Francis Pileggi Quoted in Delaware Business Court Insider Article on Significant Shareholder Wins in Section 220 Cases
Wilmington, Del. (December 29, 2020) - Wilmington Managing Partner Francis G. X. Pileggi was recently quoted in an article from Delaware Business Court Insider (part of Law.com) titled, “Section 220 in 2020: Delaware Courts Clarify Shareholder Rights Law as Case Focus Expands,” which discusses recent significant opinions that bolster shareholders’ rights to inspect company records.
As the article describes, two opinions that the Court of Chancery and Delaware Supreme Court issued within two weeks of each other ruled in favor of shareholders’ rights under Section 220 of the Delaware General Corporation Law. First, in a matter that shareholders filed against AmerisourceBergen Corp., the Delaware Supreme Court held that when shareholders sought to inspect a company’s records, Section 220 did not require them, in most instances, to state precisely what steps they would take next if the materials confirmed their suspicions of wrongdoing.
In commenting on the AmerisourceBergen decision, Mr. Pileggi explained, “It rejects a lot of the defenses that the Chancery Court, at least some Chancery decisions, were either endorsing or at least tolerating.” He added, “So I think it provides great clarity on Section 220 defenses and what will not be accepted as a defense by a company, which makes it easier for a stockholder to pursue its rights under Section 220.”
The article further describes that in a second shareholders’ Section 220 action against Gilead Sciences, Inc., the Court of Chancery explained that allowing companies to bring merit-based defenses interfered with the notion that Section 220 cases were meant to be summary proceedings with a standard that was the lowest burden of proof under Delaware law.
Mr. Pileggi told the Delaware Business Court Insider that the Gilead Sciences opinion may pave the way for the Court of Chancery to examine more often whether companies should be responsible for fees post-trial. That is, because the burden of paying for a Section 220 typically falls on the stockholder who files it, regardless of the outcome, companies have had little incentive to try to avoid courtroom battles over documents they refuse to provide. Mr. Pileggi noted, “The path that a lot of companies have been taking lately is refusing to provide any documents. None. Zero, on the theory that ‘we’re going to make somebody spend a lot of money and a lot of time going to trial, and then after trial, then we’ll give you some documents.’ Which is an aggressive approach.”
Mr. Pileggi further commented that although the time and expense associated with 220 cases were “not for the faint of heart,” the AmerisourceBergen and Gilead Sciences decisions overshadowed most other Section 220 cases brought during 2020 and thus would likely make it easier for stockholders to obtain company records.
Mr. Pileggi is a member of Lewis Brisbois’ Complex Business & Commercial Litigation Practice. He focuses primarily on high-stakes disputes of corporations, stockholders, members of boards of directors, members and managers of LLCs, and those with managerial or ownership interests in other forms of entities. Since 2004, Mr. Pileggi has also maintained the Delaware Corporate & Commercial Litigation Blog, in which he analyzes key decisions from Delaware's Supreme Court and Court of Chancery.
You can read the full Delaware Business Court Insider article here (subscription may be required).