Supreme Court Upholds Late Inspection Suit
King v. Verifone Holdings Inc., No. 330, 2010 (January 28, 2011)
This decision reinstates a books and records case that was dismissed by the Court of Chancery. The Court of Chancery held that a stockholder who first files a derivative complaint may not later file a books and records case. The Supreme Court overturned that bright line test.
Instead, the Supreme Court held that when a stockholder suit might prove useful even after a derivative suit is filed, the books and records case may proceed. Thus, if the derivative suit is still pending or even after it has been dismissed if it may be refiled, the inspection of company records may be requested by a book and records suit. If, however, the derivative suit is dismissed with prejudice, then inspection serves no proper purpose and will be denied.