Oklahoma Firefighters’ Pension & Retirement System v. Citigroup, Inc., C.A. No. 9587-ML (VCN) (Del. Ch. Apr. 24, 2015).
This Delaware Court of Chancery opinion allowed an inspection of books and records pursuant to DGCL Section 220 in order to investigate mismanagement and possible breaches of fiduciary duty by the directors and officers of Citigroup in connection with allegations of fraud by its Mexican subsidiary. The plaintiff also sought to investigate, in contemplation of derivative litigation, the disinterest of the board to determine whether pre-suit demand would be excused. It is not surprising that such a demand would be granted in light of the many exhortations by the Delaware courts that Section 220 should be used prior to filing a plenary complaint asserting Caremark claims.
More noteworthy is a practical commentary on procedural points. The initial demand pursuant to DGCL Section 220 was made on March 17, 2014. A trial on the paper record was held in June 2014 before a Master in Chancery. Exceptions to the prompt decision of the Master were submitted by Citigroup after which the parties briefed those exceptions and the Master promptly issued a Final Report and recommendation. In October 2014, Citigroup filed its Notice of Exception to the Master’s Final Report. The final arguments were submitted to the Court of Chancery in December and this decision followed.
The point is, that it took more than a year, through no fault of the court, to reach a final decision — and after all that effort, including the work of no less than seven attorneys (listed on the first page of the opinion) from three offices of an AmLaw 100 Law Firm opposing the demand, the winning plaintiff now enjoys the prize of having the right to receive documents that it hopes will support a claim in a plenary lawsuit. So much for a statute that appears on its face to be simple to use and which provides for summary proceedings. The many cases highlighted on these pages on this topic suggest that Section 220 litigation is not always simple corporate litigation.