In Central Laborers Pension Fund v. News Corporation, C.A. No. 6287-VCN (Del. Ch. Nov. 30, 2011), denied a shareholder’s petition for inspection of books and records under Section 220 of the Delaware General Corporation Law (“DGCL”) after it had already filed a derivative suit for breach of fiduciary duty relating to a purchase by News Corporation of a company owned by the daughter of a chairman of that company.


In rendering its opinion, the Court determined that this Section 220 case was moot, given that the derivative action had already been filed.  Accordingly, a shareholder could “no longer tender a proper purpose for pursuing efforts to inspect the books and records” of the company relating to the acquisition.  The Court also stated that a shareholder who files a Section 220 action after its derivative action “is acting inconsistently”.

The Court further stated:

“Section 220 was not adopted as a substitute for litigation discovery; instead, in this context, it serves to enable potential derivative plaintiffs to obtain the necessary information in advance of filing their derivative action.  Although there may be special circumstances that would warrant the pursuit of a books and records action at the same time as the related derivative action, those circumstances do not exist here, and Central Laborers does not point out any unusual conditions that would support a deviation from the general rule.”


This is an important decision for shareholders who seek to inspect the books and records of a corporation under Section 220, as it makes clear that Section 220 is a pre-litigation remedy available to shareholders.  Accordingly, the Court will likely not entertain such a request if it is made after the filing of a derivative action initiated by such shareholder.