Delaware Court of Chancery Requires Production of ESI in Response to Books and Records Demand… With an Interesting Caveat

In Amalgamated Bank v. Yahoo! Inc., C.A. 10774-VCL (Del Ch. Feb. 2, 2016), the Delaware Court of Chancery has issued a comprehensive opinion touching are nearly every aspect of a shareholder demand for books and records pursuant to 8 Del. C. §220 ("Section 220"). The opinion includes two specific holdings of note. First, the Court held in no uncertain terms that books and records under Section 220 include email and electronic documents. The Court stated, "Today, over 90% of business documents are stored electronically. Limiting ―books and records to physical documents could cause Section 220 to become obsolete or ineffective." (internal quotations omitted). Second, the Court imposed an "Incorporation Condition" on the books and records production. Specifically, the Court required that the entirety of Yahoo’s production be incorporate by reference into any derivative action subsequently filed by the shareholder plaintiff.