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Court Of Chancery Denies Inspection When The Board Has An Obvious Defense To A Claim Of Wrongdoing

Beatrice Corwin Living Irrevocable Trust v. Pfizer, C.A. 10425-JL (Del. Ch. Aug. 31, 2016, corrected Sept. 1, 2016)

In general, the bar is low for exercising inspection rights to investigate claims of wrongdoing.  Plaintiffs need provide only some evidence to suggest a credible basis from which the Court can infer possible mismanagement or wrongdoing.  But as this decision holds, when there is an obvious defense to the claim, such as the board’s reliance on an audit firm for a complicated accounting issue, inspection may be denied.