1. 1
BOOKS AND RECORDS DEMANDS AND TECHNOLOGY: MEANINGFUL
STOCKHOLDER TOOL, OR LICENSE TO DEPART ON FISHING EXPEDITION
Aaron O. Thieme
I. INTRODUCTION
Delaware has strived to balance the interests and powers of directors and stockholders,
attempting to create an efficient corporate law system where all parties can thrive.1 The model
of corporation law is based upon a separation of legal control and ownership.2 The legal
responsibility to manage the business of the corporation for the benefit of the stockholder owners
rests with the discretion of the board of directors.3 Stockholders' rights to inspect the
corporation's books and records were recognized at common law because as 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.4 Those inspection rights that originated at
common law are now codified in Section 220 of the Delaware Code.
Technology continues to permeate every aspect of life, the corporate record-keeping system
being no exclusion, which creates conflicts in the legal space. Almost fifty years ago, Delaware
enacted Section 220 and it is unlikely that the legislature could have foreseen the technological
1
Lawrence A. Hamermesh, The Policy Foundations of Delaware Corporate Law, 106 Columbia Law
Review 1749, 1763–64 (2006) (“[T]oday's drafters of the DGCL do not devote an iota of conscious effort
to make that statute more friendly to management and less protective of stockholders.... [W]e favor a
much more conservative approach that seeks to maintain whatever balance currently exists, and we are
distinctly uncomfortable with any change that alters that balance in either direction.”).
2
Malone v. Brincat, 722 A.2d 5, 9 (Del.1998).
3
8 Del. C. § 141(a).
4
Saito v. McKesson HBOC, Inc., 806 A.2d 113, 116 (Del.2002) (citing Shaw v. Agri-Mark, Inc., 663
A.2d 464, 467 (Del.1995)).

2. 2
advances that make books and records actions highly contested at the moment. Litigation exists
because shareholders are more consistently seeking information beyond just the list of
stockholders and the ledger, and the statute is silent in relation to what form the other
information must be stored in to be accessible to stockholders, and also what form it must be
transferred.
Technology creates a treasure trove of information documenting director activity, which in the
past would have only been stored in the minds of those present. At the same time, it also offers
directors the ability to cover their tracks. The Court of Chancery has been left to interpret what
digitally created and stored information is to be turned over, and that which is beyond the scope
of Section 220 demand.5 For example, in April of 2015, the Court refused to include non-
employee, director personal email accounts as the typical type of information that could be
compelled by the Court.6
What this paper argues is that the Court of Chancery has been given too much discretion when
interpreting Section 220 demands for electronically stored information, and the legislature must
step in and clarify the boundaries of these demands. This paper will prove that point by first
presenting a statutory analysis of Section 220. Then, a commentary of recent case law and
secondary sources will show how the shifting parameters for such stockholder actions that have
come to exist. This paper will lastly weigh arguments against and in favor of the current
5
See 8 Del. C. § 220(c) (The Chancery Court is granted exclusive jurisdiction to summarily grant Section
220 demands and approve the production of any document or information they deem fair and appropriate
given the circumtances).
6
In re Lululemon Athletica Inc. 220 Litigation,2015 WL 1957196, at *5 (Del. Ch. Apr. 30, 2015). See
infra.

3. 3
interpretation of Section 220, deciding whether the statute sufficiently accomodates the state of
technology.
Ultimately, the main conclusions this paper will arrive at are twofold; first, that it makes more
sense for the Delaware legislature to adopt new language that directly addresses the advent of
technology. Second, the Court of Chancery should not remediate the powerful tool of full-
fledged discovery that allows plaintiff stockholders access to corporate information at the
appropriate stage of litigation.
II. BACKGROUND
A statutory creation enacted in 1967, Section 220 of Delaware’s Corporate Code was an attempt
to balance the interests of stockholders and directors regarding access to non-public corporate
records that are often at odds.7 Section 220 provides stockholders of Delaware corporations with
a powerful right, so long as the shareholder demand for access is for a “proper purpose.”8 This
protection arguably keeps a watchful eye on directors and executives, but cannot be abused by
stockholders as substitute for full-fledged discovery.9 By properly asserting that right under
Section 220, stockholders are able to obtain information that can be used in a variety of contexts.
Stockholders may use information about corporate mismanagement, waste or wrongdoing in
several ways. For example, they may: institute derivative litigation with a more factually
7
8 Del. C. § 220 (Credits).
8
Disney v. Walt Disney Co.,857 A.2d 444, 446 (Del. Ch. 2004).
9
Saito v. McKesson HBOC, Inc.,806 A.2d 113, 116 (Del. 2002).

