Pharmaceutical company Gilead’s “overly aggressive defense strategy” received the ire of Vice Chancellor McCormick of the Delaware Court of Chancery, who found in a recent decision [$$] that shareholders easily showed they had the right to access books and records to investigate possible wrongdoing in connection with Gilead’s marketing of HIV drugs, and allowed the investors to seek attorneys’ fees from the company.
The stockholders joined in “chorus with a host of other accusers,” alleging Gilead violated antitrust laws, committed mass torts, infringed on government patents, and defrauded government programs in its efforts to protect its market share. The coordinated complaint in the action told a story “replete with inequity as the biblical verse that the company’s namesake brings to mind,” according to the Delaware Chancery.
After Gilead fought discovery and proceeded to trial over the shareholders’ access to books and records, the Vice Chancellor ruled in favor of the shareholders and lamented that the company’s strategy “epitomizes a trend.” According to the Vice Chancellor, “Delaware courts have urged stockholders to use the ‘tools at hand’ and pursue Section 220 inspections before filing derivative lawsuits for decades, and this court has seen a rise in Section 220 enforcement actions in recent years.” However, the “regrettable reaction by defendant corporations, has been massive resistance,” said the Vice Chancellor.
This decision reaffirms that properly purposed books and records demands are exactly that: proper and shareholders should take advantage of these important tools. At times, attorneys fees may be available for certain denials of shareholders’ inspection rights.