Books and Records Litigation

Demands to inspect internal corporate documents – “books and records” demands – are one of the most powerful tools for enforcing corporate accountability and exposing wrongdoing by insiders. They are an essential precursor to shareholder derivative actions, and can also play an important role in efforts to achieve governance reform outside of litigation by prompting voluntary remedial measures, deterring future misconduct, and galvanizing collective shareholder action.

The foundation of effective books and records litigation is a carefully drafted demand letter – a statutory prerequisite to litigation – that seeks a narrowly-drawn, targeted document set (in contrast to the typical expansive discovery requests used in general litigation). The demand letter must also articulate one or more “proper purposes” for the demand, and must ordinarily provide sufficient detail to support the finding of a credible basis for mismanagement, waste or wrongdoing. Elsewhere on this website, we discuss the importance of pre-filing analysis; this is particularly important for books and records actions because there is ordinarily no ability to amend the grounds for demand after filing, and the delay associated with a new demand often limits the utility of any production ultimately ordered.

To discuss a potential books and records demand or explore the value of pursuing a demand in the context of a broader shareholder dispute, please contact Ethan Wohl at 212 758 4097 or ewohl [at] wohlfruchter [dot] com.