Corporate Governance

City of Westland Police v. Axcelis Technologies: The Appeal (Part 3) (A Guest Appearance of TheRacetotheBottom)

By J. Robert Brown

TheRacetotheBottom was mentioned in the appeal.  As the brief states:

• This Court has described the 'credible basis' standard as 'the lowest possible burden of proof.' Seinfeld, 909 A.2d at 123. Nevertheless, the standard has been harshly criticized as eliminating Section 220 as a viable option for shareholders seeking to investigate corporate mismanagement.3  Although such criticism has been dismissed as 'sensationalized' by the Court of Chancery,4 the threat that the 'credible basis' standard can be misapplied so as to create an unnecessary and insurmountable hurdle for shareholders seeking to investigate legitimate claims is very real.

And the authority in footnote 3? 

• 3 See, e.g., J. Robert Brown, Inspection Rights Under Delaware Law, http://www.theracetothebottom.org (Nov. 20, 2007, 6:16 a.m.)(arguing that the 'credible basis' standard imposes an 'evidentiary burden that is often difficult or impossible to meet at the pleading stage'; see also J. Robert Brown, City of Westland v. Axcelis Technologies: The Myth of Majority Vote Provisions and the Further Need for Preemption of Delaware Law (Credible Evidence As An Excessive Pleading Standard), http://theracetothebottom.org (Oct. 21, 2009, 6:00 a.m.).

The reference to 'sensationalized' came from a Delaware Chancery Court opinion and was used to describe this Blog.  The basis for the charge of sensational was that the Delaware courts used excessive pleading standards to deny shareholders their right to inspect.  Axcelis illustrates this point with great clarity. 

The brief and the other primary documents can be found at the DU Corporate Governance web site.?

Full post as published by The Race to the Bottom on January 23, 2010 (boomark / email).