Amerisourcebergen Corp v. Lebanon County Employees' Retirement Fund
243 A.3d 417
Del.2020Background
- AmerisourceBergen, a major opioid distributor, faced extensive government investigations and multidistrict opioid litigation related to its suspicious-order monitoring practices.
- In May 2019 two institutional investors served an 8 Del. C. § 220 demand for Board Materials (May 1, 2010–present) to investigate possible breaches of fiduciary duty, evaluate remedies, assess director independence, and consider litigation or other corrective measures.
- AmerisourceBergen refused production; the plaintiffs sued in the Court of Chancery. The Chancery Court found a credible basis to investigate and ordered production of Formal Board Materials and granted leave for a post-trial Rule 30(b)(6) deposition to identify additional custodians and documents.
- AmerisourceBergen appealed, arguing (1) the demand had to disclose the plaintiffs’ intended post-inspection objectives, (2) plaintiffs must show the alleged wrongdoing is actionable, and (3) the 30(b)(6) deposition was improper.
- The Delaware Supreme Court affirmed: (a) a proper investigatory purpose under § 220 does not require stating the specific remedial objectives the stockholder might pursue after inspection; (b) the credible-basis standard governs and plaintiffs need not show the alleged wrongdoing is actionable; and (c) allowing the Rule 30(b)(6) deposition was within the Chancery Court’s discretion.
Issues
| Issue | Plaintiffs' Argument | AmerisourceBergen's Argument | Held |
|---|---|---|---|
| Whether a § 220 demand to investigate wrongdoing must state the post‑inspection objectives (what the stockholder will do with the documents). | A demand stating an investigatory purpose is proper; plaintiffs need not identify every potential post‑inspection objective. | The demand must disclose the substance/objectives of the intended use so the corporation can evaluate whether the purpose is related to stockholder interests. | A stockholder need not specify the particular ends of its investigation; stating a proper investigatory purpose suffices. |
| Whether a stockholder must show that the alleged wrongdoing is actionable (i.e., not subject to exculpatory or procedural bars) to obtain documents. | § 220 requires only a credible basis to infer possible wrongdoing; actionability is not required in most § 220 proceedings. | Plaintiffs must show the wrongdoing would be actionable; otherwise inspection would be futile and improper. | Reaffirmed credible‑basis standard; actionability not generally required. Narrow exception: if the sole purpose is litigation and a purely procedural bar (standing/statute of limitations) makes any suit impossible, inspection may be denied. |
| Whether the Chancery Court abused its discretion by allowing a post‑trial Rule 30(b)(6) deposition to identify custodians and document types. | The deposition is necessary because AmerisourceBergen refused discovery about custodians and document types; Chancery acted within its discretion to facilitate final production. | The deposition improperly shifts plaintiffs’ burden, conflicts with Palantir guidance limiting sprawling discovery, and expands the demand’s scope. | Allowing the 30(b)(6) deposition was within the Chancery Court’s discretion and did not improperly expand the demand beyond its definitions. |
Key Cases Cited
- Seinfeld v. Verizon Commc'ns, Inc., 909 A.2d 117 (Del. 2006) (articulates the credible‑basis standard for § 220 investigatory demands)
- Saito v. McKesson HBOC, Inc., 806 A.2d 113 (Del. 2002) (discusses permissible post‑inspection uses and relation to stockholder interest)
- Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026 (Del. 1996) (explains limits on fishing expeditions and credible‑basis threshold)
- Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563 (Del. 1997) (applies the credible‑basis standard)
- In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch. 1996) (establishes director oversight duty standard relevant to Caremark‑style claims)
- KT4 Partners LLC v. Palantir Techs. Inc., 203 A.3d 738 (Del. 2019) (emphasizes that § 220 proceedings should be summary and guarded against sprawling discovery)
- Corwin v. KKR Fin. Holdings, LLC, 125 A.3d 304 (Del. 2015) (business‑judgment rule where transaction approved by fully informed, uncoerced shareholder vote)
- Brehm v. Eisner, 746 A.2d 244 (Del. 2000) (Section 220 proceedings should be managed expeditiously)