Central Laborers Pension Fund v. News Corp.
2012 Del. LEXIS 285
| Del. | 2012Background
- Central Laborers Pension Fund seeks inspection of News Corp.'s books and records under 8 Del. C. §220 related to the Shine Transaction.
- Simultaneously, derivative action against News Corp.’s directors alleges unfair process and price in the Shine Transaction.
- Court of Chancery dismissed the 220 Action solely for lack of a proper purpose due to the pending derivative suit.
- Delaware law requires strict compliance with §220(b) form and manner before addressing the purpose of inspection.
- Central Laborers’ demand lacked documentary evidence of beneficial ownership, contained defects (wrong entity, inconsistent filings, no annexed ownership documents), and any cure during litigation was improper under §220.
- The Delaware appellate court affirms the dismissal on procedural grounds (failure to meet §220 form/manner), without reaching whether the purpose was proper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §220(b) compliance was satisfied by Central Laborers. | Laborers argues proper purpose not mooted by derivative suit. | News Corp. contends demand failed to meet §220(b) requirements. | Procedural defect fatal; noncompliance with §220(b) requires dismissal. |
| Whether proper purpose analysis is available before form/manner compliance is satisfied. | Laborers maintains proper purpose can be shown despite pending derivative suit. | Court should wait for form/manner compliance before evaluating purpose. | Court held form/manner compliance required before addressing proper purpose. |
| Whether failure to attach documentary evidence of beneficial ownership invalidates the demand. | Laborers provided ownership evidence later as cure. | Cure cannot substitute for an accompanying demand. | Failure to attach ownership evidence to the original demand bars standing; cure during litigation ineffective. |
Key Cases Cited
- Seinfeld v. Verizon Commc’ns Inc., 873 A.2d 316 (Del.Ch. 2005) (balance between stockholder access and director control; proper purpose required; strict compliance with §220)
- Sec. First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563 (Del.1997) (statutory procedure protects right to inspect and requires compliance with form and purpose)
- Saito v. McKesson HBOC, Inc., 806 A.2d 113 (Del.2002) (distinguishes evidence requirements for ownership and demand)
- Shaw v. Agri-Mark, Inc., 663 A.2d 464 (Del.1995) (§220 ownership evidence requirement and proper form of demand)
- White v. Panic, 783 A.2d 543 (Del.2001) (proper purpose may justify inspection where §220 requirements are met)
- Thomas & Betts Corp. v. Leviton Mfg. Co., 681 A.2d 1026 (Del.1996) (stockholder inspection rights grounded in proper purpose and statutory compliance)
- Rales v. Blasband, 634 A.2d 927 (Del.1993) (context for proper purpose standard in fiduciary-duty inspections)