Shareholder lawyer Stuart Grant of Grant & Eisenhofer told me Friday that he was feeling pretty good about his oral argument at the Delaware Supreme Court the previous day, in a case that will determine how much discovery plaintiffs are permitted when they sue to see corporate books and records.
Grant said his opponent, Wal-Mart counsel Mark Perry of Gibson, Dunn & Crutcher, gave so smooth and polished a presentation that the state justices might easily have glided along with what, according to Grant, was Perry’s “radical rewriting” of Delaware law. Instead, Grant said, “the court was not buying into Wal-Mart’s extreme theory.”
Wal-Mart, you will not be surprised to hear, had a different view of the argument: “We think it went very well,” Perry told me Friday. “We presented strong arguments and look forward to the court’s decision.”
Both sides agree on one thing: If the Delaware Supreme Court affirms then-Chancellor Leo Strine’s 2013 discovery order in IBEW v. Wal-Mart, it’s great news for shareholders and a big reason for Delaware corporations to worry. (Strine, who is now Chief Justice of the Delaware Supreme Court, was recused from hearing Thursday’s argument.)
One of the crucial advantages for corporations defending their conduct in shareholder suits is that investors can’t find out very much about internal decision-making until they’ve gotten past defense dismissal motions. Wal-Mart claims that if it loses at the Delaware Supreme Court, plaintiffs will be licensed to go on deep-sea-fishing expeditions for corporate documents before they even file a breach-of-duty complaint.
That’s because the Wal-Mart case involves a discovery demand from shareholders who haven’t yet filed a derivative suit accusing the company’s directors of breaching their duties. Lawsuits seeking corporate books and records are based on a 1967 Delaware statute that gives shareholders a right of access to certain corporate documents for certain purposes. The dispute at the Delaware Supreme Court Thursday centered on the scope of the materials shareholders should be permitted to see and what purposes investors may pursue through books-and-records suits.