Court Opinion

ID: 4641848
Source: CourtListenerOpinion
Date Created: 2020-12-10 23:02:16.77091+00
Date Added: 2024-06-11T08:00:25.446631
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

AMERISOURCEBERGEN          §
CORPORATION,               §
                           §             No. 60, 2020
     Defendant Below,      §
     Appellant,            §             Court Below: Court of Chancery
                           §             of the State of Delaware
            v.             §
                           §             C.A. No. 2019-0527-JTL
LEBANON COUNTY EMPLOYEES’ §
RETIREMENT FUND and        §
TEAMSTERS LOCAL 443 HEALTH §
SERVICES & INSURANCE PLAN, §
                           §
     Plaintiffs Below,     §
     Appellees.            §

                       Submitted: September 23, 2020
                       Decided:   December 10, 2020

Before SEITZ, Chief Justice; VALIHURA, VAUGHN, TRAYNOR, and
MONTGOMERY-REEVES, Justices, constituting the Court en Banc.

Upon appeal from the Court of Chancery. AFFIRMED.

Stephen C. Norman, Esq., Jennifer C. Wasson, Esq., Tyler J. Leavengood, Esq.,
POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Michael D.
Blanchard, Esq. (argued), Amelia G. Pennington, Esq., MORGAN, LEWIS &
BOCKIUS LLP, Boston, Massachusetts, for Appellant AmerisourceBergen
Corporation.

Samuel L. Closic, Esq., (argued) Eric J. Juray, Esq., PRICKETT, JONES &
ELLIOTT, P.A., Wilmington, Delaware; Gregory V. Varallo, Esq., BERNSTEIN
LITOWITZ BERGER & GROSSMAN LLP, Wilmington, Delaware, for Appellees
Lebanon County Employees’ Retirement Fund and Teamsters Local 443 Health
Services and Insurance Plan.
Eric L. Zagar, Esq., Michael C. Wagner, Esq., Christopher M. Windover, Esq.,
KESSLER TOPAZ MELTZER & CHECK, LLP, Radnor, Pennsylvania, for
Appellee Lebanon County Employees’ Retirement Fund.

Frank R. Schirripa, Esq., Daniel B. Rehns, Esq., Hillary Nappi, Esq., HACH ROSE
SCHIRRIPA & CHEVERIE LLP, New York, New York; David Wales, Esq.,
Andrew Blumberg, Esq., BERNSTEIN LITOWITZ BERGER & GROSSMANN
LLP, New York, New York, for Appellee Teamsters Local 443 Health Services and
Insurance Plan.

                                      2
TRAYNOR, Justice:

      This is an interlocutory appeal from a Court of Chancery memorandum

opinion1 in an action brought under Section 220 of the Delaware General

Corporation Law (the “DGCL”) ordering AmerisourceBergen Corporation (the

“Company” or “AmerisourceBergen”) to produce certain books and records to

Lebanon County Employees Retirement Fund and Teamsters Local 443 Health

Services & Insurance Plan (the “Plaintiffs”) and granting the Plaintiffs leave to take

a Rule 30(b)(6) deposition “to explore what types of books and records exist and

who has them.”2 The Company claims that the Plaintiffs’ inspection demand, which,

among other things, was aimed at investigating possible breaches of fiduciary duty,

mismanagement, and other wrongdoing, was fatally deficient because it did not

disclose the Plaintiffs’ ultimate objective—that is, what they intended to do with the

books and records in the event that they confirmed their suspicion of wrongdoing.

The Company also contends that the Court of Chancery erred by holding that the

Plaintiffs were not required to establish a credible basis to suspect actionable

wrongdoing. And finally, the Company argues that the Court of Chancery erred as

a matter of law when it allowed the Plaintiffs to take a post-trial Rule 30(b)(6)

deposition.

1
  Lebanon Cnty. Emps.’ Ret. Fund v. AmerisourceBergen Corp., 2020 WL 132752 (Del. Ch. Jan.
13, 2020).
2
  Id. at *29.
                                            3
         In this opinion, we hold that, when a Section 220 inspection demand states a

proper investigatory purpose, it need not identify the particular course of action the

stockholder will take if the books and records confirm the stockholder’s suspicion

of wrongdoing. We also hold that, although the actionability of wrongdoing can be

a relevant factor for the Court of Chancery to consider when assessing the legitimacy

of a stockholder’s stated purpose, an investigating stockholder is not required in all

cases to establish that the wrongdoing under investigation is actionable. And lastly,

we find that the Court of Chancery’s allowance of the post-trial deposition was not

an abuse of discretion. Our reasons follow.

                                    I.      BACKGROUND

         During the ongoing opioid epidemic, AmerisourceBergen, one of the

country’s largest opioid distributors, has been investigated by numerous law-

enforcement and government agencies. The Court of Chancery discussed these

investigations in depth; we briefly summarize them here.

         A.      Factual Background3

         Federal regulations require opioid distributors to maintain effective controls

and reporting systems to ensure that drug shipments stay within “legitimate medical,

scientific, and industrial channels.”4            In 2007, the federal Drug Enforcement

3
    We take the essential facts from the Court of Chancery’s opinion below. Id. at *1–6.
4
    Id. at *2 (quoting 21 U.S.C. § 823(e)(1)).
                                                  4
Administration (the “DEA”) suspended AmerisourceBergen’s license at its Orlando,

Florida distribution center, concluding that AmerisourceBergen had not maintained

effective controls there in part because it failed to flag rogue pharmacies that:

          (i) ordered opioids from AmerisourceBergen in amounts that far
          exceeded what an average pharmacy orders, (ii) ordered small amounts
          of other drug products relative to the pharmacies’ [opioids] purchases,
          (iii)   ordered     [opioids]     much      more     frequently   than
          [AmerisourceBergen]’s other pharmacy customers, and (iv) were
          publicly known to fill[] prescriptions that were issued by physicians
          acting outside the usual course of professional practice . . . .5

          AmerisourceBergen settled with the DEA and agreed to implement and

maintain at all its facilities a “compliance program designed to detect and prevent

diversion of controlled substances.”6 Following the settlement, AmerisourceBergen

continued to work with the DEA to implement an anti-diversion program and to

develop an industry standard for opioid-distribution compliance.

          Despite these efforts, since 2012 AmerisourceBergen has been the subject of

several governmental reports, investigations, and state and federal lawsuits. Federal

prosecutors in ten states and the attorneys general of forty-one states have either

subpoenaed the company’s documents or named it as a defendant in litigation. Two

congressional investigations found that AmerisourceBergen failed to address

suspicious order monitoring in violation of federal law. The first investigation,

5
    Id. (alterations in original) (internal quotations and citations omitted).
6
    Id.
                                                     5
initiated by the Energy and Commerce Committee of the United States House of

Representatives, focused specifically on AmerisourceBergen’s operations in West

Virginia. The report, released in 2018 after the investigation (the “West Virginia

Report”), found that AmerisourceBergen had improved its monitoring and

evaluation of suspicious orders in West Virginia following the 2007 settlement with

the DEA, but that the Company had failed to maintain that progress. The West

Virginia Report compared the number of opioid doses shipped by the Company with

the number of suspicious orders reported, revealing that “AmerisourceBergen’s

reporting of suspicious orders declined significantly, eventually reaching nominal

levels.”7

          In 2018, the Office of the Ranking Member for the Homeland Security and

Governmental Affairs Committee in the United States Senate released a report after

conducting an investigation of the Company’s operations in Missouri (the “Missouri

Report”).         The Missouri Report concluded that AmerisourceBergen “had

‘consistently failed to meet [its] reporting obligations’ regarding suspicious orders”8

and that the Company reported significantly less suspicious orders than other opioid

distributors that shipped a similar number of opioid doses.