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particularized complaint regarding alleged wrongdoing;10 seek an audience with the board to
discuss proposed reform or, failing in that, they may prepare a stockholder resolution for the next
annual meeting, or mount a proxy fight to elect new directors. Shareholder class-action plaintiffs
are even admonished by the Court of Chancery to ditch the “first to file” approach, and to first
exercise this important right under Section 220 in order to become lead plaintiff.11 Conversely,
directors argue their time is better spent working for the company’s interests, rather than staving
off books and records actions by warmongering stockholders.12 Where other sections of
Delaware Corporate Code have at least attempted to adapt to technological advances, Section
220 remains silent on electronic data.
A. Statutory Requirements of Section 220
Section 220 has enumerated the requirements for a stockholder to successfully demand books
and records.13 Any stockholder or beneficial owner of shares has the right to exercise this
action.14 If the corporation does not respond to the demand within five days, or refuses to permit
10
Del. Ch. Ct. R. 23.1.
11
Rales v. Blasband, 634 A.2d 927, fn. 10 (Del. 1993) (The Supreme Court encouraged the Court of
Chancery to ignore the custom of allowing the “first the file” to serve as lead counsel where a later filing
plaintiff's counsel was diligent and employed Section 220 stating, “[s]urprisingly, little use has been made
of Section 220 as an information-gathering tool in the derivative context. Perhaps the problem arises in
some cases out of an unseemly race to the courthouse, chiefly generated by the “first to file” custom
seemingly permitting the winner of the race to be named lead counsel. The result has been a plethora of
superficial complaints that could not be sustained. Nothing requires the Court of Chancery, or any other
court having appropriate jurisdiction, to countenance this process by penalizing diligent counsel who has
employed these methods, including Section 220, in a deliberate and thorough manner in preparing a
complaint that meets the demand excused test of Aronson.”)
12
See Disney v. Walt Disney Co., 857 A.2d 444, 446 (Del. Ch. 2004) (Court agreed with Defendant and
stated, “[i]f any stockholder can make public the preliminary discussions, opinions, and assessments of
board members and other high-ranking employees, it will surely have a chilling effect on board
deliberations”).
13
8 Del. C. § 220 (Credits).
14
8 Del. C. § 220(a)(1).

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a stockholder the opportunity to inspect the books, the stockholder can bring a summary action in
the Court of Chancery to compel the inspection of the books.15 Under the code, the stockholder
is entitled to inspect the corporation's stock ledger, list of stockholders, as well as other books
and records.16 When the stockholder seeks to inspect materials other than the ledger and list of
stockholders, the stockholder must first establish that: (1) the stockholder is in fact a stockholder;
(2) the stockholder has complied with Section (c) respecting the form and manner of making
demand for inspection of such documents; and (3) the inspection the stockholder seeks is for a
proper purpose.17
The statute defines proper purpose as a purpose reasonably related to such person's interest as a
stockholder.18 If the stockholder complies with these provisions of the statute, then the burden of
proof shall be upon the corporation to establish that the inspection such stockholder seeks is for
an improper purpose.19 When summarily deciding books and records actions, the Court of
Chancery can exercise its discretion to prescribe or attach additional conditions as it deems fair
and appropriate.20
B. Common Law Interpretations of Section 220
The powers under Section 220 are not limitless, and the Chancery Court has annunciated caution
when deciding Section 220 demands. The Legislature ensured that the Court would not be
15
8 Del. C. § 220(c).
16
Id.
17
Id.
18
Id.
19
Id.
20
Id.

