Ashby & Geddes Successfully Defends Corporate Client Against Improper Books & Records Demand by a Director

On November 23, 2010, A&G in conjunction with lead counsel Ropes & Gray successfully defended 5i Sciences, Inc., a medical devices company that is developing a proprietary device for the treatment of sleep apnea, against an improper demand made by a director pursuant to Section 220 of the Delaware General Corporation Law to obtain a significant portion of 5i Sciences books and records.  The director is the board designee of a noteholder that had recently made an offer to purchase the company.  After a one day trial, the Delaware Court of Chancery ruled from the bench that the director was not seeking the books and records for his use as a director, but rather for the benefit of the noteholder and thus he had an improper purpose for his demand.  The case, Gunther v. 5i Sciences, Inc., stands as one of the few instances in which the Court of Chancery has refused to compel a company to produce books and records to a director.

A team of Ashby & Geddes attorneys from the Corporate Litigation and Counseling practice group, including Stephen E. Jenkins and Catherine A. Gaul, represented the defendant corporation in conjunction with a team led by Thad Davis, Eva Ciko Carman and Sarah Zenewicz of the San Francisco and New York offices of Ropes & Gray.  The transcript of the bench ruling by Chancellor William B. Chandler III can be accessed here.