfeld , 909 A.2d at 123. 103 Marmon v. Arbinet

- Thexchange, Inc. , 2004 WL 936512, at *4 (Del. Ch. Apr. 28, 2004); accord. Thomas & Betts , 681 A.2d at 1031 (“While stockholders have the burden of coming forward with specific and credible allegations sufficient to warrant a suspicion of waste and mismanagement, they are not required to prove by a preponderance of the evidence that waste and mismanagement are actually occurring.”). 104 AmerisourceBergen , 2020 WL 132752, a t *8. 105 La. Mun. Police Emps.’ Ret. Sys. v. Countrywide Fin. Corp. ( LAMPERS ), 200724 establish by a preponderance of the evidence that there is a credible basis to suspect a possibility of wrongdoing. 106 In determining whether a plaintiff has presented a cred ible basis for inspection, the

c ourt looks at the allegations collectively. 107 The “threshold may be satisfied b y a credible showing, through documents, logic, testimony or otherwise, that there are legitimate issues of wrongdoing.” 108 When evaluating whether a credible basis exists, the court may consider on

- going lawsuits, investigations, circumstantial evidence, a nd even hearsay statements evincing possible wrongdoing. 109

WL 2896540, at *12 (Del. Ch. Oct. 2, 2007), order clarified , 2007 WL 4373116 (Del. Ch. Dec. 6, 2007). 106 See AmerisourceBergen , 2020 WL 132752, at *8

– 9; see also Seinfeld , 9 09 A.2d at 118 (holding that a Section 220 plaintiff need only allege a “‘credible basis’ from which a court can infer that mismanagement, waste or wrongdoing may have occurred” (emphasis added)). 107 See , e.g. , In re Lululemon Athletica Inc. 220 Litig. , 201 5 WL 1957196, at *11

– 14 (Del. Ch. Apr. 30, 2015) (collectively assessing founder’s inside knowledge based on company emails, suspicious timing and magnitude of founder’s trades, and the speed at which founder hit his monthly trading cap); Paul v. China Med iaExpress Hldgs., Inc. , 2012 WL 28818, at *4 (Del. Ch. Jan. 5, 2012) (determining that plaintiff had identified a credible basis for Section 220 demand based on evidence which included “numerous third

- party media reports,” “the noisy resignations of three board members” and a publicly announced “internal investigation”). 108 Seinfeld , 909 A.2d at 123 (quoting Sec. First Corp. v. U.S. Die Casting & Dev. Co. , 687 A.2d 563, 568 (Del. 1997)). 109 See , e.g. , AmerisourceBergen , 2020 WL 132752, at *9 (“Ongoing invest igations and lawsuits can provide the necessary evidentiary basis to suspect wrongdoing or mismanagement warranting further investigation. This type of evidence is strong when governmental agencies or arms of law enforcement have conducted the investigati ons or pursued the lawsuits.”); LAMPERS , 2007 WL 2896540, at *10

– 12 (finding a news article and independent statistical analysis of stock option grant dates sufficient to suspect options backdating); Elow v. Express Scripts Hldgs. Co. , 2017 WL 2352151, at *5, *5

– 625 T he Demands seek to investigate four categories of possible wrongdoing:
1. A nti competitive activity resulting in a multi

- billion dollar lawsuit accusing Gilead of violating federal and state antitrust laws by colluding with its competitors to unlawfully extend patent protection and drive up the price of its HIV drugs; 110 2. M ass torts resulting in more than 15,000 claims by plaintiffs who allege that they were seriously harmed by Gilead’s decision to inten tionally delay the introduction of safer and more effective HIV treatments in order to protect the profitability of existing branded medications; 111 3. P atent infringement resulting in a lawsuit by the DOJ against Gilead for its “deliberate” and “wanton” infri ngement of patents held by the federal government relating to PrEP treatment regimens; 112 and 4. K ick

- back schemes resul ting in DOJ investigations into False Claims Act violations

. 113 At trial, Plaintiffs presented evidence to establish a credible basis to suspect possible wrongdoing in connection with each of these four categories. To demonstrate a credible basis a s to the anticompetitive activity , Plaintiffs rely primarily on the allegations and information contained in the Sta ley complai nt as well as the federal court’s decision on the motion to dismiss the Staley A ction. 114 The Staley

(Del. Ch. May 31, 2017) (finding “pleadings in the Anthem Action, the Securities Action complaints, and public statements by Express Scripts” sufficient to establish a credible basis), abrogated on other grounds by Tiger , 214 A.3d 933; Carapico v. Phila. Stock Exch., Inc. , 791 A.2d 787, 792 (Del. Ch. 2000) (finding an “SEC inquiry” and “SEC Order” were “sufficiently concrete” to suspect mismanagement). 110 See JX

- 113 at 1; JX

- 123 at 1

– 2; JX

- 124 at 4; JX

- 128 at 1.
111 See JX

- 124 at 3

– 4; JX

- 128 at 1.
112 See JX

- 103 at 1; JX

- 113 at 1; JX

- 124 at 5

– 6; JX

- 128 at 1. 113 See JX

- 128 at 1.
114 See Pls.’ Opening Br. at 7

– 9.26 complaint spans 134 pages and outlines a litany of alle gedly anticompetitive conduct , reflecting significant research by the plaintiffs in that action

. 115 The parties to the Staley
A ction collectively filed thirty

- eight exhibits during briefing on a motion to dismiss , including copies of the relevant agreements. 116
T he Staley complaint discusses three broad categories of conduct that allegedly delay ed the entry of generic competition : (i) N o - G enerics R estraints in agreements between Gilead and Japan Tobacco, Gilead and B ristol

- Myers , and Gilead and Janssen; (ii) the Teva settlement; and ( i ii) the commercialization of TAF. 117 These categories of action are allegedly part of a broader scheme to restrain competition and increase the prices of HIV drugs

. 118 Th e complaint contends that the N o - G enerics R estraints barred the creation of competing versions of combination therapies that use generic TDF. 119
The com plaint further contends that the Teva settlement delayed Teva’s entry in the TDF market and created disincentives for ANDA second

- filers to launch their products. B y thwarting the market entry of generic TDF , these agreements allowed Gilead to continue to charge high prices for TDF

- based Stribild despite its toxicity , and later help Gilead

115 See JX

- 74. 116 See Decl. of Jayne A. Goldstein in Supp. of Pls.’ Omnibus Mem. in Opp’n to Defs.’ Mot. to Dismiss, Staley v. Gilead Scis., Inc ., Case No. 3:19

- cv - 02573

- EMC (N.D. Cal. 2019); Decl. of Heather M. Burke in Supp. Of Gilead’s Mot. to Dismiss, Staley , Case No. 3:19

- cv - 02573

- EMC. The court can take judicial notice of these filings because they are “not subject to reasonable dispute.” See, e.g. , In re Gen. Motors (Hughes) S’holder Litig. , 897 A.2d 162, 169 (Del. 2006) (citing D.R.E. 201(b)). 117 See JX

- 74 ¶¶ 88

– 355. 118 Id. ¶¶ 1

– 15. 119 Id. ¶ 4.27 shift prescriptions from Stribild to TAF

- based Genvoya. 120 The agreements also allowed Gilead to avoid being pressured to release a standalone TAF product , bec ause prescribers could not pair Gilead’s standalone TAF with drugs offered by Gilead’s competitors

. 121 The plaintiffs allege that Gilead’s actions, taken collectively, “unlawfully manipulated the regulatory framework i n order to impair and delay . . . compe tition.” 122 In response to Gilead’s motion to dismiss, the District C ourt held that the plaintiffs’ allegations regarding the Gilead/B ristol

- Myers , Gilead/Janssen, and Gilead/Teva agreements and the commercialization of TAF stated a claim on which relief could be granted

. 123 T he federal motion

- to

- dismiss standard is higher t han Section 220’s credible basis standard. 124 It follows that allegations which survive a motion to dismiss under the federal standard are sufficient to meet the credible basis standard. Thus, the
court finds that the allegations that survived the motion to dismiss in the Staley A ction

120 Id. ¶¶ 237

– 44.
121 Id. ¶ 245.
122 Id. ¶ 285. 123 See JX

- 242 at 85

– 86. The court dismissed the overa rching conspiracy claims and the claim related to the Gilead/Japan Tobacco agreement. JX

- 242 at 15, 33. Plaintiffs have since filed an amended complaint. See JX

- 244.
124 Compare Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007) (requiring a plaintiff t o plead facts sufficient to “nudge[] their claims across the line from conceivable to plausible”) and Ashcroft v. Iqbal , 556 U.S. 662, 679 (2009) (requiring a Section 220 plaintiff seeking to investigate wrongdoing to holding that the Twombly plausibility standards applies to all civil cases in federal courts) with Seinfeld , 909 A.2d at 123 (describing the credible basis standard as “the lowest possible burden of proof” (internal quotation markets omitted)).28 supply a credible basis to suspect possible wrongdoing as to the Gilead/B ristol

- Myers , Gilead/Janssen, and Gilead/Teva agreements and the commercialization of TAF

. To demonstrate a credible basis a s to the mass tort s, Plaintiffs rely on the allegations and information in the pleadings in state and federal court s in California, Delaware, and Florida. 125 The mass tort class action in C alifornia, as of June 12, 2020, involved more than 15,000 plaintiffs. 126 The complaint in that action runs forty

- four pages, alleges injuries stemming from Gilead’s decision to intentionally delay its TAF

based HIV drugs , and asserts claims for negligence, strict product liability, breach of express warranty, breach of implied warranty, fraud , and concealment. 127 In particular, the complaint alleges that Gilead developed and marketed its toxic TDF

- based med ications and withheld the saf er TAF

- based medications from the market. 128 R ather than releasing the TAF

- based medication, Gilead allegedly continued to add ingredients to its existing TDF

- based medications “in order to extend its monopoly on tenofovir in the treatment of HIV

- 1.” 129 The plaintiffs contend that Gilead did so knowing that reasonable alternatives were not available to patients. 130 The complaint references and

125 Pls.’ Opening Br. at 9

– 11. 126 JX

- 255 at 2.
127 See JX

- 82. Further illustrating the scope of the litigation, Gilead produced nearly 2.6 million pages of documents in response to the plaintiffs’ first and second requests for production

— including FDA regulatory files, license agreements, a listing of clinic al trials, and other documents

— and trial is set for January 2022. See id. ; JX

- 255 at 10

– 11. 128 JX

- 82 ¶¶ 12

– 14, 33

– 48. 129 Id. ¶¶ 76, 51

– 86. 130 Id. ¶ 2.29 quotes from papers that Gilead has published, submissions that Gilead made to U.S. and
E uropean patent offices, public announcements by Gilead representatives, statistics that have been corroborated by the CDC, studies conducted by third parties, and FDA findings. 131 T he plaintiffs’ complaint is cohesive and coherent , and the information and

a llegations in the complaint as well as the myriad evidence supporting it, supply a

cr edible basis to suspect possible wrongdoing in the form of mass torts. To demons trate a credible basis as to patent infringement, Plaintiffs rely on congressional testimony and subsequent litigation regarding Gilead’ s alleged infringement of U.S. government patents in the sales of Gilead’s HIV Pr EP treatments

