Magistrate Bonnie W. David of the Delaware Chancery Court published a post-trial report on August 25, 2023, dismissing stockholder requests for additional email production from Zendesk, Inc. The stockholders’ demands were part of a books and records demand, primarily made under 8 Del. C. § 220, for investigating potential misconduct associated with the company’s entry into a merger.
In re Zendesk, Inc. Section 220 Litigation, C.A. No. 2023-0454-BWD (Del. Ch. Aug. 25, 2023).
The court confirmed the responsibility for stockholders to indicate the ‘needs and necessary materials’ that align with their objective of investigation as given in the case. Accordingly, it was found that an unreasonably wide range of documentation was requested by the plaintiffs and was out of proportion to the targeted investigation. As such, additional email searches and production were deemed unnecessary by the court.
This decision underscores the importance of specificity and proportionality in books and records demands under Section 220. It offers guidance for corporations and their counsel when responding to such demands, emphasizing the need for a targeted and well-balanced approach, rather than a large-scale, unfocused production request.