220 Demand Confidentiality Agreement

The Supreme Court recognized that the Court of Chancery “certainly has the power to impose appropriate restrictions on confidentiality” and that “the objectives of Section 220 can often demonstrate that a certain degree of confidentiality is warranted when asked to provide non-public information. But confidentiality must be justified; it cannot simply be suspected. The Court of Chancery “must assess and compare applause and damage when determining the initial degree and duration of confidentiality.” In Tiger v. Boast Apparel, Inc., the Delaware Supreme Court recently proposed guidelines on the confidential status of documents established in a Section 220 action and found that there was “no presumption of confidentiality in Section 220 productions.” The applicant in the case filed his complaint after submitting two requests for books and statements, both of which were rejected by the company because the parties were unable to negotiate a confidentiality agreement. The Court of Chancery imposed an “indeterminate period of confidentiality” up to and until the applicant commenced an action on the basis of facts learned from his audit, and the applicant appealed. During the appeal process, the Delaware Supreme Court upheld the confidentiality decision and stated that “the Court of Chancery generally can and does inspections in accordance with Section 220 regarding the introduction of an appropriate confidentiality order,” but such inspections “are not subject to the presumption of confidentiality.” The Tribunal also stated that the Court of Justice must “assess and compare benefits and damages” in determining the extent and duration of confidentiality and “could not conclude by reflex that the need for [confidentiality] was in any event easily identifiable.” The Supreme Court dismissed the case and asked the Court of Chancery to make “specific findings” regarding the confidentiality of the documents. In accordance with these decisions, other recent cases – in Re Facebook, Inc. Section 220 Litigation, Bucks County Employees Retirement Fund v. CBS Corporation and Inter-Local Pension Fund GCC/IBT v. Calgon Carbon Corporation – have ordered the production of electronic communications in response to Section 220 requests.

These cases also illustrate the Court of Chancery`s desire to order the production of electronic communications, in which the members of the Board of Directors acted informally. While the types of documents available to shareholders have been expanded in appropriate circumstances, the basic study – if the documents are “necessary and essential” to achieve the shareholder`s goal – remains the same.