. 132
After an expert provided the U.S. House Committee on Oversight with a detailed description of his work with the CDC and Gilead, 133 the U.S. government filed a patent infringement lawsuit against Gilead. 134 The complaint totaled 1,739 pages including the ninety

- two attached exhibits , and its filing was reported by multiple news outlets

. 135 The

131 See, e.g. , id. ¶ 40 (quoting Gilead paper comparing the relative effectiveness and safety of TAF as compared to TDF); id. ¶ 41 (citing Gilead patent submission showing that TAF was more effective than TDF); id. ¶ 60 (citing an October 2004 company announcement regarding the future of TAF development); id. ¶ 67 (citing HIV

- treatment statistics that have been corroborated by the CDC); id. ¶ 78 (citing an April 2012 HIV study conducted by researchers at San Francisco’s Veterans’ Administration Medical Center and the Univers ity of California, San Francisco); id. ¶ 79 (quoting FDA characterization of TDF’s safety profile); id. ¶ 91 (quoting Gilead’s Chief Scientific Officer during an October 2010 earnings call). 132 Pls.’ Opening Br. at 11

– 14. 133 See supra note 67 and accompanyin g text. 134 See JX

- 98. 135 See id. (complaint); JX

- 99 (11/8/19 New York Times article covering the litigation);30 exhibits included the relevant patents, various news articles, and relevant scholarship from the scientific community. 136 W hen Gilead sought review of the U.S. government’s patents, the Patent Trial and Appeals Board held that Gilead “has not demonstrated a reasonable likelihood of prevailing.” 137 The thoroughness of the U.S. government’s complaint and the Patent Trial and Appeals Board ’s ruling easily clear the hurdle to establish a credi ble basis to suspect possible wrongdoing as to patent infringement. To demonstrate a credible basis as to False Claims Act violations , Plaintiffs rely

on the existence of four subpoenas issued by the DOJ

. 138 By 2016, Gilead w as the subject of a n “expanding investigation” by the U.S. Attorney for the District of Massachusetts related to possible violations of the False Claims Act

. 139 As d isclosed in its public filings, Gilead received subpoenas in 2016 and 2017 requesting documents related to Gilead’s relation ship with certain charitable organizations , Gilead’s copay
coupon program , and Gilead’s Medicaid price reporting methodology. 140 Further, Gilead is facing a qui tam action in Pennsylvania federal court that alleges multiple violations of the anti

- kickback provisions of the False Claims Act. 141 Although that action focuses on Hepatitis B

- providers, one of the drugs at issue (Viread) is also

JX

- 102 (11/8/19 Science Magazine article covering the litigation). 136 See JX

- 98 at 77

– 1739. 137 JX

- 246 at 21; JX

- 247 at 12. 138 See Pls.’ Opening Br. at 14

– 15. 139 See JX

- 51 at 1. 140 JX

- 134 at 79.
141 See JX

- 88 at ¶¶ 1, 13.31 used to treat HIV

. 142 The complaint alleges that Gilead provided healthcare providers with illegal kickbacks in exchange for prescribing Gilead products

. 143 It contains public payment information from relevant healthcare providers to Gilead, detailed information regarding the co mposition of Gilead’s advisory boards, public pricing information regarding the drugs at issue, and quotes from internal emails referencing the speaker
programs. 144 The combination of multiple government investigations relating to possible False Claims Act violations plus the ongoing qui tam litigation alleging the exact same conduct with respect to Gilead’s Hepatitis B business, establishes a credible basis to suspect possible wrongdoing as to False Claims Act violations. Gilead takes issue with Plaintiffs’ reliance on the complaints in the other lawsuits , contending that unsubstantiated allegations can not supply a credible basis to suspect possible wrongdoing

. 145 As discus sed above, however, the credible basis requirement d oes no t require that allegations of wrongdoing be substantiated or even probable ; 146 they only need be credible. One of the reasons why Delaware courts urge stockholders to conduct pre

- suit investigations is to investigate allegations before filing plenary litigation

142 See id. ; see also JX

- 55 (noting that Vemlidy is a TAF

- based drug and an alternative to Viread). 143 JX

- 88 ¶¶ 58

– 99.
144 Id. ¶ 64 & n.2 (citing “Open Payment” information, which is defined as “ payments that are not associated with a research study such as compensation, food and beverage and lodging”); id. ¶ 69 (listing 2017 advisory boards and each of their composition); id. ¶ 76 (listing prices of drugs at issue in the litigation); id. ¶ 134 (q uoting an internal email that allegedly read: “Let them hear the Message for $3,000”).
145 See Def.’s Answering Br. at 5

– 22. 146 See supra notes 102

– 09 and accompanying text.32 to determine whether they are substantiated

. In furtherance of that objective, this court attempts to avoid “placing an unduly difficult obstacle in the path of stockholders seeking to investigate . . . mismanagement.” 147 The allegations , information, and evidence in the complaints on which Plaintiffs rely meet this standard for the reasons discussed above. Requiring that Plaintiffs demonstrate more would place “an unduly difficult obstacle” in the path of stockholders. The parties also di spute whether Plaintiffs have presented evidence demonstrating that Gilead’s board of directors and senior officers were aware of the categories of alleged wrongdoing. 148 Such a showing is not required to support a credible basis where, as here, Plaintiffs have not limited their purposes to pursuing derivative claims. 149 If Plaintiffs must demonstrate a credible basis to suspect wrongdoing at the level of the board or senior management, then they have done so. Gilead’s HIV drugs generate 73% of Gilead’s reve nue and were thus “intrinsically critical to the company’s business operation.” 150 T here is thus a credible basis to suspect that the board and senior management knew about the possible wrongdoing . If they did not, there is a credible

147 See Thomas & Betts , 681 A.2d at 1032. 148 See Pls.’ Opening Br. at 15

– 17; Def.’s Ans wering Br. at 14

– 15. 149 See AmerisourceBergen , 2020 WL 132752, at *15, *19. 150 See Marchand v. Barnhill , 212 A.3d 805, 822 (Del. 2019); accord. In re Caremark Int’l Inc. Deriv. Litig. , 698 A.2d 959, 967

– 70 (Del. Ch. 1996).33 basis to suspect that they failed to monitor a business segment that was “mission critical,” as well as vitally important to the lives of millions of people. 151
2. Plaintiffs’ Purposes Are Their Own. Only one Plaintiff must demonstrate a proper purpose for the c ourt to grant some l evel of inspection. Thus, for Gilead to avoid inspection entirely, Gilead must accomplish the difficult task of undermining all five Plaintiffs’ purpose s . Gilead’s primary argument toward this end is that each Plaintiff was a passive conduit in a purely lawyer

- driven endeavor and thus lacks a proper purpose under Wilkinson v. A. Schulman,
Inc

. 152 Gilead bears the burden of proving this defense. 153
In Wilkinson , t he plaintiff’s deposition testimony revealed a discrepancy between the plaintiff’s actual purpose and the stated purpose in the demand

. 154 T he plaintiff wanted to investigate the company’s negative financial results, but the demand sought to investigate a b oard decision to accelerate equity awards. 155 Wilkinson’s counsel had ignored his client’s purpose and chose to send a demand concerning the counsel’s

151 See Marchand , 212 A.3d at 824. 152 See Def.’s Answering Br. at 22

– 36 (citing 2017 WL 5289553 (Del. Ch. Nov. 13, 2017)). 153 See Inter

- Local Pension Fund GCC/IBT v. Calgon Carbon Corp., 2019 WL 479082, at *9 (Del. Ch. Jan. 25, 2019) (“A corporate defendant may resist demand where it sho ws that the stockholder’s stated proper purpose is not the actual purpose for the demand. However, in order to succeed, the defendant must prove that the plaintiff pursued its claim under false pretenses. Such a showing is fact intensive and difficult to establish.” (internal quotation marks omitted)), aff’d 237 A.3d 818 (Del. 2020). 154 See Wilkinson , 2017 WL 5289553, at *2

– 3. 155 Id.34 purpose . 156 The disconnect between the client and counsel persisted through the Section 220 enforcement action. 157 Wilkinson verified the complaint, but he did nothing to confirm the accuracy of its allegations and knew nothing about the inspection process or litigation. 158 He failed to play any me aningful role in the litigation and testified that he was unaware of any facts concerning the wrongdoing that his counsel sought to investigate. 159 This confluence of unusual facts led the c ourt to find that the plaintiff lacked a proper purpose. 160 Gilead fails to prove that the facts of this case rise to the level seen in Wilkinson

. In this case, Plaintiffs testified that they actual ly s ought to investigate wrongdoing. 161 They reviewed their respective Demands and complaints prior to autho rizing their service and filing

. 162 For the most part, they were knowledgeable ab out the basis for their Demands. 163 They remained in contact with their respective counsel throughout the

156 Id. 157 See id. 158 Id. at *3. 159 Id. at *2

– 3. 160 See id. at *2

– 4; see also Calgon Carbon, 2019 WL 479082, at *9 (noting that the “misalignment of goals between the stockholder and his counsel was a key factor in the [ Wilkinson ] Court’s determination that there was no proper purpose for the demand.”). 161 See Collins Dep. Tr. at 86:22

– 87:11; Friedt Dep. Tr. at 65:24

– 66:8; Pettry Dep. Tr. at 77:5

– 78:11; Trial Tr. at 12:23

– 13:15 (Ramirez); Ramirez Dep. Tr. at 87:15

– 19, 98:6

– 7, 119:9

– 22; Williams Dep. Tr. at 57:22

– 58:10. 162 See Collins Dep. Tr. at 67:21

– 24; Friedt Dep. Tr. at 74:18

– 22, 111:18

– 112:12, 124:42

– 125:2; Pettry Dep. Tr. at 59:15

– 61:21, 101:9

– 18; Trial Tr. at 12:20

– 22 (Ramirez); Ramirez Dep. Tr. at 58:22

– 24; Williams Dep. Tr. at 54:21

– 24, 77:5

– 18. 163 See Collins Dep. Tr. at 95:17

– 113:22; Pettry Dep. Tr. at 79:16

– 82:17; Trial Tr. at35 demand process and litigation. 164 This testimony is sufficient to establish that Plainti ff s ’
purpose s are their own. To be sure, Gilead proved that lawyers were heavily involved in the process, but that is to be expected considering the significant role lawyers play in representative litigation generally. On that point , In re Fuqua Industries, Inc. Sharehold er Litigation 165 is instructive. There, former Chancellor Chandler denied a motion to disqualify a derivative plaintiff who was unfamiliar with the basic facts of the case and largely deferred control of the litigation to counsel. 166 After canvasing state and federal case law concerning the adequacy standard imposed on derivative plaintiffs, the court held that the plaintiffs’ bare knowledge of the “basic facts” was s ufficient to meet the adequacy requirement, and that

