Do Derivative Plaintiffs Have to Make a Books and Records Demand in Delaware?

The Delaware Supreme Court has long pressed shareholder plaintiffs in derivative suits to make a pre-suit books and records demand under 8 Delaware Code Secion 220.  In In re Freemont McMoRan Copper & Gold Derivative Litigation (, however, would-be derivative plaintiffs in the context of a merger and acquisition sought to stay a derivative action by other plaintiffs.  The basis of the stay request was that the would-be plaintiffs had made a books and records demand under Section 220.  They feared that the case brought by others without the benefit of the book and records, if unsuccessful, would preclude their later derivative suit.  The Chancery Court held that the case should proceed, reasoning that the merger was scheduled to close in a matter of weeks and that the expediency necessitated by that schedule outweighed the legitimate concern about obtaining the books and records and the possible res judicata effects of other plaintiffs proceeding without the books and records.  The Delaware Supreme Court this week declined to take up the matter.  The upshot seems to be that, in the face of an impending merger, the need for speed outweighs the need for plaintiffs to obtain pre-suit books and records.  If the derivative suit without the books and records fail yet the Section 220 demand uncovers additional facts, the Delaware courts will be keft with a messy issue of res judicata (and one the Delaware Supreme Court will speak on in the impending Allergan decision).