Stockholders of Delaware corporations have the qualified right to inspect “books and records”—a term of art for documents in any form—to the extent necessary to satisfy a stockholder’s proper purpose. See 8 Del. C. § 220. In Simeone v. The Walt Disney Company, 2023 WL 4208481 (Del. Ch. Jun. 27, 2023), the Delaware Court of Chancery addressed a stockholder’s request for additional information about Disney’s decision to publicly oppose Florida House Bill 1557, since enacted into law, limiting school instruction on sexual orientation and gender identity. After initially remaining largely silent, Disney changed course after considering views expressed by its employees and creative partners. One of Florida’s largest employers, Disney eventually spoke publicly against the law. In response to the plaintiff-stockholder’s books and records demand to investigate that decision, Disney produced its policies concerning charitable and public policy engagement, as well as the board minutes relating to the decision. In this post-trial decision, the Court of Chancery rejected the stockholder’s request for the directors’ independence questionnaires and communications (such as emails, if any) relating to the decision.
The stockholder-plaintiff testified as to the process in which he was solicited by counsel compensated by a third-party organization that was supportive of the legislation. His understanding of the demand and the information it sought were not consistent with the demand document. In light of that testimony, the Court of Chancery found that the purposes in the demand were not the stockholder’s own purposes, as opposed to being those of counsel who solicited his involvement. The Court also reasoned that the stockholder lacked the necessary “credible basis” to suspect wrongdoing at Disney. The Court explained that, as a general matter, choosing “to speak (or not to speak) on public policy issues is an ordinary business decision” that may be delegated, but for which the board of directors retains the “ultimate responsibility.” Although the stockholder alleged that several board members were involved in political or social organizations that opposed the bill, that did not itself create any credible basis to suspect a conflict of interest with Disney. Nor did it call into question the board’s deliberative process. In addition, with respect to the additional documents requested, the Court reasoned that the plaintiff was not entitled to directors’ independence questionnaires and informal communications “to search for hypothetical conflicts.” Rather, the formal board materials produced in response to the demand were sufficient to satisfy any proper purpose.