12:23

– 13:15, 32:5

– 34:4 (Ramirez); Ramirez Dep. Tr. at 50:22

– 53:4, 87:15

– 93:18; Williams Dep. Tr. at 58:21

– 62:13. Although Friedt demonstrated a general understanding the subject matter of her demand ( see Friedt Dep. Tr. at 65:24

– 66:8), her knowledge of the basis for her demand was exceptionally weak; this fact standing alone does not compare to the confluence of unusual facts present in Wilkinson

. 164 See Collins Dep. Tr. at 40:3

– 122:9; Friedt Dep. Tr. at 61:9

– 125:2; Pettry Dep. Tr. at 53:6

– 81:18; Trial Tr. at 10:10

– 23, 14:8

– 15:8, 23:20

– 24:6, 41:20

– 42:20 (Ramirez); Ramirez Dep. Tr. at 56:5

– 213:9; Williams Dep. Tr. at 23:4

– 85:24. Gilead accuses Collins of lying about who initiated the process a nd his level of involvement based mostly on Collins’ poor recall of demands he served on Gilead in 2016 and 2018 and his lack of direct contact with litigation counsel. See Def.’s Post

- Trial Answering Br. at 28

– 31. But those demands are largely irrelevan t, and Collins’ sworn testimony established that he had reviewed the demand letters sent on his behalf and maintained contact with his referring counsel. See Collins Dep. Tr. at 40:3

– 122:9. This is sufficient to support the finding that Collins’ stated p urposes were his own. 165 752 A.2d 126 (Del. Ch. 1999). 166 Id. at 134

– 37.36 knowledge of “ the particulars” was not required. 167 In reaching this conclusion, the court observed that Delaware law provides incentives for private attorneys to bring derivative suits as a solution to the collective action problem, that those attorneys naturally play a “dominant role in prosecuting litigation on behalf of clients ,” and that lawyer involvement is particularly appropriate “in cases involving fairly abstruse issues of corporate governance and fiduciary duties.” 168 Of course, the adequacy requirement of Cou rt of Chancery Rule 23.1 at issue in Fuqua and the proper purpose requirement of Section 220 at issue in this case are not the same. This decision does not suggest otherwise. The point is that Delaware courts have
encourage d stockholder s to pursue Sectio n 220 actions in advance of derivative suits for decades. 169 It would be inconsistent with this policy to require that Section 220 plaintiffs

167 Id. at 136 (“[The plaintiff] was at times quite lucid and able to independently communicate the basic facts and claims underlying her lawsuit. She did not know the particulars.”). 168 Id. at 135; id. at 133 (“Our legal system has privatized in part the enforcement mechanism . . . by allowing private attorneys to bring suits on behalf of nominal shareholder plaintiffs.”); see also In re Del Monte Foods Co. S’holders Litig. , 2011 WL 25352 56, at *14 (Del. Ch. June 27, 2011) (“Delaware courts recognize the value of representative litigation.”); In re Revlon, Inc. S’holders Litig. , 990 A.2d 940, 959 (Del. Ch. 2010) (“[R]epresentative litigation serves as a valuable check on managerial conflic ts of interest. Stockholder plaintiffs can and do achieve meaningful results.” (citation omitted)); Bird v. Lida, Inc. , 681 A.2d 399, 402

– 03 (Del. Ch. 1996) (explaining that entrepreneurial plaintiff attorneys can “pursue monitoring activities that are we alth increasing for the collectivity (the corporation or the body of its shareholders)”). 169 See, e.g. , Cal. State Tchrs.’ Ret. Sys. v. Alvarez , 179 A.3d 824, 839 (Del. 2018) (“[T]his Court has repeatedly admonished plaintiffs to use the ‘tools at hand’ and to request company books and records under Section 220 to attempt to substantiate their allegations before filing derivative complaints.”); Sec. First Corp. , 687 A.2d at 571 (Del. 1997) (“[A] Section 220 proceeding may serve a salutary mission as a prelud e to a37 know more than what is required of derivative plaintiffs. It would also be inconsistent with this policy to prohibit lawyers from playing a “ dominant role ” in Section 220 actions while permitting them to do so in derivative litigation. This is particularly so given the increa sing complexities plaguing Section 220 actions. 170
T he incentive s in representative litigation are imperfect , and judicial oversight is required in Section 220 actions as elsewhere . In Fuqua , the court went on to admonish the plaintiffs ’ counsel for effec tively “supplanting” his client in a d eposition, explaining that “e xtreme facts call for the court to exercise its discretion and to curb the agency costs inherent in private regulatory and enforcement mechanisms .” 171 I t was similarly extreme

derivative suit.”); Ash v. McCall , 2000 WL 1370341, at *15 n.56 (Del. Ch. Sept. 15, 2000) (“As the Delaware Supreme Court has repeatedly exhorted, shareholders plaintiffs should use the ‘tools at hand,’ most prominently § 220 books and records actio ns, to obtain information necessary to sue derivatively.”). 170 See, e.g. , Wilkinson , 2017 WL 5289553, at *3 (“A stockholder obviously can use counsel to seek books and records. Section 220 expressly contemplates that a stockholder can make a demand ‘in per son or by attorney or other agent.’ Indeed, given the complexity of Delaware’s sprawling Section 220 jurisprudence, a stockholder is well

advised to secure counsel’s assistance.” (quoting 8 Del. C. § 220(b)); Calgon Carbon , 2019 WL 479082, at *10 (holding that stockholders are entitled to rely on counsel “to raise concerns, to advise them on how to remedy those concerns, and to pursue appropriate remedies”); Kosinski v. GGP Inc. , 214 A.3d 944, 951

– 52 (Del. Ch. 2019) (“The fact that Plaintiff sought and acc epted the advice of counsel is to his credit, not his detriment.”); see also Cox et al., supra note 6, at 2150 (attributing the increased complexity in Section 220 actions to the fact that “defendants have turned books and records litigation into a surroga te proceeding to litigate the possible merits of the suit where they place obstacles in the plaintiffs’ way to obstruct them from employing it as a quick and easy pre

- filing too”).
171 Fuqua , 752 A.2d at 133

– 34.38 facts that drove the outcome in Wilkinson , where t he attorneys disregarded their client’s objectives entirely and pursued their own

. 172
In this cas e, the degree of lawyer involvement does not come close to the line

crossing conduct at issue in Fuqua or Wil kinson

. This case reflect s benign manifestations
of the role that plaintiffs’ law firms play generally in representative litigation. Gilead singles out Pettry and Friedt because they were enrolled in a portfolio monitoring program and had no knowledge of alleged wrongdoing at Gilead before counsel contacted them

. 173 But there is nothing in appropriate about such programs. They are voluntary and serve the purpose of keeping stockholders abreast of corporate developments that may affect the value of their stock holdings. They do not obligate participants to send Section 220 demands or file suits

. 174
Gilead also complains about Hollywood’s involvement in portfolio monitoring
programs , 175 bu t those arguments are similarly misguided. Hollywood is a police officers’ retirement fund that is run by a seven - member Board of Trustees, all of whom

172 See Wilkinson , 2017 WL 5289553, at *2

– 3. 173 S ee Def.’s Answering Br. at 24

– 28; Trial Tr. at 147:9

– 16; id. at 149:22

– 150:4; Friedt Dep. Tr. at 61:24

– 64:9; Pettry Dep. Tr. at 38:12

– 22, 40:19

– 41:22, 75:10

– 19. 174 See Calgon Carbon , 2019 WL 479082, at *10 (“Advice from counsel comes in many forms. Indiv idual stockholders and smaller institutions cannot be expected to have an independent, in

- house team to cultivate purely homegrown legal analyses of their investments. Stockholders are entitled to hire counsel to review and monitor their portfolios for po tential mismanagement or wrongdoing. They are also entitled to rely on that counsel to raise concerns, to advise them on how to remedy those concerns, and to pursue appropriate remedies.”). 175 See Def.’s Answering Br. at 31

– 33; Trial Tr. at 156:15

– 158:22.39 are volunteers

. 176 Hollywood works with portfolio monitoring counsel , who raise potential issues with Hollywood, first by bringing them the attention of Hollywood’s outside general counsel. 177 If the general counsel determines that the matter is worthy of consideration, he elevates the discussion first to the Chairman of the B oard and then to
the Board to make the determination of whether to take action. 178 Hollywood followed its process in this case , 179 and that process is sound. Like boards of Delaware corporations, 180 boards of pension funds are encouraged to rely on professional advisors when fulfilling the ir duties to act in the best interests of the retirees. Hollywood’s reliance on professional advisors, including portfolio monitoring counsel, strengthens the integrity of Hollywood’s purpose , not the opposite. Demonstrating how far Gilead was willing t o go in attacking Plaintiffs, Gilead tries to impugn Ramirez’s testimony based on a cut

- and

- paste error in Ramirez’s retainer agreement with counsel. 181 The error ( failing to replace the word “opioid”) was made by counsel

— not Ramirez. 182 Ramirez explained that he was caught by surprise when asked about the error at his deposition; the “curveball,” as he called it, confused him because

176 See Williams Dep. Tr. at 22:23

– 23:3, 42:1

– 11; see also id. at 25:7

– 9 (“Q. Who at Hollywood has decision

- making authority with respect to litigation decisions? A. That would be the board of trustees.”).
177 Id. at 41:13

– 21. 178 Id. at 55:11

– 56:7. 179 See JX

- 12 9 at 1; Williams Dep. Tr. 56:8

– 57:3. 180 See, e.g., 8 Del. C. § 141(e). 181 See Trial Tr. at 39:21

– 40:8 (Ramirez). 182 See id. at 10:19

– 11:11, 40:16

– 21 (Ramirez).40 this case has nothing to with opioids. 183 Ra mirez confirmed throughout his deposition and trial testimony t hat his aim in seeking records was true, even stating that he was inspired by an article he read related to wrongdoing related to Gilead’s HIV drugs. 184 In the end, Gilead faile d to establish that any P laintiff’s lawyers’ involv ement undermined any Plainti ff’s purpose ( much less all of them ) . The record reflects that each Plaintiff genuinely holds its stated purpose of investigating possible wrongdoing in the development and commercialization of Gilead’s HIV treatments.
B. Gilead’s So
- Called “Standing” Argum ents In its second attack on Plaintiffs’ purposes, Gilead argues that “Plaintiffs’ Demands are defective because Plaintiffs lack standing to investigate the claimed wrongdoing.” 185 This is so, according to Gilead , because any derivative claims challenging the wrongdoing at issue would be dismissed for the following reasons : (i) Plaintiffs did not own shares at the time of the alleged wrongdoing; 186 (ii) the

