Shareholder inspection of books and records pursuant to Section 220 of the Delaware General Corporation Law is a routine procedure for Delaware practitioners, and represents an important tool for shareholders when it comes to their involvement in corporate governance. As is well known, a Section 220 plaintiff must prove that he has a proper purpose for the inspection in order for the court to allow it. Recently, in High River Limited Partnership v. Occidental Petroleum, No. 2019-0403-JRS (Del. Ch. Nov. 14, 2019), the Delaware Court of Chancery considered the shareholder plaintiffs’ two proffered purposes—investigation of corporate mismanagement and communication with other shareholders in furtherance of a potential proxy contest—and found that neither presented a basis for the requested inspection. The court’s opinion provides useful guidance to all practitioners who assist shareholders with Section 220 inspections, and is of particular note to those who represent investors involved in proxy contests for its analysis of the plaintiffs’ novel argument.

Background of the Case

The plaintiffs in the case, High River Limited Partnership, Icahn Partners Master Fund LP and Icahn Partners LP (all affiliates of the prominent activist investor Carl Icahn), began buying stock in the defendant, Occidental Petroleum Corp., after Occidental’s May 2, offer to buy Anadarko Petroleum Corp. At the time of trial, the plaintiffs had come to own around 26 million shares in Occidental, valued at more than $1 billion. Shortly after making its offer to Anadarko, on May 9, Occidental entered into a merger agreement with Anadarko, and Occidental funded substantial portions of the $55 billion purchase price through preferred stock sales to Berkshire Hathaway, Inc. and a presale of certain Anadarko assets to Total S.A.

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