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pigeonholed under any formulaic model or circumstance, because the code explicitly grants the
Court of Chancery the discretion to prescribe any limitations or conditions with reference to the
inspection, or award such other or further relief as they deem just and proper.21 At the same
time, with the emergence of the technological age, the statute seems archaic in terms of even
attempting to identify the new sources of proper books and records demands. The relevant
inquiry in confining the scope of such an action is whether or not a particular document is
essential to a given inspection purpose.22 A document is essential for Section 220 purposes if, at
a minimum, it addresses the crux of the shareholder's purpose, and if the essential information
the document contains is unavailable from another source.23 Whether or not a particular
document is essential to a given inspection purpose is fact specific and will necessarily depend
on the context in which the shareholder's inspection demand arises.24
Although the Court of Chancery addressed Section 220 demands at many times prior, the 1997
holding in Security First v. U.S. Die Casting & Development serves as an appropriate starting
point for the scope of this paper.25 Technology had reached a point at which it was
commonplace in business, and more practical for documents to be created and stored on servers
21
8 Del. C. § 220(c)
22
See Espinoza v.Hewlett-Packard Co.,32 A.3d 365, 371-72 (Del. 2011) (The Court of Chancery denied
plaintiff’s demand to inspect a report prepared by outside counsel in regards to allegations of a corporate
officer engaging in sexual harassment. On appeal, the Supreme Court agreed with the Chancery Court’s
ruling, and stated that plaintiff’s demand for this specific document was not essential to his stated
purpose, which was to investigate for potential corporate wrongdoing. Additionally, the demand was
overbroad because the document was confidential and privileged).
23
Id. (Emphasis added).
24
Id.
25
Although the conversion from paper to digital may have occurred sooner, it is quite appropriate that by
the year 2000, digital information had firmly asserted itself as the primary means of recording, creating,
transferring, and storing information and documents. See David McGurgan, Essential Communication
Tools for the 21st Century Computers and the Internet,16-SPGDel. Law. 23, SPRING1998 (1998).

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rather than file cabinets. In that case, U.S. Die Casting demanded to inspect all books and
records of Security First after the company’s stock plummeted following the termination of a
merger agreement. U.S. Die Casting was granted an initial order by the Court of Chancery and
Security First challenged the scope of the order as too broad. On appeal, the Delaware Supreme
Court agreed with the Court of Chancery’s analysis, but limited the scope of information turned
over to U.S. Die Casting per the Chancery Court’s ruling. The Supreme Court advised that in the
future, a Section 220 proceeding should result in an order circumscribed with “rifled
precision.”26
The Delaware Supreme Court went on to explain exactly why Section 220 proceedings are an
important part of the corporate governance landscape in Delaware. It hinted at the obvious
inference that these actions are precursors to derivative litigation, and therefore the Court was
not going to unfairly grant plaintiff stockholders all of the documents they should have to wait
for full-fledged discovery to obtain. Going forward, the Court reminded plaintiffs of their
substantial burden; a credible basis for finding corporate wrongdoing, and be able to justify each
category of documents sought as necessary to achieve that end.27 The result, the Court opined,
would be a decision by the Court of Chancery that was more carefully tailored to the plaintiff
stockholder’s reasonable needs.28 This case served as an important example of how deep into
26
Security First Corp.v. U.S.Die Casting & Dev.Co.,687 A.2d 563, 570 (Del. 1997); See e.g. Loudon v.
Archer-Daniels-Midland Co.,700 A.2d 135, 140 (Del. 1997) (This standard seems to have emerged as an
adaptation of the pleading-stage standard assigned to the truthfulness of allegations concluded in a
complaint.)
27
Id.
28
Id.

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non-public, director and executive information stockholders would be able to go.29 Although the
attachment of “rifled precision” has remained in the setting of Section 220 litigation, it is unclear
whether that standard has broadened with the emerging sources of technology.
Even if the Legislature did not originally undertake the task of planning for it when drafting
Section 220, the Court of Chancery has clearly contemplated the new challenges that technology
poses. The Court is well aware that its inquiry must not be limited to the merits of stockholder
requests, but also considerations about the potential harm to, and chilling effect of broadening
Section 220’s summary discovery, as communications that would not have existed in the past
now have the potential to be turned over to the stockholders.30
In 2004, Khanna v. Kovad Communications came before the Court of Chancery and served as
yet another stage for the Court to enumerate the proper inquiry for books and records actions. In
deciding that case, the Court disallowed certain requests as overly broad and reinforced the
notion that these actions are not a substitute for discovery.31 The Court may have accidentally
29
See Security First Corp.v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 570 (Del. 1997) (“Stockholders
have a right to at least a limited inquiry into books and records when they have established some credible
basis to believe that there has been wrongdoing. In fact, a Section 220 proceeding may serve a salutary
mission as a prelude to a derivative suit. Yet it would invite mischief to open corporate management to
indiscriminate fishing expeditions. The trial court must assure that a proper balance is struck.”).
30
Pershing Square, L.P. v. Ceridian Corp.,923 A.2d 810, 823-24 (Del. Ch. 2007) (The Court of
Chancery ruled that even though Pershing Square had stated a proper purpose, disclosure of the letters
they sought would be unfairly harmful to Ceridian Corporation and its executives).
31
See Khanna v. Covad Communications Group, Inc., 2004 WL 187274, at *9 (Del. Ch. Jan. 23, 2004)
(The Court enumerated, “[a] Section 220 action is not a substitute for discovery under the rules of civil
procedure. For instance, the demand, which seeks correspondence, sent by or on behalf of Khanna to the
board or any representative thereof is an example of documents for which Khanna has not shown any
necessity and which he should be aware of in any event. Moreover, to require the production of all
communications, including e-mails, among directors and officers of Covad, under these circumstances,
would be excessive.”).

