Stockholder books and records demands: inspection rights may be broadening.

The Delaware Supreme Court, in Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, 2014 WL 3638848 (July 23, 2014), broadened the scope of stockholder books and records inspections made pursuant to Section 220 of the DGCL. Electrical Workers Pension Trust Fund IBEW, a stockholder of Wal-Mart, made a demand to inspect the books and records of the superstore following a New York Times report implicating bribery at a Mexican subsidiary of the company, Wal-Mex. The stockholder made a Section 220 demand with the purpose of investigating the bribery allegations.

The Court of Chancery, in its Final Order and Judgment, required Wal-Mart to produce documents to supplement the approximately 3,000 previously furnished for inspection, including documents privileged or protected by the work-product doctrine. Among the documents Wal-Mart was required to produce were: (1) officer-level documents; (2) documents protected by the attorney-client privilege; (3) "documents spanning a seven-year period;" (4) disaster recovery tapes for data from two custodians to complement disaster tape recovery data voluntarily collected by the superstore for nine other custodians; and (5) documents "known to exist" by Wal-Mart's Office of General Counsel.

The Court of Chancery found that the privileged and additional documents it required for production were "necessary and essential" to the stockholder's "proper purposes" of investigating potential mismanagement and alleged breaches of fiduciary duty by Wal-Mart and Wal-Mex executives in connection with bribery allegations.

In affirming the decision below, the Delaware Supreme Court reiterated that the proper standard to be applied in Section 220 actions is "necessary and essential" to achieve a "proper purpose." Furthermore, the court noted that documents are "necessary and essential" if they reach the "crux of the shareholder's purpose" and if that information "is unavailable from another source." The Delaware Supreme Court also noted that Delaware courts must circumscribe orders granting inspection "with rifled precision."

More notably, perhaps, the Delaware Supreme Court applied the Garner doctrine with respect to the production of documents protected by attorney-client privilege, stemming from Garner v. Wolfmbarger, 430 F.2d 10993 (5th Cir. 1970), a Fifth Circuit decision from 1970. As applied here, the Garner doctrine...