Chancery Allows Demand for Books and Records Against Hershey to Proceed Regarding Claims of Child Labor

Louisiana Municipal Police Employees’ Retirement System v. The Hershey Company, C.A. No. 7996-VCL (Del. Ch. Mar. 18, 2014)(Transcript of hearing).

Issue addressed: whether claims that the Hershey Company has knowingly obtained cocoa supplies from countries in Africa that employ child labor in violation of applicable law, meets the threshold requirement for demanding related books and records of the company.
Short answer: Based on the facts presented, the claims should survive a motion to dismiss, without regard to what the ultimate ruling on the merits might be.

Brief overview of Court of Chancery Bench Ruling on appeal of Master’s recommendation:

Contrary to the findings of the Master in Chancery highlighted on these pages, to which the Court said it owed no deference, the Court of Chancery’s ruling from the bench includes several noteworthy points that contravened the Master’s findings:

  • A motion to dismiss, which the Master granted under Rule 12(b)(6), requires a meager showing to cross the low threshold for purposes of surviving a motion to dismiss.
  • Combined with the equally low threshold of merely presenting a “credible basis” but not being required to establish a claim of wrongdoing, a motion to dismiss a Section 220 demand for books and records is rarely granted, and should not have been granted by the Master.
  • In addition, the court observed that most Section 220 cases should be tried within 60 to 90 day of the complaint being filed and dispositive motions often serve to delay that day of reckoning without disposing of the case (as in this case that has been pending for more than a year).
  • The court made no indication of how it would ultimately rule in terms of whether any documents would be required to be produced, but did require the parties to be prepared to go to trial on the merits promptly.

 Frank Reynolds of Thomson Reuters does his customary excellent work in reviewing the decision.