7
    Id. at *4.
8
    Id. (quoting the Missouri Report at 2).
                                              6
         In 2019, the New York Attorney General filed a complaint, naming

AmerisourceBergen, among other opioid distributors and manufacturers, as a

defendant (the “NYAG Complaint”).             The NYAG Complaint alleged that the

AmerisourceBergen’s policies failed to properly identify suspicious orders and that

the Company “‘ha[d] consistently stood out as compared to its major competitors

[because of] its unwillingness to identify suspicious orders, even among customers

that regularly exceeded their thresholds and presented multiple red flags of

diversion.’”9

         AmerisourceBergen is also a defendant in multi-district litigation in the

United States District Court for the Northern District of Ohio (the “Multidistrict

Litigation”), which “centralizes 1,548 different lawsuits brought by state attorneys

general, cities, counties, Native American tribes, union benefit funds, and other

plaintiffs.”10 The plaintiffs in the Multidistrict Litigation, who also allege that

AmerisourceBergen has failed to implement and maintain effective systems to flag

suspicious orders, have successfully defended AmerisourceBergen’s motion to

dismiss and motion for summary judgment. In an effort to settle the ongoing

Multidistrict Litigation, the Company and two other opioid distributors, offered to

pay $10 billion. The regulators rejected the offer and demanded $45 billion.

9
    Id. (quoting the NYAG Complaint ¶ 727).
10
     Id. at *5.
                                              7
       To date, AmerisourceBergen “has spent more than $1 billion in connection

with opioid-related lawsuits and investigations.”11                  Analysts estimate that

AmerisourceBergen could spend up to $100 billion to reach a global settlement.

       B.      Procedural History

       In May 2019, amidst this “flood of government investigations and lawsuits

relating to AmerisourceBergen’s opioid practices,”12 the Plaintiffs served a Section

220 demand on AmerisourceBergen, requesting inspection of thirteen categories of

books and records (the “Demand”). The Plaintiffs requested Board Materials13 from

May 1, 2010 to date concerning certain settlements, acquisitions, investigations, and

other events related to AmerisourceBergen’s operations and its potential

involvement in the opioid crisis.

       The Demand listed four investigatory purposes:

       (i) to investigate possible breaches of fiduciary duty,
            mismanagement, and other violations of law by members of the
            Company’s Board of Directors and management . . . in connection
            with [the Company]’s distribution of prescription opioid
            medications;
       (ii) to consider any remedies to be sought in respect of the
            aforementioned conduct;

11
   Id. at *1.
12
   Id. at *10.
13
   The Demand defined “Board Materials” as “documents dated from May 1, 2010 to the present
that were provided at, considered at, discussed at, or prepared or disseminated, in draft or final
form, in connection with, in anticipation of, or as a result of any meeting of the Company’s Board
or any regular or specially created committee thereof, including, without limitation, all
presentations, Board packages, recordings, agendas, summaries, memoranda, charts, transcripts,
notes, minutes of meetings, drafts of minutes of meetings, exhibits distributed at meetings,
summaries of meetings, and resolutions.” App. to Opening Br. at A621.
                                                8
       (iii) to evaluate the independence and disinterestedness of the members
             of the Board; and
       (iv) to use information obtained through inspection of the Company’s
             books and records to evaluate possible litigation or other corrective
             measures with respect to some or all of these matters.14

       AmerisourceBergen rejected the Demand in its entirety, claiming that the

Demand did not state a proper purpose and that, even if the Plaintiffs’ purpose were

proper, the scope of the inspection was overbroad. In July 2019, the Plaintiffs filed

this action in the Court of Chancery, seeking to compel production of the requested

documents. The parties negotiated a schedule, during which they agreed that there

would be no depositions and only limited discovery. During discovery, when the

Plaintiffs served an interrogatory asking AmerisourceBergen to identify the

individuals at the Company who had records responsive to the Demand,

AmerisourceBergen objected to the interrogatory and declined to furnish the

requested information.

       In its memorandum opinion following trial on a paper record, the Court of

Chancery found that the Plaintiffs had demonstrated a proper purpose sufficient to

warrant the inspection of Formal Board Materials.15 In reaching this conclusion, the

Court of Chancery made several subsidiary findings. The court found that the

14
  Id. at A622–23.
15
   The Court of Chancery defined “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,” distinguishable from “Informal Board Materials” and
“Officer-Level Materials,” which are discussed in further detail later. See AmerisourceBergen,
2020 WL 132752, at *24–25.
                                               9
Plaintiffs had established a credible basis, through “strong circumstantial evidence,”

to suspect that “AmerisourceBergen’s situation did not result from any ordinary

business decision that, in hindsight, simply turned out poorly,”16 but instead may

have been the product of the Company’s violation of positive law. The Plaintiffs

had not, according to the court, “approached AmerisourceBergen as part of an

indiscriminate fishing expedition or out of mere curiosity.”17 The court also rejected

AmerisourceBergen’s contention that the Plaintiffs’ sole purpose in seeking the

inspection was to investigate a potential Caremark18 claim, noting that the Plaintiffs’

demand “reserved the ability to consider all courses of action that their investigation

might warrant pursuing.”19 And finally, the court rejected AmerisourceBergen’s

contention that the Plaintiffs were required to show the wrongdoing they sought to

investigate was “actionable” wrongdoing, but that, even if they were, it would be

premature to consider the merits-based defenses advanced by AmerisourceBergen.

       Next, because the Plaintiffs had satisfied their burden of proof under Section

220, the court concluded that the Plaintiffs were entitled to Formal Board Materials

16
   Id. at *11.
17
   Id.
18
   In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996); see Stone ex rel.
AmSouth Bancorporation v. Ritter, 911 A.2d 362, 370 (Del. 2006) (holding that Caremark imposes
director oversight liability where: “(a) the directors utterly failed to implement any reporting or
information system or controls; or (b) having implemented such a system or controls, consciously
failed to monitor or oversee its operations thus disabling themselves from being informed of risks
or problems requiring their attention”) (emphasis in original)
19
   Id. at *14.
                                                10
relating to most of the events listed in the Demand.20                        Finding that

AmerisourceBergen had thwarted the Plaintiffs’ efforts to establish “what types of

books and records exist[ed] and who ha[d] them,” the court then granted sua sponte

the Plaintiffs leave to take a Rule 30(b)(6) deposition to seek answers to those

questions and, if appropriate, seek additional documents.21

       The Company moved for, and the Court of Chancery granted, certification of

an interlocutory appeal on all three rulings. In our order accepting the interlocutory

appeal, we noted that the issues the Company had raised were “substantial issues of

material importance relating to the scope of the statutory proper-purpose

requirement when seeking books and records for the purpose of investigating

management[] and the scope of the Court of Chancery’s remedial discretion in a

Section 220 action.”22

       On appeal, AmerisourceBergen challenges the Court of Chancery’s opinion

on three grounds. First, AmerisourceBergen argues that the Court of Chancery

erroneously found that the Plaintiffs had stated a proper purpose and need not

“identify the objectives of the investigation.”23 Second, the Company asserts that

the court erroneously determined that the Plaintiffs had established a credible basis

20
   Id. at *27–29.
21
   Id. at *26.
22
   AmerisourceBergen Corp. v. Lebanon Cnty. Emps.’ Ret. Fund, No. 60, 2020, at 5 (Del. Mar. 5,
2020) (ORDER) (accepting interlocutory appeal).
23
   Opening Br. at 16.
                                             11
from which the court could suspect wrongdoing and that such wrongdoing need not

be actionable. Finally, AmerisourceBergen contends that the Court of Chancery

erred when it granted the Plaintiffs leave to conduct a post-trial Rule 30(b)(6)

deposition.

