In Louisiana Municipal Police Employees’ Retirement System v. Countrywide Financial Corporation, 2007 WL 2896540 (Del. Ch., Oct. 2, 2007), read opinion here, the Chancery Court allowed a statistical analysis to provide the necessary "credible basis" of wrongdoing which is a necessary element of establishing a right to books and records of a corporation–based on a suspicion of wrongdoing– under Section 220 of the Delaware General Corporation Law ("DGCL").

The court acknowledged that its decision was a "close call" and the court was not at all convinced that any wrongdoing occurred, but there was (barely) enough evidence presented at trial to pass the low threshold for the limited purposes of this summary proceeding. In fact, the court emphasized that the "only evidence" presented at trial to support the "suspicion of possible corporate misconduct is a statistical correlation suggesting the possibility of backdating or springloading of certain stock options granted to corporate executives … between 1997 and 2002."

An insight into how easily this case could have been decided differently, is indicated by the very first sentence of the opinion which quotes the famous observation that: "there are three kinds of lies: lies, damned lies and statistics". The court then explained that in its opinion it was toiling in "last category" and was required to "probe what would appear to be the outer limits of the minimal quantum of evidence that would constitute a proper purpose to inspect corporate books and records" under DGCL section 220.

As can be seen from typing "220" in the search box in the right margin of this blog, over the almost three years that I have been summarizing key decisions of the Chancery Court and Supreme Court on these pages, I have probably summarized more decisions applying DGCL section 220 than decisions applying any other  single section of the DGCL.  I have not done a statistical analysis of the exact number of cases summarized  on this blog over the last three years in order to categorize those summaries according to the various sections of the DGCL, but I am simply supplying  the best of my recollection. These section 220 cases are among the more useful "tools" for the "toolbox" of the business litigator–especially when a statistically significant number of cases from the Delaware Supreme Court over many years have instructed parties and their counsel to seek books and records under section 220 prior to filing a derivative complaint or related types of complaints against corporations. However, as this case suggests,  a 220 demand is not always a simple matter, and it often requires a trial (and the attendant expense) to establish one’s right to books and records under 220.