Wal-Mart Stores, Inc. v. Ind. Elec. Workers Pension Tr. Fund IBEW - 95 A.3d 1264 (Del. 2014)

Rule:

Documents are "necessary and essential" pursuant to a Del. Code Ann. tit. 8, § 220 (2014) demand if they address the crux of the shareholder's purpose and if that information is unavailable from another source. Whether documents are necessary and essential is fact specific and will necessarily depend on the context in which the shareholder's inspection demand arises.

Facts:

Plaintiff IBEW was a retirement system that provided retirement benefits to electrical workers in Indiana. On the other, defendant Wal-Mart operated stores in 27 different countries and employed about 2.2 million people worldwide. At all times, plaintiff has been a stockholder of defendant. In April 2012, The New York Times issued an article that described a scheme of illegal bribery payments made to Mexican officials at the direction of the then Walmart Mexico CEO. Defendant received a demand letter from plaintiff requesting an inspection of broad categories of documents relating to the bribery allegations described in the Times Article. Defendant agreed subject to certain conditions to make available the materials relating to the allegations, as well as existing policies relating to defendant’s Foreign Corrupt Practices Act compliance. However, defendant declined to provide documents that it determined were not necessary and essential to the stated purposes in the letter or that were protected by the attorney-client privilege and work-product doctrine. The Court of Chancery conducted a trial and entered a final order and judgment, which required the defendant to produce a wide variety of additional documents, including ones whose content was privileged or protected by the work-product doctrine. Defendant appealed with regard to its obligations to provide additional documents. 

Issue:

Did the court err in requiring the defendant to produce a wide variety of additional documents?

Answer:

No.

Conclusion:

The court affirmed the judgment and held that the record did not support defendant’s claim that officer-level documents requested by plaintiff under Del. Code Ann. tit. 8, § 220 (2014) were not necessary and essential to the plaintiff’s purpose of investigating bribery allegations and how the defendant investigated those allegations. The court further held that the Garner fiduciary exception to attorney-client privilege applied to § 220 proceedings, in this case, the court of chancery properly applied the doctrine in finding that good cause existed to order privileged documents to be produced. Also, the court of chancery's ruling that work product documents had to be produced properly was based on Del. Ch. Ct. R. 26(b)(3) rather than Garner. Thus, the court of chancery did not err in ordering the plaintiff to return documents that had been sent to them anonymously and were not otherwise publicly available.