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created confusion for the future, in regards to individual director and executive
communications.32 Interpretation of Section 220 at this point seemed to signal to plaintiff
stockholders that documents, such as emails between directors, might be out of their reach for
the time being. Of course, as this paper will explore, the Court of Chancery did not hold on to
this sentiment for long.
In 2007, in Pershing Square, the Court of Chancery voiced their continued reservations about
stockholders gaining access to information outside the scope of Section 220.33 The Court of
Chancery denied Pershing Square’s books and records demand for two letters from the CEO of
Ceridian to the board of directors.34 Pershing Square sought to use the letters to disparage the
current board during a heated proxy contest.35 The Court essentially created two categories of
demands that would typically not be granted; circumstances when the stockholder demand for
otherwise potentially relevant corporate documents may be confidential, and when the scope of
32
See Khanna v. Covad Communications Group, Inc.,2004 WL 187274, at *9 (Del. Ch. Jan. 23, 2004)
(Interestingly, the Court also stated, “the appropriate documents, i.e., necessary for purposes reasonably
related to his status as stockholder, consist of those documents that are not the documents of individuals
but, instead, are those which are held by the corporation.”).
33
See Pershing Square, L.P. v. Ceridian Corp., 923 A.2d 810, 823-24 (Del. Ch. 2007) (The Court stated,
“[i]f any stockholder can make public the preliminary discussions, opinions, and assessments of board
members and other high-ranking employees, it will surely have a chilling effect on board deliberations”
and on important relations and communications between directors and executives. Directors, while they
set the strategic vision of the company and monitor the managers in carrying out that vision, usually are
not involved in the daily inner workings of the company. Executives, on the other hand, are exposed in
this manner. Thus, executives may provide an invaluable source of information regarding highly relevant
topics such as employee morale, employee efficiency, employee mismanagement, and a plethora of other
topics. In order to keep directors well-informed in this regard, it is important as a policy matter that we
protect the confidentiality of communications. I do not suggest that any document between an executive
and a board member that the company marks as confidential is automatically excluded from inspection
under § 220.”’).
34
Id.
35
Id.

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documents sought is too burdensome and overbroad to possibly force disclosure by the
corporation.
Conversely, there are also situations where the benefit of disclosure outweighs the risks of
harm.36 In this case, those documents involved both confidential business and personnel matters,
however the potential benefit of disclosing the information did not outweigh the potential harm,
and the Court should continue to exercise caution in requiring disclosure absent special
circumstances.37
This past spring, the Court of Chancery decided the Lululemon Section 220 litigation. The
plaintiff in that case successfully overcame the initial two-step gatekeeper of Section 220;
arguing a credible inference of corporate wrongdoing, coupled with a proper purpose for its
different categories of document demands.38 However, the corporation did not turn over all of
the documents enumerated in the initial order, and submitted a log of sixteen different chains of
documents that it argued were outside the corporations control, and also privileged, therefore
should not have been subject to the order.39 The pertinent documents for purposes of this paper
were email chains involving non-employee directors, using their own personal email accounts.
36
Id.
37
Id.
38
See In re Lululemon Athletica Inc.220 Litigation,2015 WL 1957196, at *2 (Del. Ch. Apr. 30, 2015)
(Vice Chancellor Parsons concluded that Plaintiffs had a proper purpose to seek books and records
regarding trades executed by founder and chairman-of-the-board because there was a credible basis to
infer wrongdoing by founder and Lululemon. Specifically, in addition to a possible Brophy claim against
founder, Vice Chancellor Parsons concluded that Plaintiffs had demonstrated a credible basis to infer
possible mismanagement by the Company in connection with their oversight as to the questionable
trading).
39
For purposes of this paper, the other potential privileged documents and emails involved in the case
will not be discussed.

