Delaware Supreme Court Reverses Chancery Court Dismissal Of Derivative Plaintiff's Section 220 Books And Records Action

In King v. VeriFone Holdings, Inc., No. 330, 2010, 2011 WL 284966 (Del. Jan. 28, 2011), the Supreme Court of the State of Delaware reversed a decision by the Court of Chancery dismissing a derivative plaintiff’s action under Section 220 of the Delaware General Corporation Law seeking books and records of a Delaware corporation. The Supreme Court held that the Chancery Court erred as a matter of law when it held that the purpose of plaintiff’s demand to inspect books and records — to assist in bolstering demand futility allegations in a parallel shareholder derivative complaint filed in a California federal court — was improper. The Supreme Court explained that although the plaintiff’s simultaneous pursuit of a derivative action and a Section 220 books and records action was perhaps ill advised, it was not impermissible under prevailing Delaware law.

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