183 Id. at 13:13

– 15, 32:5

– 34:4 (Ramirez). 184 See id. at 12:23

– 13:15 (Ramirez); Ramirez Dep. Tr. at 87:15

– 19, 98:6

– 7, 119:9

– 22. 185 Def.’s Answering Br. at 36. 186 See id. at 36 (citing 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 its stated purpose is not reasonably related to its role as a stockholder.”); W. Coast Mgmt. & Cap., 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 t he underlying suit[.]”)); id. at 37

– 38.41 derivative claims they seek to pursue are time

- barred; 187 and (iii) any derivative claims they seek to pursue would be barred by an exculpatory charter provision. 188 Gilead devoted extensive resources to this argument. To support it, Gilead served discovery, brought a motion to compel, and took five depositions. Gi lead explored these
issues at trial and devoted eight pages of post

- trial briefing to them

. 189
There a re a number of vexing aspects of this argument. For starters, although certain of these points may speak to a plaintiff’s standing to pursue a derivative suit, they do not speak to a p laintiff’ s standing to pursue a Section 220 action. Under Delaware law, “[t]he issue of standing is concerned ‘only with the question of who is entitled to mount a legal challenge and not with the merits of the subject matter in controversy.’” 190 Where the right at issue is statutory, “the real determinant” of standing “is the statutory language itself.” 191 Section 220(c) answers the question of who has standing to pursue a n

187 See id. at 36 (citing Graulich , 2011 WL 1843813, at *6 (denying Section 220 demand where “plaintiff ha[d] articulated no stated purpose other than to investigate wrongdoing in order to bring an appropriate suit a gainst defendant, and plaintiff [was] time

- barred from bringing that suit”)); id. at 39

– 43. 188 See id. at 43 n.26 (citing Se. Pa. Transp. Auth. v. Abbvie Inc. , 2015 WL 1753033, at *13 (Del. Ch. Apr. 15, 2015) (investigating corporate wrongdoing and waste we re not proper purposes when the facts alleged amounted to only a possible breach of the duty of care, damages for which would be barred by the corporation’s exculpation clause)). 189 See Trial Tr. at 185:4

– 190:15; Def.’s Answering Br. at 36

– 43. 190 Dover Hist . Soc’y v. City of Dover Plan. Comm’n , 838 A.2d 1103, 1110 (Del. 2003) (quoting Stuart Kingston, Inc. v. Robinson , 596 A.2d 1378, 1382 (Del. 1991)). 191 Oceanport Indus., Inc. v. Wilm. Stevedores, Inc. , 636 A.2d 892, 900 (Del. 1994); Newark Landlord Assoc. v . City of Newark , 2003 WL 21448560, at *5 (Del. Ch. June 13, 2003).42 enforcement action under Section 220(c)

— a stockholder. 192 In this case, it is undisputed that each Plaintiff held stock when filing their complaints (and also for significant periods prior to filing the complaints)

. 193 Gilead’s arguments speak not to Plaint iffs’ standing to pursue a Section 220 action
but , rather , to the viability of derivative claims that Plaintiffs might pursue in the future.
“T his Court has repeatedly stated that a Section 220 proceeding does not warrant a trial on the merits of underl ying claims. ” 194 Yet Gilead pushes the c ourt do just that

—

192 See 8 Del. C. § 220(c) (providing that “[i]f the corporation . . . refuses to permit an inspection sought by a stockholder . . . the stockholder may apply to the Court of Chancery for an order to compel such inspection” (emphasis added)); see also Weingarten v. Monster Worldwide, Inc. , 2017 WL 752179, at *5 (Del. Ch. Feb. 27, 2017) (“[T]he legislature has made clear that only those who are stockho lders at the time of filing have standing to invoke this Court’s assistance under Section 220.”). 193 Collins has held Gilead stock since 1999, except for a five

- month period in 2008. JX

52. Friedt has held Gilead stock since 2013. See JX

- 157 at 9; Friedt Dep. Tr. at 31:15

– 19, 38:13

– 22. Pettry has held Gilead stock since 2016. See JX

- 155 at 9; Pettry Dep. Tr. at 43:7

– 16. Ramirez has held Gilead stock since 2016. See JX

- 46; Ramirez Dep. Tr. at 27:3

– 15. Hollywood has held Gilead stock since 2010. JX

- 16 1 at 9. 194 In re UnitedHealth Gp., Inc. Section 220 Litig. , 2018 WL 1110849, at *7 & n.95 (Del. Ch. Feb. 28, 2018) (Montgomery

- Reeves, V.C.) (collecting cases) ; see also Lavin , 2017 WL 6728702, at *9 (Slights, V.C.) ( holding that a Corwin defense will not impede an otherwise properly supported demand for inspection and observing that “when a stockholder demands inspection as a means to investigate wrongdoing in contemplation of a class or derivative action, Delaware co urts generally do not evaluate the viability of the demand based on the likelihood that the stockholder will succeed in a plenary action”); Amalgamated Bank v. UICI, 2005 WL 1377432, *2 (Del. Ch. June 2, 2005 ) (Noble, V.C.) (“ The potential availability of affirmative defenses to withstand fiduciary duty claims cannot solely act to bar a plaintiff under Section 220. First, these are summary proceedings; the factual development necessary to assess fairly the merits of a time

- bar affirmative defense, for exam ple, as to each potential claim, is not consistent with the statutory purpose. Second, courts should not be called upon to evaluate the viability of affirmative defenses to causes of actions that have not been, and more importantly may not ever be, assert ed. Third, that a claim arising out of a particular43 evaluate, in the context of a summary proceeding, defenses to causes of action that have not yet been asserted and might have never been asserted. Beyond the obvious practical concerns raised by su ch an approach, t he theoretical problems with Gilead’s argument are rife, as Vice Chancellor Laster persuasively explained in Amerisou r ceBergen

. 195 As the court held in AmerisourceBergen , a defense
to a future derivativ e claim affects a stockholder’s ability to invoke Section 220 only where the stockholder identifies pursuing a derivative claim as its sole purpose, as was the case in Graulich and West Coast Management

. 196 In this case, Plaintiffs did not limit

transaction may be barred does not mandate the conclusion that documents relating to that transaction are not ‘necessary, essential, and sufficient’ for a shareholder's proper purpose with respect to mor e recent transactions.”) ; LAMPERS , 2007 WL 2896540, at *12 (Noble, V.C.) (rejecting, in a Section 220 proceeding, that no springloading ever occurred because “by raising such a defense, Countrywide seeks to litigate the ultimate issue in a possible future derivative suit that might eventually be filed by LAMPERS” and holding that “[t]his is neither the time nor the procedural setting to address that issue”). 195 See AmerisourceBergen , 2020 WL 132752, at *14

– 24; see also Okla. Firefighters Pension & Ret. Sys. v. Citigroup Inc. , 2014 WL 5351345, at *6 (Del. Ch. Sept. 30, 2014) (“Although Citigroup disclaims any effort to turn this proceeding into a trial on the meri ts of Plaintiffs possible derivative claims, Citigroup essentially seeks that result by implying that Plaintiff must have specific, tangible evidence that Citigroup’s Board or senior management was complicit in the fraud at Banamex. That argument ignores the inferences that this Court can

— and must

— draw under the credible basis standard, and would discourage the very behavior this Court has sought to encourage among would

- be derivative or class plaintiffs.”). 196 See Graulich , 2011 WL 1843813, at *5 (“[P]lain tiff’s only purpose is to pursue potential derivative claims.” (emphasis added)); W. Coast Mgmt., 914 A.2d at 641 ( “It is clear that West Coast’s sole purpose for investigating claims of wrongdoing is to obtain additional information to replead demand fut ility in order to pursue a second derivative suit.” (emphasis added)). To be clear, a Section 220 plaintiff is not required to limit the end

- uses of the information they seek at the outset of their investigation. AmerisourceBergen 2020 WL 132752, at *12 (holding that the proper purpose44 themselves to the s ole purpose of pursuing derivative claims. 197 Rather, Plaintiffs expressly identified multiple potential end

- uses for the information obtained through the ir investigation s . 198 Gilead acknowledges that Plaintiffs have stated multiple potential end

- uses for the information obtained through their investigation s , 199 but Gilead pivots to argue that “it is obvious based on Plaintiffs’ [i] deposition testimony, coupled with their [ii] retention agreements, that their only true purpose is to pursue such a lawsuit .” 200
A review of Plaintiffs’ testimony and a close examination of Gilead’s citations reveal that Gilead’s position is unsupported and its citations are misleading . As an initial

requirement does not require a stockholder to pick one of these end

- uses at the outset, or “commit in advance to what it will do with an investigation before seeing the results of the investigation”)

. 197 See Def.’s Answering Br. at 37 (acknowledging that “Plaintiffs claim that their purposes ‘are not limited to bringing a derivative lawsuit’” (citing Pls.’ Opening Br. at 46)); JX

- 123 at 2 (Ramirez’s demand stating that if the investigation supports doi ng so, he “ may use the documents to pursue a shareholder derivative action” (emphasis added)); JX

- 128 at 15 (Collins’s demand stating that the information sought will enable him “to determine whether wrongdoing or mismanagement has taken place such that it would be appropriate to initiate litigation”); JX

- 108 at 1 (Pettry’s demand listing “presenting a litigation demand to the Board” or “suggesting corporate governance reforms” as other potential end uses of the fruits of their investigation); JX

- 113 at 1 ( Friedt’s demand listing “presenting a litigation demand to the Board” or “suggesting corporate governance reforms” as other potential end uses of the fruits of their investigation); JX

- 124 at 1 (Hollywood’s demand expressly stating that Hollywood reserves the right to “take other action to seek appropriate relief”). 198 See Pls.’ Opening Br. at 25

– 45. 199 See Def.’s Answering Br. at 37 (acknowledging that “Plaintiffs claim that their purposes ‘are not limited to bringing a derivative lawsuit’” (citing Pls.’ Op ening Br. at 46)). 200 Id. (emphasis added).45 matter, although Gilead makes this point as to “Plaintiffs” as a whole, Gilead does not cite to any deposition testimony from one of the five Plaintiffs

— Hollywood. 201 Nor could they. Hollywood’s 30(b)(6) representative Williams testified that he had not
pr edetermined what would happen after the investigation. 202 Williams , a retired police officer, expressly likened a Section 220 inspection to a police investigation, and stated that “ [ t ] his is simply an investigation. If it turns out that there is no [wrongdoing] , then it will be the end of it.” 203 Gilead can only avoid inspection if it defeats all five Plaintiffs’ proper purposes. By failing to show that Hollywood had predetermined what to do with the frui ts of its investigation, Gilead’s argument fal ls short from the get