11. 11
The plaintiffs argued it was immaterial that the emails were not stored on company accounts,
because they still directly involved the business and affairs of the corporation.40 Vice Chancellor
Parsons ruled that his initial order was overly broad, and concluded that the corporation was not
required to search these non-employee directors’ personal email accounts for the demanded
emails.
This decision has at least one important future implication. It seems the Court of Chancery
remains firm in its stance against compelling corporations to turn over documents from non-
employee directors.41 This notion is particularly important when different issues of technology
are being decided. A director or executive may have control over a particular document or
email, and the corporation does not have any dominion over such document because it’s stored
on his personal email account or his own computer.
The outcome of these representative cases does not necessarily cry chaos. The Court of
Chancery has seemed to stick to its guns through the passage of time and adjusted to the
technological advances that could muddy the water in this arena of litigation. It is evident that
the Delaware Courts are more than well equipped to address these Section 220 claims. However,
the terms “books and records” are just too outdated to be workable, and for greater uniformity
40
The purpose of this demand was Lululemon's non–employee directors apparently did not have company
email accounts and instead conducted any company-related business through email accounts of their own.
41
See Indiana Electric Workers Pension Trust Fund IBEW v. Wal-Mart Stores,Inc.,7779-CS, at 97-98
(Del. Ch. May 20, 2013); Wal-Mart Stores,Inc.v. Indiana Electric Workers Pension Trust Fund IBEW,
95 A.3d 1264 (Del. 2014) (Chancery Court decision and Supreme Court decision respectively) (This is
based on an understanding of Walmart I & II, in which the Court ruled that only information the
corporation could exhibit dominion and control over could be turned over in a successfulSection 220
action.).

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the Delaware legislature should adopt new language to explicitly account for the emergence of
new technology in the statute.
C. Discussion of Secondary Sources
Because Section 220 has become such an important precursor to derivative litigation, the area
has been ripe with scholarly debate, and articles have been published about the different
consequences of its use, particularly with the emergence of activist stockholders. Two articles in
particular serve as reasonable representatives of the avenues different scholars have chosen to
pursue when discussing the many complex issues Section 220 creates in modern law.
A 2006 article written by S. Mark Hurd and Lisa Whittaker posits that one potential harmful
effect of Section 220 is to gain better positioning for a settlement in a derivative suit, without
ever having any contemplation of really going forward.42 The article argues that if Section 220
continues to expand, the Courts should at least first ensure that they administer orders in a way
that minimizes abuse. The conclusion ultimately reached was that Section 220 should become a
more expansive tool, obviating the need for expensive and wasteful discovery proceedings once
real litigation begins.43
42
S. Mark Hurd, Lisa Whittaker, Books and RecordsDemandsand Litigation: Recent Trends and Their
Implications for Corporate Governance,9 Del. L. Rev. 1, 34 (2006) (Courts must be diligent to prevent
the use of Section 220 from clouding the distinction between claims “motivated by the hope of creating
settlement leverage through the prospect of expensive and time-consuming litigation discovery” and
claims that reflect “a reasonable apprehension of actionable director malfeasance that the sitting board
cannot be expected to objectively pursue on the corporation's behalf.”)
43
The authors proposed a straight-forward solution to potential abuse by permitting courts to consider, for
pleading purposes, both the scope of the section 220 production and its entire contents. Such a rule, they
argue, would serve to encourage a more-expansive production of books and records, and also minimize
the need for judicial intervention regarding the appropriate scope of the section 220 production. It would
make section 220 the “powerful right” that courts intend it to be, without creating the potential “waste of
resources” that courts seek to avoid.

