In In re Wal-Mart Stores Delaware Derivative Litigation, C.A. No. 7455-CB (Del. Ch. May 13, 2016), the Delaware Court of Chancery held that an order of the U.S. District Court for the Western District of Arkansas dismissing an Arkansas complaint precluded Delaware plaintiffs from litigating demand futility in a Delaware derivative action challenging the same underlying conduct. Although the Court of Chancery’s opinion primarily involves an analysis of the requirements for issue preclusion under Arkansas law, it also provides important guidance on multiforum litigation for Delaware corporations and practitioners.
In the wake of a 2012 New York Times article, 15 derivative lawsuits were filed in Arkansas and Delaware alleging claims related to the alleged cover-up of bribery claims at a Mexican subsidiary of Wal-Mart Stores Inc. One of the Delaware plaintiffs demanded inspection of Wal-Mart’s books and records under Section 220 of the Delaware General Corporation Law, seeking to uncover information to support its derivative claims. After Wal-Mart disputed certain document requests, the Delaware plaintiff filed a Section 220 action in September 2012 to obtain the disputed documents. The Section 220 action was resolved three years later (in May 2015), but only after extensive proceedings in the Court of Chancery, and an appeal to the Delaware Supreme Court.
