LITIGATION TRENDS 2025 | 115 T O C E M P E S G A N T I I P C A P R O W C S P O R T C O N T A C T I N T A P P P A T C C L S E C the challenged act or transaction or has a material relationship with a person with a material interest in such act or transaction. ■ Limitations on Books and Records Inspections. Amended Section 220 of the DGCL retains the “proper purpose” requirement as a prerequisite for inspection of books and records and defines a narrow list of what constitutes “books and records” available under Section 220, including: board of directors and committee meeting minutes and materials, annual financial statements, certain types of stockholder agreements, and director and officer independence questionnaires. The amended statute further provides that the Court of Chancery may not order the production of any documents other than the statutorily enumerated documents, except in two narrow circumstances. First, if the corporation does not have any minutes, financial statements, or, in the case of public companies, director and officer questionnaires, the Court of Chancery may order the corporation to produce documents “constituting the functional equivalent of any such books and records” to the “extent necessary and essential to fulfill the stockholder’s proper purpose.” Second, if a stockholder files an action to compel the inspection of books and records, the Court of Chancery may order the production of “other specific records of the corporation” beyond the statutorily enumerated documents “only if and to the extent” the stockholder, among other things, makes a showing of a “compelling need for an inspection of such records to further the stockholder’s proper purpose” and “such stockholder has demonstrated by clear and convincing evidence that such specific records are necessary and essential to further such purpose.”. We believe these changes to the DGCL should mitigate certain litigation risks and transaction costs for Delaware corporations and their stockholders. However, we expect that the use of the statutory safe harbors will draw litigation – at least in the near term – testing the limits of the new Delaware rules and the strength of the statutory protections. And the continued development of Delaware law in an increasingly competitive market for incorporations will be important to watch in 2025 and beyond. Delaware Supreme Court Reaffirms the High Bar for Pleading and Proving Aiding and Abetting Claims Against Third-Party Acquirers A recent decision by the Delaware Supreme Court in In re Mindbody, Inc. Stockholder Litigation confirms that an aiding and abetting claim remains “one of the most difficult claims to prove.” --- A.3d ---, at *32 (Del. 2024). In a 2023 post-trial opinion, the Court of Chancery held that Mindbody’s founder and CEO breached (i) his “Revlon” duties in connection with Vista’s take-private acquisition of Mindbody by “tilt[ing] the sale process in Vista’s favor for personal reasons” and (ii) his duty of disclosure by “fail[ing] to disclose the full extent of his involvement with Vista[.]” In re Mindbody Inc. S’holder Litig., 2023 WL 2518149, at *2 (Del. Ch. Mar. 15, 2023). The Court of Chancery also found that Vista, a third-party acquirer, aided and abetted the CEO’s breach by “failing to correct the proxy materials to include a full and fair description of its own interactions with [the CEO],” including because Vista had a contractual right to review the proxy and an obligation to “correct” any misstatements, and did, in fact, receive drafts of the proxy. On appeal, the Delaware Supreme Court affirmed the decision that the CEO breached his fiduciary duties, but reversed the Chancery Court’s holding with respect to Vista, finding that the evidence at trial did not rise to the level of “knowing participation” required to sustain an aiding and abetting claim. As explained by the Delaware Supreme Court, the question before it was “whether a passive failure to act rather than active participation or ‘substantial assistance’ can give rise to [aiding and abetting] liability.” In concluding that passive failure to act was insufficient, the Court held that knowing participation requires “substantial assistance” in S Securities Litigation 114 | Weil, Gotshal & Manges LLP
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