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In 2012, an article even more aligned with the goals of the paper, Francis G.X. Pillegi, Kevin F.
Brady, and Jill Agro argued the Delaware legislature and Courts needed to explicitly address the
issue of electronically stored information (ESI) in an authoritative manner.44 The article
discusses the fact that the Courts have skirted the issue of whether or not ESI is included in
Section 220 actions, and posits that they must come to some resolution on the topic. They use
the example of the adaptation of federal discovery rules to formulate a new standard for Section
220 that would adapt more easily to technological advances.45 The article makes a similar
conclusion that whatever change comes to Section 220, it has to be able to respond to the new
challenges technology creates.
The interesting proposition created by these two articles is that scholars almost seem to be
predicting that a change in the statute is imminent. The spur of that change is clear; at some
point in the future, the legislature or the Courts are going to have to respond to the many
questions created by technology.
44
Francis G.X. Pileggi, Kevin F. Brady, Jill Agro, Inspecting Corporate "Books and Records" in A
Digital World: The Role of Electronically Stored Information,37 Del. J. Corp. L. 163 (2012).
45
Id. (One possible solution for defining the limits of ESI production in response to a Section 220 request
is to use the “reasonably accessible” standard developed in the discovery context. After the 2006
amendments to the FRCP 26, the accessibility of ESI in plenary litigation is now defined by the
“reasonably accessible” standard. Although Delaware courts have applied this federalstandard to
discovery requests,there is not yet any Delaware case law directly addressing the issue of whether ESI in
a Section 220 case is or is not “reasonably accessible.”).

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III. BATTLEGROUND OF COMPETING INTERESTS
This section of the article is by no means an exhaustive list of all arguments on either side of the
expansion of Section 220, but rather is meant to serve as an illustration of the issues case law and
the secondary sources discussed above have created. The common inference created from the
many arguments, however, is that the solution may no longer simply be for the legislature and
Courts to continue down the same path. Section 220 creates many issues that originate with
varied sources from within the statute. The most reasonably prudent solution to this issue is for
the legislature to undertake the necessary steps to fill in gaps created by technology, and also to
ensure that Section 220 is not ripe for abuses. Drafting a new and updated statute would
accomplish those goals.
A. Section 220 Provides Chancery Court with Necessary Flexibility.
Section 220 litigation is a definitively factual process. In each case, the Court of Chancery is
presented with a new demand seeking constantly changing categories of documents. For that
reason alone, the Court needs to be equipped with a statute that allows them flexibility to tailor
their orders to the particular facts of the case at hand.46 Courts are not forced to grant every
demand of a plaintiff stockholder, even if they have successfully argued an inference of
corporate wrongdoing and a proper purpose.47 They are able to balance the competing interests
of stockholder plaintiffs who are seeking to hold directors and executives liable for their
46
8 Del. C. § 220(c)
47
Pershing Square, L.P. v. Ceridian Corp.,923 A.2d 810, 823-24 (Del. Ch. 2007).

15. 15
potential malfeasance while at the same time ensuring those same directors are not constantly
staving off stockholder demands and can work for the benefit of the corporation.48
It is clear that the legislature intended for the Court of Chancery to have flexibility, and a
potential downfall to the adoption of new language to compensate for technological advances
may be the loss of that flexibility. The way that the statute is currently written allows the Courts
to consider the ever-changing environment of the law, and determine at what point there needs to
be a change. This approach, however, could potentially grant too much legislative authority to
the judiciary, rather than vesting properly in the hands of the legislature.
B. Plaintiff Can Form More Particularized, Credible Complaints.
One of the likely possibilities for the installation of this statute was to empower plaintiff
stockholders with non-public corporate documents so that they would be better equipped to make
a decision about a lawsuit. The cost of discovery is incredibly high, and the burden to overcome
a 12(b)(6) motion creates a dilemma for stockholder who suspects corporate wrongdoing.
Section 220 serves as a means for that stockholder to gain valuable documents without incurring
the costs of full-scale lawsuits against the corporation. The Supreme Court has gone so far as to
admonish stockholder class-action plaintiffs to ditch the “first to file” approach, and to first
exercise this important right under Section 220 in order to become lead plaintiff.49
This important right serves many positive functions. First, it keeps poorly pled claims
potentially from ever being brought in front of the Court of Chancery. Second, it decreases the
48
Id.
49
Rales v. Blasband, 634 A.2d 927, fn. 10 (Del. 1993)