                            II.    STANDARD OF REVIEW

       We review de novo whether a stockholder’s stated purpose for demanding

inspection under Section 220 is a “proper purpose.”24 When a stockholder seeks to

investigate corporate wrongdoing, the Court of Chancery’s determination that a

credible basis to infer wrongdoing exists is a mixed finding of fact and law, to which

we afford considerable deference.25 This Court reviews the scope of relief ordered

in a books and records action for abuse of discretion.26

                                     III.    ANALYSIS

       A stockholder’s right to inspect a corporation’s books and records was

“recognized at common law because ‘[a]s a matter of self-protection, the stockholder

was entitled to know how his agents were conducting the affairs of the corporation

of which he or she was a part owner.’”27 Section 220(c) provides that stockholders

who seek to inspect a corporation’s books and records must establish that “(1) [s]uch

24
   City of Westland Police & First Ret. Sys. v. Axcelis Techs., Inc., 1 A.3d 281, 287 (Del. 2010).
25
   Id.
26
   Wal-Mart Stores, Inc. v. Ind. Elec. Workers Trust Fund IBEW, 95 A.3d 1264, 1272 (Del. 2014).
27
   Seinfeld v. Verizon Commc’ns, Inc., 909 A.2d 117, 119 (Del. 2006) (quoting Saito v. McKesson
HBOC, Inc., 806 A.2d 113, 116 (Del. 2002)).
                                               12
stockholder is a stockholder; (2) [s]uch stockholder has complied with [Section 220]

respecting the form and manner of making demand for inspection of such

documents; and (3) [t]he inspection such stockholder seeks is for a proper

purpose.”28 A proper purpose is a “purpose reasonably related to such person’s

interest as a stockholder.”29

       Myriad proper purposes have been accepted under Delaware law including:

“the determination of the value of one’s equity holdings, evaluating an offer to

purchase shares, inquiring into the independence of directors, investigation of a

director’s suitability for office, testing the propriety of the company’s public

disclosures, investigation of corporate waste, and investigation of possible

mismanagement or self-dealing.”30                “[M]ere disagreement with a business

28
   8 Del. C. § 220(c).
29
   Id. § 220(b).
30
    Donald J. Wolfe, Jr. & Michael A Pittenger, Corporate and Commercial Practice in the
Delaware Court of Chancery § 9.07[e][1], at 9-143 to -144 (2d ed. 2019); see also Edward P.
Welch et al., Folk on the Delaware General Corporation Law, Fundamentals § 220.05, at GCL-
771 to -772 (2020 ed.) (“A stockholder may state a ‘proper purpose’ when he seeks to investigate
allegedly improper transactions or mismanagement; to clarify an unexplained discrepancy in the
corporation's financial statements regarding assets; to investigate the possibility of an improper
transfer of assets out of the corporation; to ascertain the value of his stock; to inspect the stock
ledger in order to contact other stockholders regarding litigation he has instituted and invite their
association with him in the case; [t]o inform fellow shareholders of one's view concerning the
wisdom or fairness, from the point of view of the shareholders, of a proposed recapitalization and
to encourage fellow shareholders to seek appraisal; to discuss corporate finances and
management's inadequacies and then, depending on the responses, determine stockholder
sentiment for either a change in management or a sale pursuant to a tender offer; to inquire into
the independence, good faith, and due care of a special committee formed to consider a demand to
institute derivative litigation; to investigate director independence; to communicate with other
stockholders regarding a tender offer; to communicate with other stockholders in order to
effectuate changes in management policies; to investigate the stockholder's possible entitlement to
oversubscription privileges in connection with a rights offering; to determine an individual's
                                                13
decision”31 will fail to establish a proper purpose. Once a stockholder shows that its

primary purpose is reasonably related to its interest as a stockholder, the fact that it

may also have “a further or secondary purpose . . . is irrelevant.”32

       For over a quarter-century, this Court has repeatedly encouraged stockholders

suspicious of a corporation’s management or operations to exercise this right to

obtain the information necessary to meet the particularization requirements that are

applicable in derivative litigation.33 Section 220 has thus become a widely used tool

for stockholders seeking information about corporate wrongdoing, mismanagement,

or waste. This development, in turn, sparked “[t]he evolution of [our] jurisprudence

suitability to serve as a director; to obtain names and addresses of stockholders for a contemplated
proxy solicitation; to inspect documents relating to a ‘market check’ on the terms of financing that
may have been influenced by an interested party; or to obtain particularized facts needed to
adequately allege demand futility after the corporation had admitted engaging in backdating stock
options; or to investigate a private corporation’s serial failure to convene annual stockholder
meetings.”) (internal quotations and internal citations omitted).
31
   High River Ltd. P’ship v. Occidental Petroleum Corp., 2019 WL 6040285, at *5 (Del. Ch. Nov.
14, 2019) (citing Deephaven Risk Arb. Trading Ltd. v. UnitedGlobalCom, Inc., 2005 WL 1713067,
at *8 (Del. Ch. July 13, 2005)).
32
   Gen. Time Corp. v. Talley Indus., Inc., 240 A.2d 755, 756 (Del. 1968).
33
   Ca. State Teachers’ 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.”); Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040,
1056-57 (Del. 2004) (affirming the Court of Chancery’s dismissal of plaintiff’s derivative action
where plaintiff had not sought inspection under Section 220 and thus had not “exhaust[ed] all
reasonably available means of gathering facts”); Seinfeld, 909 A.2d at 122 (reiterating “the
salutary use of [S]ection 220 as one of the ‘tools at hand’ for stockholders to use to obtain
information” as observed in Thomas & Betts, Grimes, and Security First); Grimes v. Donald, 673
A.2d 1207, 1216 & n.11 (Del. 1996) (observing the utility of “using the ‘tools at hand’ to obtain
the necessary information before filing a derivative action” (internal citation omitted)); Rales v.
Blasband, 634 A.2d 927, 934 n.10 (recognizing that a plaintiff seeking to file a derivative
complaint has “many avenues available to obtain information bearing on the subject of their
claims,” including “the summary procedure embodied in 8 Del. C. § 220”).
                                                14
in section 220 actions[,] reflect[ing] judicial efforts to maintain a proper balance

between the rights of shareholders to obtain information based upon credible

allegations of corporation mismanagement and the rights of directors to manage the

business of the corporation without undue interference from stockholders.”34

       To avoid “indiscriminate fishing expedition[s],” a bare allegation of possible

waste, mismanagement, or breach of fiduciary duty, without more, will not entitle a

stockholder to a Section 220 inspection.35             Rather, a stockholder seeking to

investigate wrongdoing must show, by a preponderance of the evidence, a credible

basis from which the court can infer there is “possible mismanagement as would

warrant further investigation.”36        Although not an insubstantial threshold, the

credible basis standard is the “lowest possible burden of proof.”37 A stockholder

need not show that corporate wrongdoing or mismanagement has occurred in fact,

but rather the “threshold may be satisfied by a credible showing, through documents,

logic, testimony or otherwise, that there are legitimate issues of wrongdoing.”38

Once a stockholder has established a proper purpose, the stockholder will be entitled

only to the “books and records that are necessary and essential to accomplish the

stated, proper purpose.”39

34
   Seinfeld, 909 A.2d at 122.
35
   Id.
36
   Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 568 (Del. 1997).
37
   Seinfeld, 909 A.2d at 123.
38
   Id.
39
   Saito, 806 A.2d at 116.
                                              15
       A.      The Plaintiffs’ Proper Purpose

       In the Court of Chancery, AmerisourceBergen argued that the Plaintiffs failed

to demonstrate a credible basis to investigate a Caremark claim, which, according

to the Company, was “the only purported purpose of the Demand.”40                       The court

disagreed with AmerisourceBergen’s characterization of the Demand, noting that

the Demand “signaled that [the Plaintiffs] are not solely interested in filing a

derivative lawsuit . . . [and] are open to considering other possible remedies,

corrective measures, and methods of addressing the wrongdoing that they believe

has occurred.”41 The court further understood AmerisourceBergen to “maintain[]

that if a stockholder wants to investigate wrongdoing and use the resulting

documents to achieve an end other than filing litigation, the stockholder must say so

in the demand.”42

       After a thoughtful analysis of Section 220’s proper-purpose requirement,

which included a review of a line of authority in the Court of Chancery requiring

stockholders who want to investigate corporate wrongdoing “to state up-front what

