Delaware Business Litigation Report

Court of Chancery Explains The "Some Evidence" Rule In Section 220 Cases

Louisiana Municipal Police Employees Retirement System, C.A. No. 2608-VCN (October 2, 2007).

To obtain inspection of corporate records to investigate allegations of wrongdoing, it has long been held that a stockholder must have "some evidence" that there was indeed wrongdoing to investigate. Otherwise, mere allegations would permit intrusive books and records reviews.

Here, the allegation was that options had been back dated and the Court permitted inspection based on a statistical analysis that showed stock price rises immediately after many option grants. The Court felt this was "some evidence" that warranted inspection. However, the Court was clearly skeptical and cautioned that it was going to continue as the gate keeper to limit inspections that were not justified.

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