16. 16
wasteful necessities of full-fledged discovery because the plaintiff is asking for exactly the
documents he seeks to be turned over.50 The Court of Chancery will also not be bogged down
with derivative claims lacking merit. It seems from a perspective of judicial economy, Section
220 is a very useful tool that should be expanded.
C. “Proper Purpose" Standard Contradicts Corporate Law Structure.
As previously stated, a “proper purpose” is a purpose reasonably related to such person's interest
as a stockholder.51 Allowing stockholder plaintiffs the right to invade the private space of the
corporation as long as they can enumerate some “proper purpose” contradicts the spirit of
Delaware’s corporate law structure. The legal responsibility to manage the business of the
corporation for the benefit of the stockholder owners rests with the discretion of the board of
directors.52 Even if directors are potentially committing acts that would subject the corporation
or themselves to liability, that alone should not give the stockholders the right to embark on a
fishing trip to find out if that is the case. An analogous example is citizens’ Fourth Amendment
right against illegal searches and seizures by government officials. The judicial activism
surrounding Section 220 demands blurs the line of separation between ownership and control, a
tenet of Delaware corporate governance.
Directors need to be granted the protection of control of the corporation, and there are other
safeguards in place that are more effective and more fair than the current interpretation of
50
The “rifled precision” used by the Court of Chancery will arguably keep discovery costs lower because
the plaintiff will be in possession of at least some of the documents he would have sought preliminarily.
51
Id.
52
8 Del. C. § 141(a).

17. 17
Section 220 to ensure that they do their job properly.53 If Stockholders are increasingly able to
uncover traditionally non-public information used by directors, a chilling effect will occur, and
directors will be second-guessed by their stockholders. In order to preserve the traditional
notions of Delaware corporate governance, Section 220 should no longer give the Court of
Chancery such discretion to summarily decide what documents will be turned over to
stockholders. The statute should be amended to more clearly reflect the wishes of the legislature
in regards to the scope of this essentially pre-filing discovery demand.
D. Section 220 is Silent on the Issue of Technology.
As indicated in the Pileggi article, there are other sections of Delaware law that have adopted
new language to address technological advances.54 Electronically stored information is
specifically enumerated in Chancery Court Rule 26 as one of the generally acceptable methods a
party may obtain discovery.55 Clearly, the legislature thought that the advent of new technology
was too inevitable and too important to keep the discovery statute silent on its use. It is a
reasonable inference to say that if the legislature would have contemplated such an expansion on
the use of Section 220 demands to reach such electronic information; they would have amended
the statute so that it explicitly stated such. Therefore, the legislature potentially could have never
contemplated Section 220 demands to be broadened to such a scope.
53
Derivative suits, particularly where individual directors are named create a more realistic “check” on
the activities of executives and directors who handle the corporation, because at that point the potential
remedies are far more damaging than being forced to produce certain documents.
54
Francis G.X. Pileggi, Kevin F. Brady, Jill Agro, Inspecting Corporate "Books and Records" in A
Digital World: The Role of Electronically Stored Information,37 Del. J. Corp. L. 163 (2012).
55
Del. Ch. Ct. R. 26.

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Instead, the legislature has left the interpretation of the statute and its implications on electronic
information to the Courts. Judicial activism has extended the scope of demands into electronic
information, and it is time for the legislature to interject and explicitly state its intent on the issue
within the statute.
E. Section 220 As A Tool of Litigious Investors and Law Firms.
Over time, the “proper purpose” as described above is potentially no longer related to
stockholder’s interest as stockholders, but rather as a tool for litigious, profit-seeking law firms
and investors to reach into the deep pockets of corporations.56 Therefore, their interests are no
longer aligned with the success of the company, and their rewards as a partial owner, but rather
in the profits from a successful settlement with the corporation. If a plaintiff stockholder is
successful in the Court of Chancery for its demand of corporate documents, they are in a much
stronger negotiating position when it comes to settlement price.57 For this reason, it can be
argued that Section 220 has become too broad, and the Court has not decided the scope of
inquiries with “rifled precision,” leading to stockholder plaintiff abuse of the statute.58
Additionally, law firms engaged in the practice of shareholder class-action and derivative
litigation are potentially cashing in on the benefits of these actions. The firms can encourage a
beneficial owner of stock in a company to institute a Section 220 action, gain access to that
information, and then later receive a large portion of the settlement as their fee once the case
56
The proper purpose standard is met when a plaintiff shows a document is related to their ownership of
the stock, and necessary in order to investigate a claim of corporate wrongdoing.
57
When a corporation is forced to face a plaintiff armed with even more information than they originally
had, it effectively turns the table on litigation strategy for the corporation, and places them in a more
defensive position.
58
Security First Corp.v. U.S.Die Casting & Dev.Co.,687 A.2d 563, 570 (Del. 1997).

