Saito v. McKesson HBOC, Inc.

Facts

Saito (Plaintiff) became a shareholder of McKesson after it negotiated and publicly announced a merger with HBOC to form McKesson HBOC, Inc. (Defendant). He wanted to inspect the books and records of McKesson and McKesson HBOC (Defendant) to investigate McKesson’s apparent failure to learn of accounting irregularities at HBOC until months after the merger was completed. The Delaware Chancery Court denied his request as far as it related to documents prepared before Saito (Plaintiff) became a shareholder on the ground that under 8 Del. C. § 327, stockholders who bring derivative suits must allege that they were shareholders at the time of the complained-of transaction. Plaintiff also requested documents in Defendant’s possession that the corporation obtained from financial and accounting advisors. The Chancery Court denied access to these documents on the ground that Plaintiff could not use his inspection rights to bring claims against third parties. Lastly, Plaintiff requested HBOC documents on the basis that he was a shareholder of HBOC’s parent, McKesson HBOC (Defendant). The Chancery Court also denied this request on the ground that a stockholder of a parent corporation is not entitled to inspect the books and records of a subsidiary with no showing of fraud or that the subsidiary is an alter ego of the parent, finding no basis to disregard HBOC’s separate identify. The Delaware Supreme Court granted review.