Delaware Supreme Court Affirms Books And Records Demand May Rely On Post-Demand Evidence And Sufficiently Reliable Hearsay To Establish A Credible Basis

On March 25, 2026, the Delaware Supreme Court, in a divided en banc opinion, affirmed a Court of Chancery order to comply with a Section 220 demand based on a petition that included post-demand evidence and hearsay. Paramount Global v. Rhode Island, No. 2024-0457 (Del. Mar. 25, 2026). The Court agreed that evidence arising after a books and records demand can be used to establish a credible basis “under exceptional circumstances” and that “sufficiently reliable hearsay” evidence is admissible for books and records demands.

Plaintiff, a minority stockholder, served the books-and-records demand after news reports suggested that the company’s supermajority controller blocked a sale of the company and leveraged the attendant marketing efforts to sell her own interest first and at greater value. The Company rejected the demand. After the rejection but before the stockholder filed suit, SEC filings and confidentially sourced newspaper articles added to allegations that the controller rejected offers that would have provided greater value for the Company’s stockholders but less value for the controller.

Plaintiff sought to rely on these post-demand developments to establish the “credible basis” required for inspection. The Magistrate in Chancery declined to consider the post-demand evidence and found that plaintiff could not establish a proper purpose. Reviewing de novo, Vice Chancellor J. Travis Laster disagreed, holding that plaintiff could rely on the post-demand evidence, which established a credible basis for the demand. The Company appealed. In a 3-2 majority opinion authored by Justice Gary F. Traynor, the Delaware Supreme Court affirmed. The Court addressed two principal issues.

Post-Demand Evidence. The Court found that, while the general rule limits the court “to evidence identified in the demand” and information available contemporaneously, a court has discretion to consider post-demand evidence “under exceptional circumstances” where the evidence “is material to the court’s credible-basis inquiry and not prejudicial to the corporation.”  The Court found no prejudice here, noting that the post-demand evidence pertained to the Company’s conduct, the parties had stipulated to the admissibility of certain of the evidence, and the Company itself offered post-demand evidence at trial. (Chief Justice Seitz and Justice Valihura dissented, arguing that post-demand evidence should be categorically barred and warning that the majority’s approach would encourage premature demands and add unnecessary complexity to summary proceedings.)

Sufficiently Reliable Hearsay. The Court separately rejected the Company’s challenge to the admissibility of confidentially sourced news articles as hearsay. The Company argued that the Court of Chancery had treated the hearsay as reliable merely because it appeared in a “reputable publication.”  The Court disagreed, finding that the Court of Chancery analyzed multiple factors when assessing credibility, such as the number of articles on the subject, the content of the quotations, the specificity of the assertions, the absence of “conspiratorial undertones,” the Company’s own reliance on similar publications, and corroboration with the Company’s public filings.