Document: Central Laborers Pension Fund v. News Corp., C.A. No. 6287-VCN (Del. Ch. Nov. 30, 2011)
The Delaware Court of Chancery dismissed an action to inspect the books and records of defendant News Corporation (“News”), under Section 220 of the Delaware General Corporation Law (“Section 220”), on the basis that plaintiff’s purpose for making such a demand was not proper where plaintiff had already filed a derivative complaint against News. The derivative complaint alleged that News’s directors had breached their fiduciary duties in connection with a proposed acquisition of Shine Group Limited by News (the “Potential Transaction”). The 220 action sought books and records for the purpose of investigating potential breaches of fiduciary duty by the News board in connection with the Proposed Transaction. The Court found that, by filing its derivative complaint, plaintiff acknowledged—if for no other reason than to satisfy its lawyers’ ethical obligations—that it had sufficient information to support its substantive allegations in the complaint. Thus, plaintiff’s pleadings were inconsistent, and the Court ruled that Section 220 could not be used as a substitute for litigation discovery.