40
   App. to Opening Br. at A869.
41
   AmerisourceBergen, 2020 WL 132752, at *7.
42
   Id. at *11. This understanding is apparently derived from AmerisourceBergen’s contention in
its Opening Trial Brief that “[a]part from a vague and conclusory (and thus insufficient) comment
that [the Plaintiffs] may take ‘appropriate action’ following their inspection, the Demand’s only
concretely stated purpose is to investigate breaches of fiduciary duty in preparation for derivative
litigation.” App. to Opening Br. at A869. In this Court, AmerisourceBergen frames the issue less
obliquely, contending that “[t]he lower court erred by holding that a stockholder seeking to
investigate wrongdoing is not required to identify the objectives of the investigation.” Opening
Br. at 16.
                                                16
they plan[] to do with the fruits of the inspection,”43 the court concluded that,

although “the Demand did not recite ends to which the [P]laintiff[s] might put the

books and records[,] . . . they were not required to do so. Instead the [P]laintiffs

reserved the ability to consider all possible courses of action that their investigation

might warrant pursuing.”44 We, too, reject AmerisourceBergen’s characterization

of the Plaintiffs’ Demand as solely limited to pursuing derivative litigation. And we

agree with the Court of Chancery’s observation that a stockholder is not required to

state the objectives of his investigation.45

       AmerisourceBergen acknowledges that investigating corporate wrongdoing is

a widely recognized proper purpose under Section 220. Yet it claims that “whether

that purpose in a specific case is reasonably related to the stockholder’s interest as a

stockholder     cannot     be    ascertained     in   a    vacuum.”46         According      to

AmerisourceBergen, “[t]he objectives of the investigation will dictate whether the

purpose is in fact a proper purpose.”47 And AmerisourceBergen contends that,

unless those objectives are explicitly disclosed in the stockholder’s demand, “the

43
   AmerisourceBergen, 2020 WL 132752, at *12.
44
   Id. at *14.
45
   Although we agree with the Court of Chancery’s ultimate conclusion regarding the Plaintiffs’
Demand, we interpret the Demand as stating the objectives of the Plaintiffs’ investigation—i.e.,
pursuing litigation, making a demand on the Company’s board of directors, and other corrective
measures.
46
   Opening Br. at 19.
47
   Id.
                                               17
corporation [will be] impaired, if not entirely thwarted in its efforts to evaluate the

propriety of the demand’s purpose”48 without resorting to litigation.

      AmerisourceBergen concedes that this Court has not considered whether a

stockholder must state in its demand the objectives of an investigation of corporate

wrongdoing. Therefore, the Company relies heavily on Northwest Industries, Inc.

v. B.F. Goodrich Co.49 (“Northwest Industries”), a case involving a stockholder’s

request to inspect the company’s list of stockholders. The majority in Northwest

Industries held that, in that context, a demand that contained “a mere statement” that

the purpose of the inspection was “to communicate with other stockholders”50 was

inadequate. In the majority’s view:

      [Section] 220 required Goodrich to state in its demand the substance of
      its intended communication sufficiently to enable Northwest, and the
      courts if necessary, to determine whether there was a reasonable
      relationship between its purpose, i.e., the intended communication, and
      Goodrich’s interest as a stockholder of Northwest.51

      But a request to inspect a list of stockholders is fundamentally different than

a request to inspect books and records in furtherance of an investigation of corporate

wrongdoing.52 A corporation cannot discern whether the inspection of its list of

stockholders for the purpose of communicating with other stockholders is related to

48
   Id. at 23.
49
   260 A.2d 428 (Del. 1969).
50
   Id. at 429.
51
   Id.
52
    For the same reason, we find the Court of Chancery opinions addressing share-valuation
inspections cited by AmerisourceBergen inapposite.
                                           18
the stockholder’s interest as a stockholder without a disclosure of the substance of

the intended communication. By contrast, corporate wrongdoing is, as the Court of

Chancery noted, in and of itself “a legitimate matter of concern that is reasonably

related to [a stockholder’s] interest[] as [a] stockholder[].”53

       We have recognized that, when a stockholder investigates meritorious

allegations of possible mismanagement, waste, or wrongdoing, it serves the interests

of all stockholders “and should increase stockholder return.”54 It follows that, under

such circumstances, the stockholder’s purpose is proper.                Of course, a mere

statement of suspicion is inadequate. If the stockholder cannot present a credible

basis credible basis from which the court can infer wrongdoing or mismanagement,

it is likely that the stockholder’s demand is an “indiscriminate fishing expedition.”55

But where a stockholder meets this low burden of proof from which possible

wrongdoing or mismanagement can be inferred, a stockholder’s purpose will be

deemed proper under Delaware law.56

       AmerisourceBergen contends that “this Court has expressly recognized that

the objectives of an investigation are critical to a determination whether an

investigative purpose is reasonably related to the stockholders’ interests as a

53
   AmerisourceBergen, 2020 WL 132752, at *11.
54
   Seinfeld, 909 A.2d at 121 (citing Saito, 806 A.2d at 115).
55
   Id. at 122.
56
   See, e.g., KT4 Partners LLC v. Palantir Techs. Inc., 203 A.3d 738, 758 (Del. 2019); Seinfeld,
909 A.2d at 123; Sec. First Corp., 687 A.2d at 567–69; Thomas & Betts Corp. v. Leviton Mfg. Co.,
681 A.2d 1026, 1031 (Del. 1996).
                                              19
stockholder,”57       citing     Saito     v.    McKesson        HBOC,        Inc.58     (“Saito”).

AmerisourceBergen’s reliance on Saito is misplaced. In that case, we addressed the

interplay of the standing requirement in 8 Del. C. § 32759 and books-and-records

inspections under Section 220.                   Admittedly, we said—as quoted by

AmerisourceBergen—that “[i]f a stockholder wanted to investigate alleged

wrongdoing that substantially predated his or her stock ownership, there could be a

question as to whether the stockholder’s purpose was reasonably related to his or her

interest as a stockholder, especially if the stockholder’s only purpose was to institute

derivative litigation.”60

       AmerisourceBergen omits, however, the following qualification of that

observation:

       But stockholders may use information about corporate mismanagement
       in other ways, as well. They may seek an audience with the board to
       discuss proposed reforms or, failing in that, they may prepare a
       stockholder resolution for the next annual meeting, or mount a proxy
       fight to elect new directors. None of those activities would be
       prohibited by § 327.61

57
   Opening Br. at 22.
58
   Saito, 806 A.2d at 117.
59
   8 Del. C. § 327 (“In any derivative suit instituted by a stockholder of a corporation, it shall be
averred in the complaint that the plaintiff was a stockholder of the corporation at the time of the
transaction of which such stockholder complains or that such stockholder's stock thereafter
devolved upon such stockholder by operation of law.”).
60
   Saito, 806 A.2d at 117.
61
   Id.
                                                20
       None of these post-inspection uses of the company’s books and records were

included in the purpose stated in Saito’s demand, yet we recognized that they

remained available to him.62                Thus, our reading of Saito undermines

AmerisourceBergen’s contention that a stockholder who seeks an inspection for the

purpose of investigating mismanagement or wrongdoing must state in the demand

all of the ways it might use the documents uncovered in the investigation.

       This is not to say that the stockholder’s intended uses are irrelevant or that it

is not advisable, in the interest of enhancing litigation efficiencies—to state the

intended uses in the stockholder’s demand. And we agree with the Court of

Chancery that a corporation may challenge the bona fides of a stockholder’s stated

purpose and present evidence from which the court can infer that the stockholder’s

stated purpose is not its actual purpose. Or the court, when assessing the propriety

of a stockholder’s purpose, can imply—as it did in West Coast Management &

Capital, LLC v. Carrier Access Corp.63 (“West Coast Management”) and Pershing

62
   Id. at 115 (“The stated purpose of Saito’s demand was: (1) to further investigate breaches of
fiduciary duties by the boards of directors of HBO & Co., Inc., McKesson, Inc., and/or McKesson
HBOC, Inc. related to their oversight of their respective company’s accounting procedures and
financial reporting; (2) to investigate potential claims against advisors engaged by McKesson, Inc.
and HBO & Co, Inc. to the acquisition of HBO & Co., Inc. by McKesson, Inc.; and (3) to gather
information relating to the above in order to supplement the complaint in Ash v. McCall, et al., …
in accordance with the September 15, 2000 Opinion of the Court of Chancery.”).
63
   914 A.2d 636, 640 (Del. Ch. 2006) (“The complaint, like the demand letter, articulates that the
sole purpose [of the inspection] is to investigate wrongdoing. Implicit in both is that the
investigation is targeted at reinitiating derivative litigation.”).
                                                21
Square, L.P. v. Ceridian Corp.64—what the stockholders’ intended use of the books

and records will be. But when the purpose of an inspection of books and records

under Section 220 is to investigate corporate wrongdoing, the stockholder seeking

inspection is not required to specify the ends to which it might use the books and

records.

