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When a Del. Code Ann. tit. 8, § 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. 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.
This was an interlocutory appeal from a Court of Chancery memorandum opinion in an action brought under Section 220 of the Delaware General Corporation Law ordering appellant AmerisourceBergen to produce certain books and records to appellees and granting the appellees leave to take a Rule 30(b)(6) deposition "to explore what types of books and records exist and who has them." The appellant claimed that the appellees’ inspection demand was aimed at investigating possible breaches of fiduciary duty, mismanagement, and other wrongdoing, and was fatally deficient because it did not disclose the appellees’ ultimate objective. The Court of Chancery held that the appellees were not required to establish a credible basis to suspect actionable wrongdoing.
Did the Court of Chancery err in holding that the appellees were not required to establish a credible basis to suspect actionable wrongdoing?
The “credible basis” test was the standard by which investigative inspections under § 220 were to be judged and the court should defer the consideration of defenses that did not directly bear on the appellee were entitled to the formal board materials and reserved judgment, subject to additional discovery, as to the informal board materials and the officer-level documents.