- go . Gilead’s other citations amount to misrepresentations of the record

. For the position that it is “obvious” from “Plaintiffs’ deposition testimony” that Plaintiffs’ “only true purpose” was to pursue derivative claims, Gilead offer s the following :

• Gilead cites to the portion of Collins’s testimony where Collins directly denies any plans to file a derivative claim. 204 The examining attorney asked: “Do you intend to file a derivative action against Gilead?” Collins

201 See id. at 36

– 43. 202 See Williams Dep. Tr. at 58:1

– 10 (“Well, as I understand it, it’s similar to a police investigation, if you will. If there is some wrongdoing that's being alleged, there’s an investigation t hat follows. That investigation may turn out to be completely prudent. Any and all the action taken was in the best interests of the company. And as I stated before, if there’s nothing there, then we move on. If it turns out that there’s wrongdoing, th en the matter would be brought back to the board for any other consideration.”). 203 Id. 52:1

– 3; see also id. at 51:10

– 17 (“Q. And when you say ‘the action,’ what do you mean by that? A. The books and records investigation involving Gilead. Q. Has Holly wood considered bringing a derivative lawsuit related to the allegations in the Section 220 demand letter? A. No.”). 204 Def.’s Answering Br. at 37 (citing Collins Dep. Tr. at 103

– 05).46 responded: “I d on’t have any plans to do that at the moment.” 205 The attorney continued: “Are you aware of any other Gilead stockholders who are contemplating bringing a derivative action against Gilead?” He responded: “No, I’m not.” 206

• Gilead cites to the portion of P ettry’s testimony where she directly denies that her purpose is limited to pursuing a derivative claim. 207 The examining attorney asked: “Now, at the time you entered into th is engagement agreement [with counsel], did you intend to file derivative litigati on relating to Gilead?” Pettry answered: “It was a matter of first finding out

. I mean, obviously, although it’s potentially a shareholder derivative matter, clear ly there was first to do inspection demand to get information in order to determine whether it’s appropriate to file derivative, shareholder litigation.” 208

• Gilead cites to the portion of Ramirez’s deposition transcript where Ramirez uses equivocal language when refer ring to a future derivative lawsuit. 209 Counsel for the defendants identif ied each category of documents requested in Ramirez’s demand and asked: “[F]or what purpose do you need this information?” 210 In response to the first few such questions, Ramirez vaguely indicated that he believed that the information would strengthen his “case.” 211 In response to the last such question, Ramirez went further to say that he believed the information would strengthen the allegations for the purpose of a potential lawsuit, but he used conditional language, stating: “ if there is a case to be bro ught.” 212 The

205 Collins Dep. Tr. at 104:19

– 23. 206 Id. at 105:1

– 4. 207 Def.’s Answering B r. at 37 (citing Pettry Dep. Tr. at 64

– 65). 208 Pettry Dep. Tr. at 64:23

– 65:8 (emphasis added). 209 Def.’s Answering Br. at 37 (citing Ramirez Dep. Tr. at 102

– 12). 210 Ramirez Dep. Tr. at 107:21

– 22, 108:19

– 20, 110:1

– 2.
211 See id. at 108:3

– 5 (“I think they could help strengthen our case against the allegations.”); id. at 109:15

– 17 (“As I had previously stated, I believe they could shed some light and strengthen our case.”); id. at 110:15

– 17 (“I would again say adding merit and strength to the allegations that were present . . . for all the points as like a collective.”).
212 Id. at 111:18

– 21 (emphasis added) (“[A]s previously stated, these conversations could add merit and strength to our allegations, if there is to be a case brought.”).47 reference to a “case to be brought” called for a follow

- up question, which counsel eventually asked: “What specific case are you talking about.” 213 Ramirez responded by cl aiming privilege, but again using conditional language: “I think any of the discussions about any potential case, if there is to be one , were between my counsel and I. So I don’t know if I can properly answer that for you.” 214 The examining attorney let the questioning end there. 215

• Gilead cites to the portions of Friedt’s te stimony where Friedt suggests that she will rely on her counsel in determining the end

- uses of her investigation. 216 The lead

- off question in this series, which the examiner insisted required a “yes or no” response, was: “[H]ave you informed Gilead that yo u may file a derivative action against it?” 217 To this question, Friedt responded “[t]hrough counsel, yes,” and then said “I left it up to my counsel to inform Gilead.” 218 The examiner had not previously asked whether Friedt had considered filing a derivativ e claim, and thus the question assumed aspects of the very fact that Gilead seeks to prove

— Friedt’s intent to pursue derivative claims. Moreover, on its face, this examiner’s question only asks whether Friedt “ may ” file a derivative action, and not that s he has predetermined that a derivative claim is the only end

- use she intend ed to pursue. Friedt later clarified, in other pages specifically relied on by Gilead, that she intended to leave it to her counsel to determine whether to pursue derivative claims , implicitly denying any then

- present intention of pursuing derivative claims. 219 T his deposition te stimony does not support , and portions directly contradict , Gilead’s contention that Plaintiffs’ “only true purpose” is to pursue a derivative lawsuit.

213 Id. at 112:14

– 15.
214 Id. at 112:16

– 20 (emphasis added). 215 See id. 216 Def.’s Answering Br. at 37 (citing Friedt Dep. Tr. at 54

– 56). 217 Friedt Dep. Tr. at 54:1

– 5. 218 Id. at 54:9

– 15. 219 Id. at 81:4

– 9 (“Q. At the time you entered into this engagement agreement, did you intend to file a derivative action relating to Gilead . . . ? A. . . . I would leave that up to my counsel.”).48 Plaintiffs’ retention agreements with counsel similarly fail to demonstrate that Plaintiffs’ sole purpose was to pursue a derivative suit. Gilead argues that “the retention agreements make clear that counsel will not be paid until Plaintiffs achieve a fin ancial
sett le ment or judgment

— an implausible scenario absent the prosecution of derivative claims.” 220 O nce again, Gilead fails to make this point as to all Plaintiffs

— only four of the five Plaintiffs executed retention agreements with counsel. 221 Collins re presented that he did not have a retention agreement with counsel. 222
I t is true that plaintiffs’ attorneys commonly take matters on contingency and receive compensation only as a consequence of the prosecution and settlement of derivative claims. This co mmon arrangement is, again, a benign aspect of Delaware’s solution to the collective action problem that stockholders face . Moreover, the fact that retention agreements with counsel provide that counsel only gets paid in the event of plenary litigation do es not prevent Plaintiffs from using “ the fruits of their investigation for other ends.” 223 It is logical that the agreements would address litigation because “[t]he plaintiffs would need their counsel to conduct li ti gation ,” but not to pursue

220 Def.’s Opening Br. at 37 (citing JX

- 79 at 2 (Friedt Retention Agreement); JX

- 80 at 2 (Pettry Retention Agreement); JX

- 87 at 1

– 2 (Ramirez Retention Agreement); JX

- 122 at 2 (Hollywood Retention Agreement)).
221 See JX

- 79 (Friedt Retention Agreement); JX

- 80 (Pettry Retention Agreement); JX

- 87 (Ramirez Retention Agreement ); JX

- 122 (Hollywood Retention Agreement).
222 Collins Dep. Tr. at 45:19

– 24. 223 See AmerisourceBergen , 2020 WL 132752 at *14.49 alternative courses of action. 224 The retention agreements standing alone, therefore, do not undermine Plaintiffs’ proper purposes. To sum up the defects in Gilead’s so

- called “standing” arguments as a whole: They are not actually about standing to bring a Section 220 action . They speak to the viability of a derivative claim, which is largely beyond the scope of Section 220 proceedings. Even the authorities on which Gilead relies limit the application of Gilead’s arguments to situations wher e pursuing a derivative cl aim is the plaintiff ’ s sole purpose. Section 220 plaintiffs generally need not specify the end

- uses of their investigation at the
outset of their investigation , a nd Plaintiffs here have stated multiple potential end

- uses. Gilead’s arguments to the contra ry based on Plaintiffs’ deposition testimony fail to address all Plaintiffs and are misleading . Plaintiffs’ retention agreements with their counsel do not support Gilead’s point. Gilead’s arguments fail for other reasons as well. Gilead argues that Pla intiffs lack stan ding to seek inspection because Plaintiffs did not own shares at the time of the possible wrongdoing. 225 Yet, i n Saito , the Delaware Supreme Court found that “the date on which a stockholder first acquired the corporation’s stock does not control the scope

224 Id. 225 See Def.’s Answering Br. at 36 (citing Graulich , 2011 WL 1843813, at *5 (“If plaintiff would not have standing to bring sui t, plaintiff does not have a proper purpose to investigate wrongdoing because its stated purpose is not reasonably related to its role as a stockholder.”)); W. Coast Mgmt. , 914 A.2d at 641 (“If a books and records demand is to investigate wrongdoing and th e plaintiff’s sole purpose is to pursue a derivative suit, the plaintiff must have standing to pursue the underlying suit[.]”)).50 of records available under § 220

. ” 226 As the c ourt explained , a stockholder can seek inspection of records pre

- dating their stock ownership “[i]f activities that occurred before the purchase date are ‘reasonably related’ to the stockholder’s interest as a stockholder.” 227 A document can reasonably relate to a stockholder ’ s current interests if it provides background and context to the current or ongoing wrong t he stockholder seeks to investigate. 228 In this case, any records sought that arguably pre

- date Plaintiffs’ ownership of Gilead stock are “reasonably related” to Plaintiffs’ current interest as stockholders, and concern post

- purchase date wrongs that have t heir roots in earlier
events. In any event, Gilead’s timing

- of

- ownership argument does not apply to the on

going False Claim Acts investigations, and the antitrust abuses, mass torts, and patent violations are all alleged to be continuing

. 229
There is also a non

- frivolous argument that Gilead waived its statute of limitations and Section 102(b)(7) defenses by failing to identify them in its interrogatory responses, despite this court ordering discovery into Gilead’s defenses. 230 Gilead responds that it

226 Saito v. McKesson HBOC, Inc., 806 A.2d 113, 117 (Del. 2002). 227 Id. 228 UICI , 2005 WL 1377432 , at *2 ( “A document that contributes to the investigation of a continuing wrong or provides background and context to a current, actionable wrong may be relevant and, indeed, necessary to a shareholder’s proper purpose regardless of whether the events revealed in the documents are themselves actionable.”). 229 See JX

- 82 at ¶ 2; JX

- 98 at 3, 69

– 75; JX

- 244 at ¶¶ 155, 163. 230 See JX

- 164; JX

- 191; JX

- 206; JX

- 210; see also IQ Hldgs., Inc. v. Am. Com. Lines Inc. , 2012 WL 3877790, *1 (Del. Ch. Aug. 30, 2012) (“The underlying purpose of discovery51 was not required to raise these defenses in its answer or otherwise because they are not defense s to a books and records action but , rather, to the plenary lawsuit. 231 This decision need not reach this argument given the multiple other defects in Gi lead’s position. But it bears noting that Gilead’s position only underscores that Gilead’s

