Proliferation of Books and Records Litigation

It has been recently noted by other commentators such as Boris Feldman at Wilson Sonsini ( noted a dramatic increase in lawsuits seeking corporate "books and records" under Del. Corp. Code section 220.  Mr. Feldman noted that plaintiff's firms essentially just keep asking for more and more documents until they force an impasse when the corporation finally draws the line.  Mr. Feldman suggested that the suits are becoming so common and disruptive that the Delaware legislature may eventually need to step in to curtail the litigation. The phenomenon of "books and records" litigation appears to be catching on to an extent in California as well.  We have noted an increasing advent of lawsuits under Cal. Corp. Code sections 1600-1605.  The California code sections purport to apply broadly to corporations incorporated outside the state in some instances and lack some of the procedural protections of the Delaware laws (the statement of purpose for the inspection need not be under oath in California).  The case law in California is also less developed, providing corporations with less certainty as to their obligations to comply with broad requests, under the threat of having to pay the plaintiff-shareholders' fees and costs if it errs in the breadth of documents it allows for production.

Like Delaware, California should perhaps look again at its shareholder inspection laws.