Court of Chancery Denies Motion to Stay Books and Records Action in Favor of Separate Derivative Action Involving Substantially Similar Matters
Kaufman v. Computer Associates International, Inc., C.A. No. 699-N, 2005 WL 3470589 (Del. Ch. Dec. 13, 2005).
A beneficial stockholder filed a books-and-records action pursuant to 8 Del.C. §220
seeking documents relating to the corporation's decision to settle certain derivative and federal class action litigation in a manner that allegedly benefited the individual wrongdoers at the corporation's expense. A special litigation committee acting on behalf of the corporation moved to stay this action until it completed its investigation on this issue, which had become the subject of new derivative litigation in New York brought by different plaintiffs.
The court denied the committee's motion to stay. The court acknowledged that Petitioner had already received 177 boxes of documents produced in connection with the new derivative litigation, that the subject of Petitioner's request was substantially similar to the matters being litigated in the new derivative litigation, and that any additional documents that would be produced would be unlikely to lead to the assertion of new or different claims. The court explained, however, that the right to proceed under Section 220 to inspect books and records exists independently of any claim the Petitioner might ultimately chose to bring. The court also noted that while there are circumstances in which a books-and-records action can be understood to interfere with the workings of a special litigation committee, courts have generally allowed such actions to proceed despite the presence of even a well-constituted committee.