“ standing ” arguments speak to the viability of a potential derivative claim and not Plaint iffs’ entitlement to inspection under Section 220. C. Scope of Production Onc e a Section 220 plaintiff establish es a proper purpose, the c ourt must determine the scope of inspection. A stockholder with a proper purpose “bears the burden of proving that each category of books and records is essential to accomplishment of the stockh older's articulated purpose for the inspection.” 232 The Delaware Supreme Court recently articulated this burden as follows: Books and records satisfy this standard “if they address the ‘crux of the shareholder’s purpose’ and if that information ‘is unavail able from another source.’” That determination is “fact specific and will necessarily depend on the context in w hich the shareholder’ s inspection demand arises.” Keeping in mind that § 220 inspections are not tantamount to “comprehensive discovery,” the Court of Chancery must tailor its order for inspection to cover only those books and records that are “essential and sufficient to the stockholder's stated purpose .” In other words, the court must give the

in general is to reduce the element of surprise at trial . . . .”). 231 See Def.’s Answering Br. at 40 n.23 (“The statute of limitations is not an affirmative defense in a books and records action.”). 232 Palantir , 203 A.3d at 751 (quoting Thomas & Betts , 681 A.2d at 1035).52 petitioner everything that is “essential,” but stop at what is “sufficient.” 233 In this case, Plaintiffs seek inspection of formal board materials , including board minutes, presentations, reports, agendas, and prep aration materials, dating back to 2004 and concerning the topics of the Demands. Plaintiffs additionally seek five specific categories of documents

. Gilead’s response is three

- fold. Gilead first argues that inspection should be limited to formal board materials. Gilead next makes arguments as to each category of additional documents. Gilead finally argues that each Plaintiff should be limited to inspecting only the documents specifically sought in their respective Demands. 1. Formal B oard Materials Gil ead agrees that , upon a finding that Plaintiffs have stated proper purposes , the production of the formal board materials is appropriate

. 234 Gilead has collected and reviewed approx imately 1,600 centrally

- stored formal board m aterials from December 1,
2004 to February 25, 2020 , and identified over 400 of them as potentially related to the topics sought in the Demands. 235 Because Plaintiffs have stated proper purposes,
P laintiffs are entitled to inspect this category of documents. These documents should have been produced in response to the Demands without resort to litigation.

233 Id. at 751

– 52. 234 Def.’s Answering Br. at 47

– 50. 235 JX

- 210 at 21

– 23.53 2. Categories of Additional Documents Gilead argues that the c ourt should limit inspection to the formal board m aterials based on what Gilead describes as the “default rule that only formal board materials are necessary and essential in a Section 220 proceeding.” 236 There is no such default rule. Gilead relies primarily on Vice Chancellor Laster’s decision in AmerisourceBergen

. 237 There, the Vice Chancellor classified corporate books and records into three categories: “Formal Board Materials,” 238 “Informal Board Materials,” 239 and “Officer

- Level Materials.” 240 The Vice Chancellor explained that

“ [t] he starting point (and often the end ing point) for an adequate inspection will be board

level documents

. ” 241 The premise for that observation is that companies can and should provide these documents voluntarily without forcing stockholders to litiga te over them.

236 Def.’s Answering Br. at 54. 237 See id. 238 AmerisourceBergen , 2020 WL 132752 at *24 (defining “Formal Board Materials” as “board

- level documents that formally evidence the directors’ deliberations and decisions and comprise the materials that the directors formally received and considered ”) (collecting cases limiting the scope of production to Formal Board Material); see also Woods v. Sahara Enters. , 2020 WL 4200131, at *11 (Del. Ch. July 22, 2020) (same). 239 AmerisourceBergen , 2020 WL 132752 at *25 (defining “Informal Board Materials” as

“ generally include[ing] communications between directors and the corporation’s officers and senior employees, such as information distributed to the directors outside of formal channels, in between formal meetings, or in connection with other types of board gatherings” and sometimes including “emails and other types of communication sent among the directors themselves, even if the directors used non

- corporate accounts”). 240 Id. (defining “Officer Level Materials” as “communications and materials that were onl y shared among or reviewed by officers and employees”).
241 Id. at *24.54 Gilead misses this point and invokes the AmerisourceBergen taxonomy for a contrary
purpose

— to broaden the already extensive disputes among the parties. Formal board m aterials need not be an end point, particularly where the wrongdoing appears vast. As the Vice Chancellor further expl ain ed in AmerisourceBergen , “[i]f the plaintiff makes a proper showing, an i nspection may extend to informal materials , ” 242 and “wide

- ranging mismanagement or waste” might require a “more wide

- ranging inspection.” 243 In this case, Gilead’s efforts to draw the line at formal board m aterials fall short because Plaintiffs have shown a need for addi tional categories of documents by demonstrating a credible basis to suspect wide

- ranging misconduct and wrongdoing. In addition to formal board m aterials, Plaintiffs se ek the following categories of documents: (a ) the agreements with other companies at is sue in the antitrust litigation; (b ) policies and procedures concerning the topics covered in the Demands ; ( c ) senior management materials ; (d) communications between Gilead and the government; and ( e ) director questionnaires

.

242 Id. at *25. 243 Id. at *24 (first quoting Freund v. Lucent Techs., Inc. , 2003 WL 139766, at *5 (Del. Ch. Jan. 9, 2003); then citing Skoglund v. Ormand Indus. , 372 A.2d 204, 211 (Del. C h. 1976)).55 a. Anticompetitive Agreements Plaintiffs seek to inspect the agreements between Gilead and its competitors at issue in the antitrust litigation. 244 Plaintiffs suspect that these agreements violated antitrust laws or otherwise perpetuate unlawful anticompetitive activity

. 245 T hey are core to the wrongdoing Plaintiffs seek to investigate. 246 They are therefore necessary and essential to Plaintiffs’ proper purposes. They are unlikely to be available from another

source. Accordingly, Plaintiffs are entitled to inspect this category of documents. 247 Because of the centrality of these agreements to Plaintiffs’ purposes, Gilead should have produced them without resorting to litiga tion.

244 Pls.’ Opening Br. at 56

– 57. 245 Id. 246 See, e.g., AmerisourceBergen , 2020 WL 132752, at *28 (ordering inspection of settlement agreements with the DEA to identify the scope of the company’s compliance obligations and determine whether the Board willfully disregarded them). 247 The parties dispute the significance of AmerisourceBergen on this category of documents. In that case, the court ordered inspection of documents related to the defendant’s participation in trade associations where the plaint iffs suspected that the defendant violated the law by collaborating with trade associations. See id. Plaintiffs argue that this outcome weighs in favor of production of the antitrust agreements in this action. Pls.’ Opening Br. at 57 n.191. Gilead resp onds that the Court limited production in AmerisourceBergen to formal board materials, and argues that this court should “follow AmerisourceBergen and not order the production of the underlying antitrust agreements.” Def.’s An swering Br. at 53. Defendant misconstrues AmerisourceBergen , where the Court found that “[t]he record is inadequate to determine whether the plaintiffs can inspect any other materials because AmerisourceBergen refused to provide any discovery into what types of books and records exist, how they are maintained, and who has them.” See 2020 WL 132752, at *1. The court expressly granted the plaintiffs the ability to seek further discovery to determine what books and records exist. See id. at *29. Here, Plaintiffs obtained that discovery, so there is no need for bifurcation

.56 In holding that Plaintiffs are entitled to inspect the allegedly anticompetitive agreements, the court does not distinguish between the Gilead/Japan Tobacco agreement and those still at issue in the Staley Action. T he complete set of agreements is n ecessary to understanding the pattern of behavior that the Demands seek to investigate

. b. Policies and Procedures Plaintiffs seek to inspect Gilead’s policies and procedures concerning Gilead’s compliance with antitrust regulations and patent law. 248 These requests seek discrete
cat egories of information, which are easy to produce, and where inspection is routinely granted. 249 Gilead argues that the formal board m aterials from the relevant time period are sufficient to understand whether Board and management decisions were made in compliance with Gilead’s policies and procedures. 250 But the formal b o ard m aterials may
not reflect what, if any, policies and procedures were i n place during that time period

. These documents are therefore necessary and essential t o Plaintiffs’ proper purposes. They are unlikely to be available from another source. Accordingly, Plaintiffs are

248 Pls.’ Opening Br. at 57. 249 See, e.g. , AmerisourceBergen , 2020 WL 132752, at *27 (ordering production of the Amerisourcebergen’s written policies regarding its anti

- diversion and compliance program); In re Facebook, Inc. Section 220 Litig

. (Facebook 220 ) , 2019 WL 2320842, at *18 (Del. Ch. May 30, 2019) (ordering the production of Facebook’s formally adopted policies and procedures regarding data privacy and access to user data, including those promulgated following the entry of the Consent Decree); Unite dHealth , 2018 WL 1110849, at *10 (ordering the production of UnitedHealth’s policies and procedures regarding Medicare billing); Lucent , 2003 WL 139766, at *6 (ordering production of policies and procedures concerning accounting compliance, including polic ies for (i) preparing revenue “targets” or preparing and disclosing “financial guidance” or projections; and (ii) recognizing revenue, on sales to its distributors). 250 Def.’s Answering Br. at 53

– 54.57 entitled to inspect this category of documents. This is another category of documents that Gilead should have p roduced without resorting to litig ation.

c. Senior Management Materials Plaintiffs seek to inspect two categories of officer

- level documents that they refer to as “Senior Management Materials” to determine “whether and to what extent mismanagement occurred and what information was transmitted to Gilead’s directors and officers.” 251
This c ourt will permit inspection of officer

- level documents under certain circumstances. As the Delaware Supreme Court described in Saito when affirming inspection of officer

- level documents, “generally , the source of the documents in a corporation’s possession should not control a stockholder's right to inspection under § 220.” 252 Although inspection of officer

- level documents can be appropriate , in general, “the Court of Chancery should not order emails to be produced when other materials ( e.g. , traditional board

- level materials, such as minutes) would accomplish the petitioner’s proper purpose, but if non

- email books and records are insufficient, then the court should order emails to be produced.” 253 The burden lies on Plaintiffs to establish a reasonable basis to suspect that other materials are likely to be insufficient to accomplish the stockholder’s proper purpose

.

