A multitude of decisions and commentary about DGCL Section 220 have filled these pages over the last 12 years. This recent Court of Chancery decision is an example of a condition that the Court of Chancery has somewhat recently imposed as part of its grant of some requests for books and records under Section 220. Elow v. Express Scripts Holding Company, C.A. No. 12721-VCMR (Del. Ch. May 31, 2017). I have often suggested in connection with Section 220 cases that they are often expensive and unsatisfying, but this decision might not be the best example to support that argument.
Procedural Overview: The trial in this case took place on March 3, 2017 after a complaint was filed on August 12, 2016. The two consolidated cases were the subject of a one-day trial based on stipulations and 74 exhibits. A thoughtful and detailed decision issued approximately ten months after the complaint was filed is still fast by most litigation reference points. Notwithstanding the grant of a right to obtain some documents, the fees incurred, one can surmise, must not have been inconsiderable.
Key Takeaway: As a condition of the court granting some documents, after an extensive recitation of the nuances and prerequisites for a Section 220 demand, and how they applied to the facts of this case, the court conditioned the grant of documents pursuant to Section 220 based on the “incorporation by reference doctrine.” As explained in the Yahoo opinion, (a veritable magnum opus on Section 220) highlighted on these pages, the doctrine “permits a court to review the actual document” referenced in a complaint that is later filed after a Section 220 demand is vindicated.
Specifically, as applied in a 220 case, if the plaintiff files a plenary complaint based on the documents obtained in the 220 case, it must incorporate documents received into any subsequent derivative complaint. The “Incorporation Condition” ensures: “That the plaintiff cannot seize on a document, take it out of context, and insist on an unreasonable inference that the court could not draw if it considered related documents.”
The court also imposed a routine condition that a confidentiality agreement also be entered into as part of the production.