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In Paramount Global v. State of R.I. Office of the Gen. Treasurer, __ A.3d __, No. 129, 2025, 2026 WL 820647 (Del. Mar. 26, 2026), the Delaware Supreme Court affirmed the Delaware Court of Chancery’s decision that a stockholder had a credible basis to suspect wrongdoing based in part on post-demand news reports with confidential sources.
A Paramount stockholder made a books and records demand after news reports indicating the company’s ultimate controlling stockholder, Shari Redstone, took steps to block a company sale in favor of a sale of just her shares. Reporting on these developments continued after the demand.
The Court of Chancery held the stockholder had a credible basis to suspect wrongdoing. The Delaware Supreme Court accepted Paramount’s interlocutory appeal and affirmed. The Supreme Court majority acknowledged the potential inefficiencies from allowing post-demand supplementation, but the Court also observed that a strict prohibition could create inefficiencies by, for example, requiring sending new or updated demand letters.
The Supreme Court was “confident” in the Court of Chancery’s “ability to monitor its § 220 docket and take appropriate steps to discourage abusive practices by stockholder plaintiffs.” The high Court accordingly affirmed that there are some circumstances “when a stockholder can legitimately rely at trial [on] post-demand evidence, such as when a material event occurs after the demand but before trial and when the stockholder’s reliance on those post-demand events does not prejudice the corporation.”
The Supreme Court similarly affirmed the Court of Chancery’s decision to consider hearsay in confidentially sourced news reports, where circumstances suggest the hearsay was sufficiently reliable. While agreeing it was proper to consider confidentially sourced hearsay news reports, a minority of Justices disagreed with allowing some consideration of post-demand evidence. In their view, the “better choice” would be to “bar admission of post-demand evidence,” which would among other things “discourage a premature race to the courthouse.”
