331 A.3d 179
Del. Ch.2025Background
- The Employees’ Retirement System of Rhode Island, as a Paramount Global stockholder, sought inspection of books and records under Delaware General Corporation Law Section 220.
- Paramount Global is controlled by National Amusements, Inc. (NAI), which is in turn controlled by Shari Redstone.
- Multiple bids and sale processes occurred, involving possible transactions both at the parent-company (NAI) level and the operating-company (Paramount) level.
- News articles, and subsequent SEC disclosures, suggested Redstone may have steered deals to benefit NAI/Redstone over minority stockholders, raising potential breaches of fiduciary duty.
- The company denied the stockholder's Section 220 demand, arguing there was no proper purpose and that the evidence supporting the demand—chiefly news reports—was inadequate.
- After a bench trial (on paper trial record), the magistrate judge ruled for the company, but the Chancellor conducted a de novo review and reversed, finding for the stockholder.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper Purpose under Section 220 | Sought records to investigate credible basis for wrongdoing, specifically disloyal steering by controller | Demand failed to specify actionable wrongdoing; steering by controller is not a viable claim | Investigating possible disloyal steering of deals is a proper purpose under Section 220 |
| Evidentiary Standard: Can news articles & post-demand evidence be used? | Stockholder can rely on post-demand events and reputable news articles as credible basis | Only evidence known at demand time is relevant; news articles (esp. with anonymous sources) are unreliable | Court can consider all post-demand evidence about the company's conduct; reputable news articles can establish credible basis |
| Must a demand articulate an actionable legal theory? | Demand can note possible breach without fully articulated legal theory | Demand must specify a legal theory that’s viable; generic suspicion shouldn’t suffice | Demand need not state all legal theories, only a credible reason to suspect wrongdoing |
| Motivation for Suspected Wrongdoing | Redstone faced greater benefit from NAI-level deal, providing reason to steer process | Plaintiff did not prove any motive; actions were within statutory rights | Motive need not be proven; credible basis for improper steering sufficient |
Key Cases Cited
- Thorpe v. CERBCO, Inc., 676 A.2d 436 (Del. 1996) (controlling shareholder's steering of transactions can still breach duty of loyalty even if corporate opportunity claim fails)
- Seinfeld v. Verizon Communications, Inc., 909 A.2d 117 (Del. 2006) (investigating possible wrongdoing is a proper purpose for Section 220 demands)
- Bershad v. Curtiss-Wright Corp., 535 A.2d 840 (Del. 1987) (exercise of statutory power by a controlling shareholder must still comply with fiduciary duties)
- Agilent Technologies, Inc. v. Kirkland, 2010 WL 610725 (Del. Ch. 2010) (on preponderance standard for proof in Section 220 proceedings)