In the wake of antitrust investigations and an action filed by the Federal Trade Commission (FTC), an Amazon stockholder sought books and records to investigate possible mismanagement and wrongdoing. A Magistrate in Chancery held that the plaintiff failed to establish the necessary credible basis to suspect wrongdoing. A Vice Chancellor affirmed, reasoning the stockholder’s purpose was facially overbroad. The stockholder appealed, and the Delaware Supreme Court reversed.
Regarding the scope of the purpose, the Supreme Court held the Court-below erred in reading the demand as improperly seeking information about anticompetitive behavior “anytime” and “anywhere.” The Supreme Court reasoned that the stockholder clarified it was seeking documents concerning certain alleged anticompetitive behavior that was the subject of governmental investigations and complaints identified in the demand. The Supreme Court also reasoned that the credible basis standard was met. It explained that, while more than mere untested allegations of wrongdoing are required, here there were the FTC action and several other cases that had moved beyond the motion to dismiss stage, which in the specific circumstances concerning Amazon sufficed to establish a credible basis. The Supreme Court accordingly remanded the action to the Court of Chancery to consider the scope and conditions of the production.
[View source.]