       B.      The Relevance of Actionability

       The previous argument—that the Plaintiffs’ sole purpose in seeking to inspect

AmerisourceBergen’s books and records is to pursue a Caremark claim and the court

should not consider other potential uses of the documents—would not, standing

alone, suffice to defeat the Plaintiffs’ inspection rights.                           After all,

AmerisourceBergen concedes that the evaluation of litigation options is an

appropriate objective of an investigative Section 220 demand. As the Court of

Chancery recognized, however, AmerisourceBergen’s attempt to cabin the

Plaintiffs’ use of its books and records to their pursuit of a Caremark claim, merely

set the stage for AmerisourceBergen’s “launching [of] merits-based strikes on the

lawsuit that AmerisourceBergen expects the Plaintiffs to file someday.”65 Such

strikes are justified, AmerisourceBergen contends, because the Plaintiffs must

64
   923 A.2d 810, 819 (Del. Ch. 2007) (“Although Pershing Square states proper purposes, the
evidence overwhelmingly establishes, and I find as a fact, that despite the stated proper purposes,
one improper purpose drives Pershing Square’s demand and this litigation: to find a legal vehicle
by which Pershing Square can publicly broadcast improperly obtained confidential information.”).
65
   AmerisourceBergen, 2020 WL 132752, at *11.
                                                22
establish that the wrongdoing they seek to investigate is actionable wrongdoing.

And, according to AmerisourceBergen, the Plaintiffs’ claims are not actionable

because they are legally barred by a Section 102(b)(7) exculpatory provision in its

certificate of incorporation and by laches.

        The Court of Chancery rejected AmerisourceBergen’s argument on three

grounds. First, the court found that the argument failed for the “threshold reason …

[that] [t]he [P]laintiffs are not seeking the books and records for the sole purpose of

investigating a potential Caremark claim . . . [and thus] can use the fruits of their

investigation for other purposes.”66 Second, the court held that “to obtain books and

records, a stockholder does not have to introduce evidence from which a court could

infer the existence of an actionable claim.”67 Third, the court found that, in any

event, AmerisourceBergen’s Section 102(b)(7) and laches defenses were unavailing.

As to the Section 102(b)(7) defense, the court found that “[t]he issues that the

[P]laintiffs wish to investigate could well lead to non-exculpated claims.”68 And as

to the laches defense, it was not clear to the court that the Plaintiffs’ potential

derivative claims were time-barred, given the possibility that the doctrines of

fraudulent concealment and equitable tolling could apply. Our agreement with the

66
   Id. at *14.
67
   Id. at *15.
68
   Id. at *20.
                                          23
Court of Chancery on any one of these three grounds would be sufficient to lay

AmerisourceBergen’s argument to rest; we happen to agree on all three.

       As mentioned, the sine qua non of AmerisourceBergen’s contention that the

Plaintiffs must establish a credible basis from which actionable wrongdoing can be

inferred is that the Plaintiffs “are only seeking to investigate a Caremark claim.”69

To support this claim, AmerisourceBergen contends that the Demand, as well as the

Plaintiffs’ complaint and pre-trial briefing, is “littered with assertions” that the

company’s board of directors “ignored red flags”70—language that suggests an

investigation of a Caremark failed-oversight clam. AmerisourceBergen asserts that

the Plaintiffs’ engagement letters with counsel “unquestionably establish”71 that the

Plaintiffs are only seeking books and records in contemplation of litigation.

       AmerisourceBergen’s assertions go too far. A stockholder may state more

than one purpose for inspection and use the information obtained for more than one

purpose.72 As already mentioned, a stockholder may use the information supporting

a claim of mismanagement obtained through an inspection for purposes other than

bringing litigation.73     Although AmerisourceBergen correctly identifies several

69
   Opening Br. at 34.
70
   Id. at 33–34.
71
   Id. at 35.
72
   See CM & M Group, Inc. v. Carroll, 453 A.2d 788, 792 (“Since such a shareholder will often
have more than one purpose, that requirement has been construed to mean that the shareholder’s
primary purpose must be proper; any secondary purpose, whether proper or not, is irrelevant.”).
73
   See Saito, 806 A.2d at 117 (reasoning that stockholders “may seek an audience with the board
to discuss proposed reforms or, failing in that, they may prepare a stockholder resolution for the
                                               24
references to potential litigation in the Demand, the Demand also states that the

information sought will be used “to evaluate . . . other corrective measures with

respect to all or some of these matters.”74 The Demand also contemplates a

“[p]ossible course[] of conduct [to] include making a demand on the Company’s

Board of Directors to take action.”75             In our view, the Court of Chancery’s

determination that the Plaintiffs contemplated purposes other than litigation is

supported by a fair reading of the Demand. We need go no further than that to

dispose of AmerisourceBergen’s “actionability” argument. We nevertheless take

this opportunity to dispel the notion that a stockholder who demonstrates a credible

basis from which the court can infer wrongdoing or mismanagement must

demonstrate that the wrongdoing or mismanagement is actionable.

       As noted above, under Section 220, a stockholder who wishes to investigate

corporate wrongdoing must present a credible basis from which the court can infer

that wrongdoing may have occurred.76 It bears repeating that this test “reflects

judicial efforts to maintain a proper balance between the rights of shareholders to

obtain information based upon credible allegations of corporation mismanagement

next annual meeting, or mount a proxy fight to elect new directors”); Graulich v. Dell Inc., 2011
WL 1843813, at *7 (Del. Ch. May 16, 2011) (describing alternative purposes related to the
investigation of corporate wrongdoing other than pursuing litigation, such as a general proposition
to “‘take appropriate action’ if it were found that the directors breached their duties”).
74
   App. to Opening Br. at A622–23.
75
   Id. at A623.
76
   Seinfeld, 909 A.2d at 122 (quoting Thomas & Betts Corp., 681 A.2d at 1031).
                                                25
and the rights of directors to manage the business of the corporation without undue

interference from stockholders.”77 Having struck that balance, this Court has not

required stockholders to prove that the wrongdoing they seek to investigate is

actionable. To the contrary, we have stated that a stockholder is not required to

prove that wrongdoing occurred,78 only that there is “possible mismanagement that

would warrant further investigation.”79

       It is true that the Court of Chancery has disallowed inspections for the purpose

of investigating mismanagement and wrongdoing when the stockholder’s sole

objective is to pursue litigation that faces an insurmountable procedural obstacle.

For example, in Polygon Global Opportunities Master Fund v. West Corp.

(“Polygon”), where the stockholder lacked standing to bring the anticipated claim,

the Court of Chancery denied inspection even in the face of a credible showing of

wrongdoing.80 Likewise, the court has denied inspection by stockholders whose sole

purpose is to evaluate litigation options when the claims under consideration are

time barred, as was the case in Graulich v. Dell, Inc.81 (“Graulich”), or otherwise

77
   Id.
78
   Id.; see Sec. First Corp., 687 A.2d at 568; City of Westland Police & First Ret. Sys., 1 A.3d at
287.
79
   Sec. First Corp., 687 A.2d at 568 (quoting Thomas & Betts Corp., 681 A.2d at 1031).
80
   Polygon Global Opportunities Master Fund v. W. Corp., 2006 WL 2947486, at *5 (Del. Ch.
Oct. 12, 2006).
81
   Graulich, 2011 WL 1843813, at *5.
                                               26
precluded, as in West Coast Management.82 It should be stressed that, in each of

these instances, the sole reason for the stockholder’s demand was to pursue litigation

and the obstacle that blocked the stockholder’s path was the product of a determinate

procedural history and based on undisputed facts. We find all of these decisions to

be within the discretion that rests in the Court of Chancery’s hands when it assesses

the bona fides of a stockholder’s stated purpose under Section 220. If litigation is

the stockholder’s sole objective but an insurmountable procedural obstacle unrelated

to the suspected corporate wrongdoing bars the stockholder’s path, it cannot be said

the stockholder’s stated purpose is its actual purpose. Given the obvious futility of

the litigation the stockholder claims to have in mind, the investigation can only be

seen as assuaging the stockholder’s idle curiosity or a fishing expedition.