251 Pls.’ Opening Br. at 60

– 62. 252 Saito , 806 A.2d at 118; accord. Wal

- Mart Stores, Inc ., 95 A.3d at 1273; see also Woods , 2020 WL 4200131, at *11; Mudrick Cap. Mgmt., L.P. v. Globalstar, Inc. , 2018 WL 3625680, at *9 (Del. Ch. July 30, 2018). 253 Palantir , 203 A.3d at 752

– 53.58 First, Plaintiffs seek approximately thirty sets of materials emailed to senior
managem ent members prior to their bi

- monthly “Leadership Team Meetings” and ad hoc meetings. 254 Plaintiffs observe that Gilead stores the materials circulated in connection with the bi

- monthly meetings in a centralized location. 255 Plaintiffs contend that these
mat erials are likely to include information about the government investigations, the antitrust lawsuits, and Gilead’s decision to sue the U.S. government. 256 These thirty sets

are necessary and essential to Plaintiffs’ ability to investigate whether and to wha t extent wrongdoing occurred and what information was transmitted to Gilead’s directors and officers. 257 They are also un likely to be available from another source. Accordingly, Plaintiffs are entitled to inspect this category of documents. Second, Plaintiffs request ele ctronically stored information

— previously gathered and produced in connection with the congressional investigation, the Staley Action , and a 2016 subpoena

— from the files of two former inside directors John Milligan and John Martin

. 258 Plaintiffs say that Milligan and Martin were highly influential Board members

254 Trial Tr. at 87:7

– 21; JX

- 210 at 26, 39

. 255 See Pls.’ Opening Br. at 62 & n.204; see also JX

- 210 at 40 (“From June 2019 to present, documents may be accessed via OneDrive and projected for shared viewing.”). 256 Pls.’ Opening Br. at 60

– 62. 257 Cf. Facebook 220 , 2019 WL 2320842, at *18 (ordering the production of “electronic communications, if coming from, directed to or copied to a member of the Board, concerning” the plaintiffs’ allegations in that case, “to be collected from the following [senior management] custodians: Erskine B. Bowles, Sheryl Sandberg, Alex Stamos, and Mark Zuckerberg”). 258 Pls.’ Opening Br. at 61

– 62; see also JX

- 210 at 27 n.4 (alleging that Milligan and Martin, as former executives, were “custodians in certain Matters by virtue of their roles59 and thus their documents are critical because any wrongdoing wi ll likely involve what these Board members knew. 259 As to this one category, Plaintiffs’ efforts fall short. A dire ctor’s status as a management member or highly influential Board member can sometimes provide a basis for inspecting that director’s emails , typically where the director played a key role in the suspected wrongdoing

. 260 The mere fact that a director holds a management position or is influential seldom make s their documents necessary and essential to investigating wrongdoing. 261 In this case, Plaintiffs offer no additional justification for seeking to inspect these documents. Plaintiff s have therefore failed to demonstrate that these emails are necessary and essential to their state d purposes and are not entitled to inspect this category of documents.
d. Gilead’s Communications with the Government Plaintiffs seek to inspect high

- level commu nications between Gilead and government investigators that state the basis for the ongoing government investigations. 262 This c ourt regularly orders companies to produce communications

as Senior Officers). 259 Pls.’ Post

- Trial Opening Br. at 61

– 62. 260 See, e.g. , Yahoo! , 132 A.3d at 791

– 793 (permitting inspection of CEO’s “email and other electronic documents” because she “was the principal corporate actor in the hiring process”). 261 Cf. Kaufman v. CA, Inc. (Kaufm an II) , 905 A.2d 749, 755 (Del. Ch. 2006) (holding that the plaintiff “conflate[d] the usefulness or responsiveness of further discovery . . . with the proper standard of necessity under Section 220” and “[t]hat a document would be potentially discoverable under Rule 34 does not make it necessary and essential under Section 220”). 262 Pls.’ Opening Br. at 58

– 60.60 related to government investigations and litigation in Section 220 cases where those investigations supply or support a credible basis for wrongdoing

. 263 Just as Gilead’s policies and procedures are necessary and essential to reveal the degree of Gilead’s compliance with internal rules, these documents are necessary and
essential to reveal the degree of Gilead’s compliance with positive law and government regulations. Considering that the ongoing government investigations supported Plaintiffs’ credible basis for inspection, these documents are necessary and essential to assess whether wrongdoing occurred. These communications might also inform whether the Company has taken any steps to address the possible wrongdoing

. O ngoing government investigations might threaten Gilead’s ability to secure future government fundi ng, which would present a serious problem for Gilead’s business.
These documents are therefore necessary and essential to Plaintiffs’ proper purposes. They are also un likely to be available from another source. Accordingly, Plaintiffs are entitled to inspect this category of documents.

263 See, e.g. , Facebook 220 , 2019 WL 2320842, at *18 (ordering production of documents and communications related to “investigations conducted by the F TC, DOJ, SEC, FBI and ICO regarding Facebook’s data privacy practices”); China MediaExpress , 2012 WL 28818, at *6 (ordering production of any materials provided to the United States Patent Office or any patent office in any other country, including the Peo ple's Republic of China); Lucent , 2003 WL 139766, at *5 (ordering production of “[o]rders and other communications with the SEC concerning its investigation”); Carapico , 791 A.2d at 792 (ordering production of “reports presented to or minutes of meetings o f the Exchange Board of Governors (or any committees or subgroups thereof) relating to (a) the SEC inquiry, (b) the decision to authorize the settlement of the SEC inquiry, or (c) the impact of the terms of the SEC Order on the business of the Exchange or any of its subsidiaries”); see also AmerisourceBergen , 2020 WL 132752, at *25 (“In an appropriate case, an inspection may extend further to encompass communications and materials that were only shared among or reviewed by officers and employees . . . .”).61 e. Director Questionnaires Plaintiffs seek to inspect the directors’ and officers’ questionnaires for each Board member. 264 This court regularly orders companies to produce director questionnaires where a p laintiff has demonstrated a credible basis to suspect possible wrongdo ing

. 265
Because that the Demands investigate alleged violations of positive law and government regulations, understanding the directors’ motives and potential conflicts is paramount. Further, the burden on Gilead in producing these documents is minimal.
G ilead stores these documents in a central location , 266 so they are easy to locate and produce

. The y are unlikely to be available f rom another source. Accordingly, Plaintiffs are entitled to in spect this category of documents. 3. Plaintiff
- Specific Restrictions on Inspection Gile ad seeks to limit the scope of each Plaintiffs’ inspection s to the documents requested in their respective Demands. 267 Gilead argues that if a Plaintiff elected not to request a certain category of documents in its Demand, then it conceded that such

264 Pls.’ Opening Br. at 56. 265 See, e.g. , Facebook 220 , 2019 WL 2320842, at *18 (ordering defendant to produce director questionnaires); UnitedHealth , 2018 WL 1110849, at *9 (same); Lavin , 2017 WL 6728702, at *14 (same). Often, a stockholder will assert the desire to investigate director independence as a separate purpose for seeking books and records. See, e.g. , Facebook 220 , 2019 WL 2320842, at *1 (one of the plaintiffs’ stated purposes was to investigate the independence and disinterest of the board); Un itedHealth , 2018 WL 1110849, at *1 (Del. Ch. Feb. 28, 2018) (same); Lavin , 2017 WL 6728702, at *1 (Del. Ch. Dec. 29, 2017) (same). In this case, Plaintiffs desire to investigating director independence is a component of investigating the corporate wrongdo ing at issue. 266 JX

- 210 at 24 n.2. 267 See Def.’s Answering Br. at 45

– 46.62 category of information is nonessential to its stated purpose. Gilead contends that Plaintiffs may not by piggyback on oth er stockholders’ separate Demand s . 268 As a general rule, a stockholder’s inspection rights are limited by the scope of the demand letter, and a Sectio n 220 plaintiff will be foreclosed from recasting the scope of its demand at the eleventh hour. 269 The conve ntional wisdom underlying this rule is that it is difficult and inefficient for companies to consider the merits of an evolving request. Preventing Section 220 plaintiffs from revising the scope of their demands during litigation promotes the policy of pr otecting corporations from the burden and additional costs created by these inefficiencies. 270

268 Id. at 46 (first citing Paraflon Invs., Ltd. v. Linkable Networks, Inc. , 2020 WL 1655947, at *6 (Del. Ch. Apr. 3, 2020) (refusing to order production of documents not requested in dem and); then citing Fuchs Fam. Tr. v. Parker Drilling Co. , 2015 WL 1036106, at *4, *7 (Del. Ch. Mar. 4, 2015) (rejecting a Section 220 plaintiff’s late

- stage attempts to expands its inspection)). 269 See, e.g. , Fuchs , 2015 WL 1036106, at *4 (rejecting a Sect ion 220 plaintiff’s efforts to expand the scope of requested documents through a supplemental demand sent on the eve of trial); Quantum Tech. P’rs IV, L.P. v. Ploom, Inc. , 2014 WL 2156622, at *14 n.118 (Del. Ch. May 14, 2014) (“I note, however, that if Quantum later seeks to inspect information that is not within the categories of information sought in this action, Quantum would need to make a new demand and, if necessary, file a new action.”); Highland Select Equity Fund, L.P. v. Motient Corp. , 906 A.2d 156, 167 (Del. Ch. 2006), and aff’d sub nom. Highland Equity Fund, L.P. v. Motient Corp ., 922 A.2d 415 (Del. 2007) (“None of these revisions adequately address the court’s concern as to the breadth of the original demand sued upon or the scope of relief Highland Select continues to seek.”). 270 Pa raflon , 2020 WL 1655947, at *6 (“Striking the proper balance between a stockholders’ inspection rights and the right of a company’s board to manage the corporation without undue interference from stockholders is a core principle in our Section 220 jurispru dence. Limiting inspection to what is specified in a demand letter is a key way of maintaining that balance. A corporate board is entitled to be informed of exactly what the stockholder is demanding to inspect so it can make the call, before63 This general rule serves to promote litigant and judicial efficiency and is not strictly applied when those purposes are not furthered . For example, Section 220 plaintiffs often lack information about what type of corporate records exist when making their demands. This informational asymmetry can force Section 220 plaintiffs to make broad requests. Tailored discovery in a Section 220 action can allow Section 220 plaintiffs to refine their requests with greater precision and drop requests for non

- existent information. The iterative process that occurs through Secti on 220 discovery thus helps to eliminate pointless hypothetical disputes and promote judicial an d litigan t efficiencies, all good things this c ourt strives to encourage. 271
To that end , sometimes this c ourt will ask Section 220 plaintiffs to re vise their
reque sts to streamline dispute s. In Facebook , for example, the c ourt required the
defendant to respond to a demand as “refined by the parties’ several and meet and confer sessions .” 272 The “refined” demand was “the version of the Demand that [the defendants] addressed in their pre

- trial brief and at trial.” 273 The c ourt held : “The scope

litigation, whether to allow inspection or litigate the demand. Holding that inspection will not be ordered unless a request is presented in the stockholder’s inspection demand preserves this balance and prevents a demand letter from turning into an iterative, ongoin g request for production.”). 271 See, e.g. , ATR

