Delaware Business Litigation Report

Chancery Determines Certain Suits and Investigations Against Amazon Were Insufficient to Meet Credible Basis Standard to Inspect Corporate Books and Records

Wong Leung Revocable Tr. v. Amazon.com Inc., C.A. No. 2023-1251-BWD (Del. Ch. May 1, 2024)
In order to inspect books and records under Section 220 of the Delaware General Corporation Law, a stockholder-plaintiff must establish that they have a proper purpose. To establish a proper purpose of investigating suspected corporate wrongdoing, a stockholder must present some credible evidence from which the Court can infer that wrongdoing may have occurred. In this case, after a previous decision denying a prior books and records request to investigate wrongdoing in connection with Amazon.com’s alleged anticompetitive business practices (discussed here), a stockholder-plaintiff again sought books and records based on recent investigations and an FTC complaint against Amazon. However, the Court held that the FTC complaint was insufficient to meet the credible basis standard to establish a proper purpose as it only included allegations, and did not include evidence of wrongdoing, such as exhibits. The Court similarly reasoned that the settlement of an earlier government investigation did not establish any wrongdoing, and the plaintiff provided no basis to suspect that there would be a violation of the settlement agreement. The Court also reasoned that a fine imposed by a European regulator was insufficient to meet the standard, as the fine was still on appeal, the amount was not large in the context of Amazon’s business, and the record contained no details regarding the alleged wrongdoing on which the fine was based. Accordingly, the Court denied the stockholder-plaintiff’s books and records request.

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