       Yet AmerisourceBergen points us to two more recent Court of Chancery

opinions, one of which we summarily affirmed, that considered merits-based

defenses, not to the Section 220 action before the court but, to the anticipated plenary

action that might follow. In Southeastern Pennsylvania Transportation Authority v.

82
  W. Coast Mgmt. & Capital, LLC, 914 A.2d at 646 (finding plaintiff’s sole purpose was to replead
demand futility in a second derivative claim, a claim which issue preclusion “completely bar[red]
West Coast from pursuing”). But see In re UnitedHealth Grp., Inc. Section 220 Litig., 2018 WL
1110849, at *7 (Del. Ch. Feb. 28, 2018) (permitting inspection and declining to address merits-
based defenses that require . . . [an analysis of] the strengths and weaknesses of the underlying
[action] . . . and potential derivative claims”) ; Khanna v. Covad Commc’ns Grp., Inc., 2004 WL
187274, at *6 (Del. Ch. Jan. 23, 2004) (permitting inspection, recognizing “the question is not
whether [the company] can raise substantial doubt about the viability of [the stockholder’s] claims
of wrongdoing . . . [but rather whether the stockholder] provides a credible basis for believing that
wrongdoing may have occurred”).
                                                27
AbbVie, Inc.83 (“AbbVie”), the Section 220 plaintiffs sought to inspect the company’s

books and records to investigate possible breaches of fiduciary duties and

mismanagement in connection with a failed inversion merger that resulted in the

company’s payment of a $1.635 billion break-up fee. In short, after AbbVie

negotiated the terms of the transaction, including the break-up fee, the United States

Treasury Department changed its interpretation of a tax law in a way that eliminated

the tax advantages that the AbbVie board hoped to reap in the as-yet unconsummated

merger. In light of the new interpretation, the AbbVie board, concluding it was in

the best interests of the company, terminated the merger and paid the break-up fee.

According to the plaintiff stockholders, the risk of losing the tax advantage was well-

known in advance of the negotiations and “was so substantial, and so obvious, that

the directors must have breached their fiduciary duties to the stockholders by

entering the deal.”84 They therefore sought to inspect AbbVie’s books and records

for the purpose of investigating the “mismanagement, wrongdoing and waste by

83
   2015 WL 1753033 (Del. Ch. Apr. 15, 2015), aff’d, 132 A.3d 1, 2016 WL 235217 (Del. Jan.
20, 2016) (TABLE).
84
   Id. at *1.
                                            28
AbbVie’s directors and officers in connection with AbbVie’s obligation to pay the

$1.635 billion Break Fee.”85

       Although the Court of Chancery expressed dismay at the stockholders’ failure

to specify the “end” to which their investigation would lead, the court inferred that

the stockholders sought “an investigation to aid in future derivative litigation.”86

AbbVie challenged the propriety of this purpose on the grounds that AbbVie’s

certificate of incorporation exculpated its directors from liability for a breach of duty

of care in accordance with Section 102(b)(7) of the DGCL. Therefore, according to

AbbVie, the stockholders were without a remedy in a derivative action against the

directors for a breach of the duty of care, hence, “investigating any such breach [was]

futile and not a proper purpose for a Section 220 demand.”87

       In addressing AbbVie’s defense, the Court of Chancery acknowledged that it

had “not squarely addressed the issue of whether, when a stockholder seeks to

investigate corporate wrongdoing solely for the purpose of evaluating whether to

bring a derivative action, the ‘proper purpose’ requirement under Section 220 is

limited to investigating non-exculpated corporate wrongdoing.”88

85
   Id. at *11.
86
   Id. at *12.
87
   Id. at *13.
88
   Id. (emphasis in original).
                                           29
       After surveying the “analogous decisions”89 mentioned above denying

inspection because of procedural bars to the litigation of claims derived from an

investigative inspection, the court concluded that:

       [those] holdings, and the necessity of proper balance of the benefits and
       burdens of production under Section 220, illustrate that the proper
       purpose requirement under that statute requires that, if a stockholder
       seeks inspection solely to evaluate whether to bring derivative
       litigation, the corporate wrongdoing which he seeks to investigate must
       necessarily be justiciable.90 Because a Section 102(b)(7) exculpatory
       provision serves as a bar to stockholders recovering for certain director
       liability in litigation, a stockholder seeking to use Section 220 to
       investigate corporate wrongdoing solely to evaluate whether to bring
       derivative litigation has stated a proper purpose only insofar as the
       investigation targets non-exculpated corporate wrongdoing. Here, that
       means that [the stockholders’] stated purpose to investigate whether
       wrongdoing is proper only to investigate whether AbbVie’s directors
       breached their fiduciary duty of loyalty.91

       To skirt the exculpatory provision, the stockholders alleged that the AbbVie

directors breached the duty of loyalty by acting in bad faith or by committing waste.

The court found that the stockholders could not clear either of these hurdles and

therefore denied the stockholders’ demand for inspection, and the stockholders

appealed to this Court.

89
   Id.; see supra notes 80–82.
90
   The court appears to have used the words “justiciable” and “actionable” interchangeably.
91
   AbbVie, 2015 WL 1753033, at *13 (internal citations omitted).
                                               30
       In a one-paragraph order, a majority of this Court affirmed the Court of

Chancery’s judgment “on the basis of” its decision as summarized above.92 Two

Justices, however, thought that:

       it was unnecessary for the Court of Chancery to reach and rely upon
       Section 102(b)(7) in its analysis, and given their broader substantive
       concerns regarding reliance on Section 102(b)(7) in Section 220
       proceedings, would affirm solely on the basis that the petitioner did not
       show a preponderance of the evidence that there existed a credible basis
       to conclude that even a breach of the duty of care had been committed.93
       The footnote registering the concurring Justices’ concerns clarified that the

entire panel agreed that the petitioner had failed to show a credible basis from which

a duty-of-care breach, i.e., wrongdoing or mismanagement, could be inferred, “but

the other three members of the panel believe[d] that it was proper for the Court of

Chancery to address the matter in the precise manner that it did, because that was

the primary ground on which the defendant corporation below defended the case and

the parties framed the issue.”94

       Soon after we affirmed AbbVie, the Court of Chancery decided Beatrice

Corwin Living Irrevocable Trust v. Pfizer, Inc.95 (“Pfizer”). Here, in the Court of

Chancery, AmerisourceBergen relied on Pfizer in support of its argument that,

“[w]here a stockholder seeks to investigate mismanagement or wrongdoing solely

92
   AbbVie, 2016 WL 235217, at *1.
93
   Id. at *1 n.6.
94
   Id.
95
   2016 WL 4548101 (Del. Ch. Sept. 1, 2016).
                                               31
for potential litigation, the evidence the stockholder presents to establish a credible

basis must be evidence of ‘actionable corporate wrongdoing.’”96

       In Pfizer, the stockholders alleged that the company had violated accounting

and disclosure laws when it failed to disclose a deferred tax liability in an annual

report on the basis that calculation of liability was “not practicable.”97                        The

stockholder sent a books-and-records demand to Pfizer, identifying the following

purposes of the inspection: “(i) evaluating potential derivative or shareholder

litigation, including investigating possible breaches of fiduciary duties by Pfizer’s

board of directors (the ‘Board’) for failing to assure compliance with applicable

accounting rules[,] and (ii) valuing the [Trust’s] shares.”98

       Pfizer refused to permit the inspection, and the stockholder filed a Section 220

action to enforce its inspection rights. At trial, the stockholder presented expert

testimony that it was practicable to calculate the deferred tax liability, thus providing

a credible basis—the stockholder claimed— from which the court could infer that

the disclosure was inaccurate. But the stockholder’s trial presentation did not

address Pfizer’s reporting system or the Pfizer board’s disregard of any red flags. In

96
   App. to Opening Br. at A868 (quoting Pfizer, 2016 WL 4548101, at *6). AmerisourceBergen
also relied on Pfizer in support of its contention that, to warrant investigation of a failed oversight
claim, the stockholder must provide evidence from which the court can infer board-level
wrongdoing. AmerisourceBergen’s arguments on appeal do not challenge whether the evidence
provided by the stockholders suggests board-level wrongdoing as opposed to officer-level or other
corporate wrongdoing, but rather attack the sufficiency of the evidence presented.
97
   Pfizer, 2016 WL 4548101, at *2.
98
   Id. (alterations in original).
                                                 32
consequence, the court found that the stockholder failed to establish a credible basis

from which the court could infer that Pfizer directors breached their duty of

oversight.

