CURRENT MONTH (November 2017)

Corporate Law

Delaware Court of Chancery Denies Stockholder Access to Company’s Books, Despite Facial “Proper Purpose”

By Sara E. Bussiere, Bayard PA

In Wilkinson v. A. Schulman, Inc., 2017 WL 5289553 (Del. Ch. Nov. 13, 2017), the Delaware Court of Chancery denied a stockholder of A. Schulman, Inc. (the Company) access to the Company’s books and records, despite the fact that the stockholder stated what appeared to be a “proper purpose” in his initial demand on the Company pursuant to 8 Del. C. § 220 (220 Demand). A stockholder may inspect a company’s books and records if it states a “proper purpose,” which the statute defines as “a purpose reasonably related to such person’s interest as a stockholder.” In Wilkinson, plaintiff’s stated purpose for the 220 Demand was the Company’s decision to accelerate the vesting of the Company’s President and Chief Executive Officer’s stock, and the harm caused to the Company as a result thereof. The Company rejected the 220 Demand. At trial, the Company argued that it properly rejected the Demand because the purposes listed were not the actual reasons for the Demand, and therefore, the plaintiff failed to state a “proper purpose.” In its post-trial opinion, the court agreed. The court found that the purposes listed in the Demand were not the plaintiff’s reasons, but his “entrepreneurial” counsel’s purposes. Because the stockholder plaintiff lacked a proper purpose to inspect the Company’s books and records as required by Section 220, the court held the Company properly rejected the 220 Demand and entered judgment in favor of the Company.

Securities Litigation

U.S. Court of Appeals for Second Circuit Affirms District Court’s Class Certification for Securities Violations Claims

By Sara E. Bussiere, Bayard PA

In Waggoner, et al. v. Barclays PLC, et al., -- F.3d --, 2017 WL 5077355 (2d Cir. 2017), the United States Court of Appeals for the Second Circuit affirmed the U.S. District Court for the Southern District of New York’s (District Court) decision to grant Appellees’ motion for class certification in their suit asserting violations of Section 10(b) of the Securities Exchange Act of 1934. The plaintiffs in the underlying action—three individual owners of Barclays’ American Depository Shares (Barclays’ ADS)—alleged that defendants made false statements in connection with its operation of an “alternate trading system,” called Barclays’ LX, in violation of Section 10(b) and Rule 10b-5. The District Court granted class certification on the grounds that the presumption articulated in Affiliated Ute Citizens of the State of Utah, et al. v. United States, 406 U.S. 128 (1972) applied, finding that the investors would have found the omitted conduct material. The District Court also determined, in the alternative, that the presumption of reliance for misrepresentations articulated in Basic Incorporated, et al. v. Levinson, et al., 485 U.S. 224 (1988) applied. The District Court held that the underlying defendants failed to show that the fraudulent statements did not impact the price of Barclays’ ADS and, therefore, failed to rebut the Basic presumption. On appeal, the Second Circuit disagreed that the Affiliated Ute presumption applied. However, because the District Court applied the Basic presumption of reliance for misrepresentations, which defendants failed to rebut, the District Court properly granted class certification.

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