- Kim Eng Fin. Corp. v. Araneta , 2006 WL 3783520, at *2 (Del. Ch. Dec. 21, 2006); Loppert v. WindsorTech, Inc. , 865 A.2d, 1282, 1290

– 91 (Del. Ch. 2004); see also Dkt. 65, Oral Arg. Re Def.’s Mot. for Protective O rder and the Ct.’s Ruling at 9

– 10, 57

– 58.
272 In re Facebook 220 , 2019 WL 2320842, at *18. 273 Id.64 of documents requested in that version, therefore, has been properly joined for decision.” 274 The general rule does not promote efficiency when applied to coordinated Section 220 actions like this case . Often, corporate actions will draw demands for inspection from multiple plaintiffs. In such cases, Section 220 plaintiffs may agree to coordinate their efforts , o r sometimes the court or the defendants will ask the Section 220 plaintiffs
to do so

. A coordinated approach is almo st always desirable because it allows the c ourt to resolve, and the defendant to litigate, and a single Section 220 action rather than multiple actions . A coordinated approach also reduces the likelihood of inconsistent determinations on similar is sues. In this case, it was Gilead that asked Plaintiffs to coordinate their litigation efforts , and Plaintiffs agreed. 275 As part of their coordinated process, Plaintiffs worked together to narrow their over sixty overlapping documents requests to a streamline d list. In this context, limiting Plaintiffs to the docu ments they demanded before coordination would make no sense. There is no prejudice to Gilead in producing all categories of information deemed necessary and essential to all Plaintiffs. In fact, it would be easier for Gilead to create and track one production set rather than five

. Gilead’s approach would force the court to conduct four separate scope analyses, defeating some of the judicial efficiencies gained by coordination. It would also risk

274 Id. 275 See supra note 85 and accompanying text.65 inconsistent rulings on whether categories of documents were necessary and essential as to certain stockholder plaintiff s but not to others who seek to investigate the same wrongdoing. In sum, strict application of the general rule in this case would defeat the rule’s purpose of promote litigant and judicial efficiency

. For this reason, Gilead’s final a rgument seems yet an other indication that Gilead’s real goal in this litigation is not to protect its interests but , rather, to make the process of investigating wrongdoing as difficult as possible for its stockholder s . D. Conditions on Inspection This decision does not address whether it is appropriate to enter conditions on inspection. In its pretrial brief, Gilead asked that inspection be subject to four specific conditions. 276 In its post

- trial brief, Gilead suggests that the parties should meet and confer regarding the conditions. 277 Plaintiffs appear to agree that a meet and confer is warranted

. 278 The parties shall confer on whether conditions are appropriate and report to the c ourt within twenty days of issuance of this decision.

276 Dkt. 85, Def. Gilead Sciences, Inc.’s Pre

- Trial Br. at 56

– 57 (requesting that inspection be subject to a mutually

- agreeable form of confidentiality order, a Delaware forum selection provision applicable to any future litigated that uses the fruits of Plai ntiffs’ inspection, an incorporation condition like that entered in Yahoo! , and Gilead’s ability to assert that certain documents are privileged or nonresponsive).
277 Def.’s Answering Br. at 60. 278 See Pls.’ Opening Br. at 62

– 63.66 E. Plaintiffs Are Granted Leave to Move for Their Fees and Expenses. Delaware courts follow the American Rule that “ each party is generally expected to pay its own attorneys’ fees regardless of the outcome of the litigation .” 279 Even u nder the American Rule, however, this court retains the ability to shift fees for bad faith conduct “ to deter abusive litigation and protect the integrity of the judicial process.” 280 In assessing “bad faith,” this court can consider both litigation

- related cond uct and the party’s pre

- lit igation conduct. 281 Although there is “ no single, comprehensive definition of ‘bad faith’ that will justify a fee

- shifting award ,” 282 this court commonly employs the “glaring egregiousness” standard. 283 “The bad faith exception is applied in

279 Shawe v. Elting , 157 A.3d 142, 149 (Del. 2017) (citing Montgomery Cellular Hldg. Co. v. Dobler , 880 A.2d 206, 227 (Del. 2005)). 280 Montgomery Cellular , 880 A.2d at 227 (internal quotation marks omitted); see also Martin v. Harbor Diversified, Inc. , 2020 WL 568971, at *1 (Del. Ch. Fe b. 5, 2020) (“Shifting fees for bad faith is not, properly speaking, an exception to the American Rule on fees; it is a method for reducing and appropriately allocating the costs of vexatious behavior sufficiently serious that justice requires such mitigat ion.”). 281 Compare In re SS & C Tech., Inc. S’holders Litig. , 948 A.2d 1140, 1149

– 52 (Del. Ch. 2008) (applying the bad faith exception to the American Rule and shifting fees because plaintiffs’ counsel brought a motion to withdraw on notice in bad faith and made a series of misstatements in filings “that tended to misrepresent or downplay the facts”), with Hardy v. Hardy , 2014 WL 3736331, at *17 (Del. Ch. July 29, 2014) (applying the bad faith exception to the American Rule to pre

- litigation conduct and holding that the exception can apply “where the pre

- litigation conduct of the losing party was so egregious as to justify an award of attorneys’ fees” (quoting Est. of E. Murton DuPont Carpenter v. Dinneen , 2008 WL 2950764 (Del. Ch. Mar. 26, 2008))). 282 Montgomery Cellular , 880 A.2d at 227. 283 See, e.g. , RBC Cap. Mkts., LLC v. Jervis , 129 A.3d 816, 879 (Del. 2015) (affirming this court’s determination under the “glaring egregiousness” standard to shift fees); Isr. Disc. Bank of N.Y. v. First State Depository Co. , 2013 WL 2326875, at *28

– 29 (Del. Ch. May 29, 2013) (applyi ng the “glaring egregiousness” standard in assessing potential fee shifting); eBay Domestic Hldgs., Inc. v. Newmark , 16 A.3d 1, 47

– 48 (Del. Ch. 2010)67 ‘extraordinary cir cumstances , ’ ” 284 and it “ is n ot lightly invoked, ” 285 but this court has shifted fees in Section 220 actions where a party’s conduct rose to the level of bad faith

. 286
Delaware courts have urge d stockholders to use the “tools at hand” and pursue Section 220 inspections before filing derivative lawsuits for decades , 287 and this c ourt has seen a rise in Section 220 enforcement actions in recent years. 288 The regrettable reaction by defendant corporations has been massive resistance. As one academic article commented, “d efendants have turned books and records litigation into a surrogate proceeding to litigate the possible merits of the suit where th e y pla ce obstacles in the plaintiffs’ way to obstruct them from employing it as a quick and ea s y pre - filing

(same); In re Charles Wm. Smith Tr. , 1999 WL 596274, at *2

– 4 (Del. Ch. July 23, 1999) (same). 284 E.g. , Shaw e , 157 A.3d at 150

– 51; Montgomery Cellular , 880 A.2d at 227; accord. Dover Hist. Soc. , 902 A.2d at 1092; Henry v. Phixios Hldgs., Inc. , 2017 WL 2928034, at *14 (Del. Ch. July 10, 2017) (Montgomery

- Reeves, V.C.). 285 Ravenswood Inv. Co. v. Winmill & Co. , 201 4 WL 2445776, at *4 (Del. Ch. May 30, 2014) (quoting Beck v. Atl. Coast PLC , 868 A.2d 840, 851 (Del. Ch. 2005)). 286 See, e.g., Carlson v. Hallinan , 925 A.2d 506, 545

– 46 (Del. Ch. 2006); McGowan v. Empress Ent., Inc. , 791 A.2d 1, 3

– 8 (Del. Ch. 2000); Technic orp Int’l II, Inc. v. Johnston , 2000 WL 713750, at *44 (Del. Ch. May 31, 2000). 287 See supra note 169. 288 See Edward B. Micheletti, et al., Recent Trends in Books

- and

- Records Litigation , 38 Del. Law. 18, 18 (2020) (“[T]he frequency of stockholder demands to inspect corporate books and records has increased . . . .”); Cox et al., supra note 6 at 2123, 2146

– 47 (comparing the number of Section 220 actions filed from 1981 to 1994 with those filed from 2004 to 2018 and finding a thirteen

- fold increase).68 disc overy tool.” 289 The se obstacles increase the investment required f rom stockholder plaintiffs and their counsel when pur suing Section 220 inspections. It seems that d efendants like Gilead think that there are no real downsides to overly aggressive defense campaigns at the Section 220 phase

. Although a ggressive ly defending a Section 220 action will result in higher defense costs during that phase, the approach can undermine follow

- on derivative claims if successful , thereby lowering net
costs for defendants

. Even if the approach is unsuccessful in thwarting inspection , the work product created in building legal defenses to follow

- on derivative claims can be repurposed in the context of the derivative suit

. And t he risk of reputational harm to defendants res ulting from a decision detailing possible corporate wrongdoing rendered under a plaintiff

- friendly Section 220 appears to lack the deterrent effect one might expect it to have. Scholars have recommended fee shifting as one means of recalibr ating the ris k s of Section 220 litigation

. 290 This proposition finds support in prior decisions of this court and the Model Business Corporation Act

. 291

289 Cox et a l., supra note 6 at 2150. 290 See id. at 2151 (“Delaware should give serious consideration to awarding plaintiffs their attorneys’ fees in cases where the defendants make untoward efforts to delay the resolution of these summary cases.”); Randall Thomas, Imp roving Shareholder Monitoring of Corporate Management by Expanding Statutory Access to Information , 38 Ariz. L. Rev. 331, 335 (1996) (arguing that for Section 220 to facilitate effective stockholder monitoring, it must be significantly streamlined, includi ng shifting attorneys’ fees to deter frivolous refusals to produce information). 291 See supra note 286; Model Business Corporation Act § 16.04(c) (“If the court orders inspection and copying of the records demanded, it shall also order the corporation to pa y69 Fee shifting may be appropriate here

. Gilead exemplified the tr end of overly aggressive litigation strategies by blocking legitimate discovery, misrepresenting the record, and taking positions for no apparent purpose other than obstruct ing the exercise of Plaintiffs’ statutory rights

. Gilead ’s pre

- litigation failure to provide any Plaintiff with even a single document despite the ample evidence of a credible basis and the obvious responsiveness of certain categories of documents amplifies the court’s concerns

. For the se reasons, Plaintiffs are granted leave to move for fee

- shifting.
III. CONCLUSIO N For the foregoing reasons, judg ment is entered in favor of Plaintiffs. The parties sha ll confer regarding conditions on inspection and concerning a form of o rder memorializing the scope of Gilead’s production. Plaintiffs may see k leave to move for fee

- shifting.

the shareholder’s costs (including reasonable counsel fees) incurred to obtain the order unless the corporation proves that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the shareholder to inspect the records demanded.”).