          This finding does not concern us here. Rather, we discuss Pfizer because of

the next step in the Court of Chancery’s analysis. Specifically, the court noted that

the stockholder had failed to address the Pfizer board’s reliance on an unqualified

opinion from the company’s auditors that Pfizer’s financial statements were

prepared in accordance with generally accepted accounting principles. The court

observed that “[u]nder 8 Del. C. § 141(e), directors are ‘fully protected’ in relying

in good faith on the expert’s opinions as to matters the director reasonably believes

are within the expert’s competence, provided the expert was selected with reasonable

care.”99 And because the stockholder failed to present any evidence to overcome§

141(e)’s presumptions, the court found the stockholder’s “credible basis

argument”100 wanting.

          What interests us here is the Pfizer court’s reliance on AbbVie:

          The reasoning in Abbvie applies equally here. That is, where a
          stockholder seeks to investigate mismanagement or wrongdoing solely
          for potential litigation, the evidence the stockholder presents to
          establish a credible basis must be evidence of “actionable corporate
          wrongdoing.” As the Abbvie Court pointed out, other decisions of this
          Court have concluded that a stockholder does not have a credible basis
          to investigate mismanagement or wrongdoing if the litigation the

99
     Id. at *6.
100
      Id. at *7.
                                            33
       stockholder is evaluating would be barred by claim or issue preclusion,
       lack of standing, or the statute of limitations. So too, where a
       stockholder’s sole basis is litigation-driven and the claim he seeks to
       investigate is not justiciable due to a statutory defense, there is no valid
       purpose for the inspection.101

       Thus, it seems that the practical principles applied in Polygon, West Coast

Management, and Graulich to deny inspections whose ultimate and sole purpose

was to facilitate litigation that would be dead on arrival because of an

insurmountable procedural obstacle have been extended in AbbVie and Pfizer to

welcome the invocation in Section 220 actions of merits-based defenses that

companies anticipate will be raised in the ensuing—if any there shall be—plenary

actions.

       This trend, if it can be called that, has met with resistance in other Court of

Chancery decisions, as evidenced by the case under consideration here.                     For

instance, in Amalgamated Bank v. Yahoo! Inc.102 (Yahoo!”) a case that bears a

resemblance to the one before us now, the court found that, even where the plaintiff’s

likelihood of prevailing on a non-exculpated claim appeared slim but where the

plaintiff had established a credible basis from which the Court of Chancery could

101
   Id. at *6 (internal citations omitted).
102
   132 A.3d 752 (Del. Ch. 2016), abrogated on other grounds by Tiger v. Boast Apparel, Inc., 214
A.3d 933 (Del. 2019).
                                              34
infer mismanagement, the potential for exculpation would not warrant defeat the

stockholder’s inspection rights.103

       In a similar manner, in Lavin v. West Corp.104 (“Lavin”), the Court of

Chancery steered away from the consideration of a merits-based defense to the

claims a stockholder sought to investigate.                In that case, following West

Corporation’s merger with Appollo Global Management, Lavin served a books-and-

records demand on West for the purpose of “determin[ing] whether wrongdoing and

mismanagement had taken place”105 in connection with the merger. West rejected

the demand, and Lavin sued. West contended that, under the Corwin doctrine,106 the

stockholder vote approving the merger “cleansed” any breaches of fiduciary duty,

leaving the merger subject to challenge only on the grounds of waste, which Lavin

had not stated as a basis for inspection. The court declined West’s invitation to

“engage with Corwin” in the Section 220 proceeding:

       …the notion that the court would engage with Corwin, and all that it
       entails, in a summary Section 220 proceeding has little to commend it
       as a matter of procedure, at least in the view of this trial judge. Simply
       stated, Corwin does not fit within the limited scope and purpose of a
       books and records action in this court. Our law is settled that
       stockholders seeking books and records under Section 220 for the
       purpose of investigating mismanagement need not prove that

103
    Id. at 786.
104
    2017 WL 6728702 (Del. Ch. Dec. 29, 2017).
105
    Id. at *1.
106
     In Corwin v. KKR Fin. Holdings, LLC, we held that “the business judgment rule is the
appropriate standard of review for a transaction that is not otherwise subject to entire fairness
review and that has been approved by a fully-informed, uncoerced vote of a majority of
disinterested stockholders.” 125 A.3d 304, 305–06 (Del. 2015).
                                               35
         wrongdoing or mismanagement actually occurred. Thus, when a
         stockholder demands inspection as a means to investigate wrongdoing
         in contemplation of a class or derivative action, Delaware courts
         generally do not evaluate the viability of the demand based on the
         likelihood that the stockholder will succeed in a plenary action. In the
         rare circumstances where inspection rights have been denied based on
         an assessment of the merits of the claim the stockholder seeks to
         investigate, the courts have emphasized either that the claim was simply
         not “justiciable,” or that the claim on its face was not viable as a matter
         of law. In either event, it was clear to the court that no amount of
         additional information would aid the stockholder in pleading or
         prosecuting the contemplated plenary action, so the inspection demand
         was denied.107

         And as recently as last month in Pettry v. Gilead Sciences, Inc.108 (“Gilead”),

the Court of Chancery granted a stockholder’s inspection request over the

corporation’s objections that the stockholder lacked standing to pursue follow-on

derivative claims, which, in any event, would be time-barred and barred by the

corporation’s exculpatory charter provision.

         It could be said that the Court of Chancery opinions on both sides of this

apparent divide can be harmonized; on one side stand Polygon, West Coast

Management, Graulich, AbbVie, and Pfizer, where the stockholder’s sole purpose

for seeking inspection is to pursue litigation, and on the other stand this case, Yahoo!

and Gilead, where the stockholders have not limited themselves to pursuing

litigation. Under the first set of circumstances, one might contend that defenses to

107
      Lavin, 2017 WL 6728702, at *1.
108
      2020 WL 6870461 (Del. Ch. Nov. 24, 2020).
                                              36
the anticipated litigation, including merits-based defenses, should be considered in

the Section 220 proceeding, but not in the second.109

       We think, however, that the apparent tension that has developed between these

two approaches should be relieved in a manner that better serves the purpose and

nature of Section 220 proceedings, which, after all, are intended to be “summary,”

and thus “managed expeditiously.”110 It has become evident that the interjection of

merits-based defenses—defenses that turn on the quality of the wrongdoing to be

investigated—interferes with that process. As the Court of Chancery has noted, a

Section 220 proceeding “is not the time for a merits assessment of Plaintiffs’

potential claims against [the corporation’s] fiduciaries.”111 We therefore reaffirm

the “credible basis” test as the standard by which investigative inspections under

Section 220 are to be judged. To obtain books and records, a stockholder must show,

by a preponderance of the evidence, a credible basis from which the Court of

Chancery can infer there is possible mismanagement or wrongdoing warranting

further investigation.      The stockholder need not demonstrate that the alleged

mismanagement or wrongdoing is actionable. To the extent that our summary

affirmance in AbbVie suggests otherwise, we hereby overrule it.112

109
    Admittedly, Lavin hits a discordant note in this attempt at harmony.
110
    Brehm v. Eisner, 746 A.2d 244, 267 (Del. 2000).
111
    In re Facebook, Inc. Section 220 Litig., 2019 WL 2320842, at *2 (Del. Ch. May 30, 2019).
112
    For the reasons stated above, we still believe that the Court of Chancery reached the correct
result in AbbVie. See supra text accompanying notes 83–94.
                                               37
      In the rare case in which the stockholder’s sole reason for investigating

mismanagement or wrongdoing is to pursue litigation and a purely procedural

obstacle, such as standing or the statute of limitations, stands in the stockholder’s

way such that the court can determine, without adjudicating merits-based defenses,

that the anticipated litigation will be dead on arrival, the court may be justified in

denying inspection. But in all other cases, the court should—as the Court of

Chancery did here—defer the consideration of defenses that do not directly bear on

the stockholder’s inspection rights, but only on the likelihood that the stockholder

might prevail in another action.