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evolves into a derivative suit. Nowhere in the statute has this practice been contemplated, but it
is just another potential example of the how the current state of the statute is being taken
advantage.
F. Plaintiffs Should Be Required To Overcome Pleading Stage.
Section 220 has arguably become a beacon for plaintiff stockholders. It potentially obviates the
need for a plaintiff to overcome the pleading stage of litigation to obtain full-fledge discovery.
The result of a successful books and records demand is a treasure trove of evidence based upon a
summarily granted order. That information being turned over is then used to prepare for some
type of anticipated litigation. Although on one hand it creates potentially more well-pled
claims, it also leaves the door open for more rampant abuses on part of the plaintiff stockholders.
The Court of Chancery should be more hard-pressed to unveil non-public corporate documents
that most likely would have come to light anyway if the plaintiff had a meritorious suit. At the
very least, plaintiff stockholders should be forced to make it past the pleading stage of litigation
before they are granted the documents that the Court of Chancery has interpreted “other books
and records” to mean under Section 220 demands.
IV. CONCLUSIONS
Although this paper may not have explicitly answered whether Section 220 is a reasonable
plaintiff stockholder tool, or permission to go on a fishing expedition, it has nevertheless
engaged in an important dialogue. The question seems almost unanswerable at this time, and
further proves the point that clarification from the legislature is necessary. The case law,

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secondary sources, and arguments on both sides of the issue discussed within this paper
emphasizes the need for more uniformity in the statute. Section 220 has remained untouched by
the legislature since 1967, its interpretation left to the Courts. It is high time that the legislature
addresses the many concerns created by this outdated statute and fill in the gaps to ensure this
powerful tool can be used reasonably and fairly. The law will almost always lag behind
technology, but there comes a point, as there is here, at which there is a such a disconnect that
something must be done to correct it.
Attorneys need to be able to advise their executive clients in a more meaningful way about the
implications of Section 220. The Court of Chancery should also be given more explicit
instructions, particularly in the area of technology, and whether or not to grant all of the demands
for categories of documents in Section 220 actions. “Books and records” are simply outdated,
out of touch terms within Section 220 that need to be revised to accurately reflect the current
state of the intersection of technology and business and the law.
TABLE OF AUTHORITIES
Cases
Malone v. Brincat, 722 A.2d 5 (Del.1998).
Saito v. McKesson HBOC, Inc., 806 A.2d 113 (Del.2002).
In re Lululemon Athletica Inc. 220 Litigation, 2015 WL 1957196 (Del. Ch. Apr. 30, 2015).
Disney v. Walt Disney Co., 857 A.2d 444 (Del. Ch. 2004).
Rales v. Blasband, 634 A.2d 927, fn. 10 (Del. 1993).
Espinoza v. Hewlett-Packard Co., 32 A.3d 365 (Del. 2011).

21. 21
Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563 (Del. 1997).
Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135 (Del. 1997).
Pershing Square, L.P. v. Ceridian Corp., 923 A.2d 810 (Del. Ch. 2007).
Khanna v. Covad Communications Group, Inc., 2004 WL 187274 (Del. Ch. Jan. 23, 2004).
Indiana Electric Workers Pension Trust Fund IBEW v. Wal-Mart Stores, Inc., 7779-CS (Del. Ch.
May 20, 2013).
Wal-Mart Stores, Inc. v. Indiana Electric Workers Pension Trust Fund IBEW, 95 A.3d 1264
(Del. 2014).
Secondary Sources
Lawrence A. Hamermesh, The Policy Foundations of Delaware Corporate Law, 106 Columbia
Law Review 1749 (2006).
Francis G.X. Pileggi, Kevin F. Brady, Jill Agro, Inspecting Corporate "Books and Records" in A
Digital World: The Role of Electronically Stored Information, 37 Del. J. Corp. L. 163 (2012).
S. Mark Hurd, Lisa Whittaker, Books and Records Demands and Litigation: Recent Trends and
Their Implications for Corporate Governance, 9 Del. L. Rev. 1 (2006).
David McGurgan, Essential Communication Tools for the 21st Century Computers and the
Internet, 16-SPG Del. Law. 23, SPRING 1998 (1998).
Statutes
8 Del. C. § 220
8 Del. C. § 141(a).
Del. Ch. Ct. R. 26.
Del. Ch. Ct. R. 23.1.