      C.     The Plaintiffs’ Rule 30(b)(6) Deposition

      After finding that the Plaintiffs were entitled to inspection, the Court of

Chancery turned to its determination of the scope of the inspection. The court started

its discussion by categorizing the types of documents falling within the definition of

Board Materials set forth in the Demand that might be necessary and essential to

satisfy the Plaintiffs’ investigative purpose. The court interpreted the definition of

the term “Board Materials” to encompass three categories: Formal Board Materials,

Informal Board Materials, and Officer-Level Documents.

      The court then found that the Plaintiffs’ Demand encompassed books and

records falling within each of those categories, noting, however, that determining

whether a stockholder is entitled to a particular category is a fact-specific inquiry

                                         38
that depends “on the context in which the shareholder’s inspection demand

arises.”113 Recognizing that this is a difficult task—one that “generally needs to

proceed on a category-by-category basis,”114—the court concluded that

AmerisourceBergen had created an additional obstacle to conducting the inquiry

when it refused to disclose in discovery the types and custodians of the records it

maintains. Consequently, in addition to ordering the production of Formal Board

Materials, the court granted sua sponte the Plaintiffs leave to conduct a Rule 30(b)(6)

deposition “to explore what types of books and records exist and who has them.”115

After the deposition, the parties were to confer on a final production order and if

they were unable to reach an agreement, the court left the door open to a request

from the Plaintiffs seeking “any additional Informal Board Materials or Officer-

Level Documents that they can show are necessary for their inspection.”116

      AmerisourceBergen challenges the Court of Chancery’s grant of leave to

conduct a Rule 30(b)(6) deposition on three grounds. First, AmerisourceBergen says

that the court’s decision effectively relieved the Plaintiffs of their burden of proving

what documents are essential to achieving their investigative purpose. Second,

AmerisourceBergen claims that the court’s discovery directive conflicts with our

113
    AmerisourceBergen, 2020 WL 132752, at *25 (quoting Wal-Mart Stores, Inc., 95 A.3d at
1273).
114
    Id.
115
    Id. at *29.
116
    Id.
                                          39
holding in KT4 Partners LLC v. Palantir Technologies Inc.117 (“Palantir”). And

third, AmerisourceBergen argues that the discovery directive impermissibly expands

the categories of documents sought beyond those identified in the Demand. We

address these contentions in turn.

       1.      The Burden of Proof

       AmerisourceBergen’s claim that the Court of Chancery’s allowance of a post-

trial deposition impermissibly shifted the burden of proof is, in our view, based on a

mischaracterization of the court’s opinion. In particular, the argument assumes that

the court ruled that, at trial, the Plaintiffs only satisfied their burden of proof as to

the Formal Board Materials. We do not read the court’s opinion so narrowly. We

understand the court to have found that the Plaintiffs were entitled to the Formal

Board Materials and to have reserved judgment, subject to additional discovery, as

to the Informal Board Materials and the Officer-Level Documents. Seen in that light,

the court’s ruling is a discovery ruling in an ongoing proceeding and thus within the

court’s discretion.118 But even if the ruling were to be viewed as the court’s post-

trial remedial order, the ruling is still within the court’s discretion.119 In either case,

117
    203 A.3d 738.
118
    Mann v. Oppenheimer, 517 A.2d 1056, 1061 (Del. 1986) (“The application of the discovery
rules is subject to the exercise of the trial court’s sound discretion.”).
119
    Under Section 220(c)(3), the Court of Chancery may “in its discretion, prescribe any limitations
or conditions with reference to the inspection, or award such other or further relief as the Court
may deem just and proper.”
                                                40
we find that allowing the Rule 30(b)(6) deposition was a sound exercise of the

court’s discretion.

          2.     Palantir

          AmerisourceBergen next contends that the Court of Chancery’s discovery

directive conflicts with Palantir, seizing on, among other things, our statement in

that case that “books and records actions are not supposed to be sprawling,

oxymoronic lawsuits with extensive discovery.”120 We agree here with the Plaintiffs

that AmerisourceBergen has exaggerated the impact of the Court of Chancery’s

ruling when it laments that the ruling “will send the parties on a sprawling

inquiry.”121 We also agree with the Plaintiffs that Palantir did not establish any

bright-line rules regarding discovery to be applied in all Section 220 actions. Nor

did we impose a particular settle-order process in every Section 220 case. To be

sure, we attempted in Palantir to offer guidance as to how Section 220 proceedings,

which are intended to be summary in nature, should be litigated. But we said

nothing—and AmerisourceBergen points to nothing—that would constrain the court

in this case from exercising its discretion to permit a Rule 30(b)(6) deposition.

120
      Palantir, 203 A.3d at 754.
121
      Opening Br. at 42.
                                         41
          3.       Scope of the Plaintiffs’ Demand

          Finally, AmerisourceBergen claims that the Court of Chancery expanded the

scope of the Plaintiffs’ Demand by “facilitat[ing] Plaintiffs’ request[] [of] ‘Informal

Board Materials’ and ‘Officer-Level Documents,’ categories that by definition

would include documents beyond the ‘Board Level Materials’ requested in the

Demand.”122 Once again we disagree with AmerisourceBergen’s characterization

of the Court of Chancery’s opinion.

          The court explained its classification of the Board Materials as defined in the

Demand in clear terms, upon which we cannot improve:

          For each demanded category, the Demand seeks “Board Materials,”
          which it defines as documents “that were provided at, considered at,
          discussed at, or prepared or disseminated, in draft or final form, in
          connection with, in anticipation of, or as a result of any meeting of the
          Company’s Board or any regular or specially created committee
          thereof.

          Through this definition, the Demand requests Formal Board Materials,
          Informal Board Materials, and Officer-Level Materials. The Demand
          seeks Formal Board Materials by requesting documents “provided at,
          considered at, discussed at, or … disseminated … in connection with,
          in anticipation of, or as a result of any meeting of the Company’s Board
          or any regular or specially created committee thereof.” The Demand
          seeks Informal Board Materials by requesting “documents prepared or
          disseminated, in draft or final form” and because the phrases “in
          connection with,” “in anticipation of,” and “as a result of” are broad
          enough to extend beyond documents formally reviewed during an
          official meeting. The Demand requests Officer-Level Materials
          because officers and other employees could have prepared documents

122
      Id. at 46.
                                             42
       in connection with, in anticipation of, or as a result of a board
       meeting.123

       Thus, each of the three categories are derived from the definition of Board

Materials set forth in the Demand. The categories are not—as AmerisourceBergen

argues—“new categories of books and records [that] far exceed the categories of

documents fairly requested in the Demand.”124                            We therefore reject

AmerisourceBergen’s assertion that the court improperly expanded the scope of the

Plaintiffs’ Demand.        Whether any Informal Board Materials or Officer-Level

Materials are necessary and essential awaits the Court of Chancery’s “fact

specific”125 determination, which is committed to the court’s sound discretion.126

                                    IV.     CONCLUSION

       We affirm the Court of Chancery’s interlocutory judgment as set forth in its

January 13, 2020 Memorandum Opinion and remand for further proceedings

consistent with this opinion. Jurisdiction is not retained.

123
    AmerisourceBergen, 2020 WL 132752, at *25 (internal citations omitted).
124
    Opening Br. at 48.
125
    Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 372 (Del. 2011).
126
    Sec. First Corp., 687 A.2d at 569 (“Absent any error of law, this Court reviews for abuse of
discretion the decision of the trial court regarding the scope of a stockholder’s inspection of books
and records.”).
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