Lending Credence to the Benefits of Allowing Emails, Text Messages, and Social Media in a Shareholder Demand, 54 UIC J
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UIC Law Review Volume 54 Issue 1 Article 5 2021 Expanding the World of Section 220: Lending Credence to the Benefits of Allowing Emails, extT Messages, and Social Media in a Shareholder Demand, 54 UIC J. Marshall L. Rev. 345 (2021) Drake Edward Follow this and additional works at: https://repository.law.uic.edu/lawreview Part of the Law Commons Recommended Citation Drake Edward, Expanding the World of Section 220: Lending Credence to the Benefits of Allowing Emails, Text Messages, and Social Media in a Shareholder Demand, 54 UIC J. Marshall L. Rev. 345 (2021) https://repository.law.uic.edu/lawreview/vol54/iss1/5 This Comments is brought to you for free and open access by UIC Law Open Access Repository. It has been accepted for inclusion in UIC Law Review by an authorized administrator of UIC Law Open Access Repository. For more information, please contact [email protected]. EXPANDING THE WORLD OF SECTION 220: LENDING CREDENCE TO THE BENEFITS OF ALLOWING EMAILS, TEXT MESSAGES, AND SOCIAL MEDIA IN A SHAREHOLDER DEMAND DRAKE EDWARD* I. INTRODUCTION ............................................................... 345 II. BACKGROUND ................................................................. 348 A. The Rights of a Shareholder .................................... 348 B. Section 220 Demand ................................................ 350 C. The Traditional Meaning Of “Books and Records” .................................................................... 352 D. Corporations and The Use of Technology ............... 354 III. ANALYSIS ........................................................................ 357 A. Admissibility of Emails ........................................... 358 1. Emails in Other Areas of the Law .................... 358 2. Emails in the Context of Section 220 ............... 360 3. Comparative Analysis of Emails Inside and Outside the Context of Section 220 .................. 361 B. Admissibility of Text Messages ............................... 362 1. Text Messages in Other Areas of the Law ....... 362 2. Text Messages in The Context of Section 220 . 364 3. Comparative Analysis of Text Messages Inside and Outside the Context of Section 220 ........... 365 C. Admissibility of Social Media .................................. 366 1. Social Media in Other Areas of the Law ........... 366 a. Authentication of a Social Media Page ... 366 b. Authentication of a Social Media Message .................................................... 368 2. Comparative Analysis of Social Media to Emails and Text Messages ............................................ 369 D. Foreseeable Detriments in Expanding the Scope of Section 220 To Allow for Emails, Text Messages, and Social Media ............................................................. 369 IV. PROPOSAL ....................................................................... 370 A. Broadening the “Books and Records” Language of Section 220 ............................................................... 371 B. Preservation of Documentation .............................. 371 C. Section 220 Relevancy Standard ............................. 372 D. Adopting the New York Approach to Social Media to Section 220 ............................................................... 373 E. The Admissibility Standard .................................... 374 F. Authentication ......................................................... 375 V. CONCLUSION ................................................................... 377 I. INTRODUCTION Within corporate America, it is becoming commonplace to see a news headline or Twitter trend every day regarding an internal scandal happening in a large company.1 To illustrate, in 2016, the *Drake Edward, Juris Doctor, UIC John Marshall Law School, 2021. Thank 346 UIC John Marshall Law Review [54:1 Consumer Financial Protection Bureau (CFPB) imposed a $100 million fine on Wells Fargo Bank for opening millions of deposit and credit card accounts without the consent of the accountholders.2 Due to competitive sales targets and cash incentives, Wells Fargo employees would boost sales figures by opening accounts and secretly transferring funds from customer accounts without their knowledge.3 Because the scandal was so large and affected so many customers, Wells Fargo also had to pay fifty million dollars to the City of Los Angeles and thirty-five million dollars to the Office of Comptroller of the Currency.4 Other corporate scandals have arisen from a failure to disclose certain information, inappropriate work relationships, or a violation of fiduciary duties.5 When the shareholders of a company become aware of improper conduct and it catches the attention of the media, the shareholders seek answers.6 Often, the question is whether the Board of Directors was involved or knew of the wrongdoing.7 Shareholders will seek said answers by launching a demand you to my mom for her continued support throughout law school and the writing process of this Comment. I hope this Comment will serve to spark thought- provoking conversations surrounding the nuances of corporate law. 1. Ariel Schwartz, BP Greenwasehes Post-Deepwater Horizon CSR Report, FASTCOMPANY (Mar. 25, 2011), www.fastcompany.com/1742432/bp- greenwashes-post-deepwater-horizon-csr-report [perma.cc/2ULP-7C6J] (highlighting that the most recent and most publicized corporate scandal involved the 2010 BP oil spill in the Gulf of Mexico). 2. Consumer Financial Protection Bureau Fines Wells Fargo $ 100 Million for Widespread Illegal Practice of Secretly Opening Unauthorized Accounts, CONSUMER FIN. PROT. BUREAU (Sept. 8, 2016), www.consumerfinance.gov/ about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo- 100-million-widespread-illegal-practice-secretly-opening-unauthorized- accounts/ [perma.cc/R4ED-Y38T]. 3. Id. 4. Id. CFPB Director Richard Cordray went on record to state that this is the largest CFPB penalty ever imposed because it wanted to put the entire banking industry on notice that if these financial incentive programs are not vigilantly monitored, the consequences will be enormous. Id. 5. See, e.g., Inter-Local Pension Fund GCC/IBT v. Calgon Carbon Corp., No. 2017-0910-MTZ, 2019 Del. Ch. LEXIS 47, at *12 (Del. Ch. Jan. 25, 2019) (stating that in response to various breaches of fiduciary duties by members of the Board, a Del. Code Ann. tit. 8, § 220 (“Section 220”) demand was launched to determine whether to pursue litigation). 6. Id. at *12 (stating that the party launching the Section 220 demand will most likely not receive the answers as to why there was some type of corporate wrongdoing or mismanagement if the court only requires disclosure of traditional documents such as meeting minutes and written correspondence); see also Hutton v. McDaniel, 264 F. Supp. 3d 996, 1006 (D. Ariz. 2017) (seeking Board of Directors “books and records” pursuant to a Section 220 demand to determine whether there was a violation of fiduciary duties). 7. Adam Bryant, The Five Most Common Mistakes of Board of Directors, FORBES (June 21, 2018), www.forbes.com/sites/adambryant/2018/06/21/the- five-most-common-mistakes-of-board-directors/?sh=4f276169e250 [perma.cc/5VCJ-9CTV]. 2021] Expanding the World of Section 220 347 pursuant to Section 220 of Delaware General Corporation Law (“Section 220”).8 Often, directors will refuse to disclose information by arguing that the information sought is too broad.9 This is problematic because it hinders transparency and does not allow shareholders access to vital information that they are entitled to.10 A shareholder’s right to information is imperative because, as a stakeholder in the company, a shareholder has a fundamental right to be fully informed in the affairs of the corporation.11 This access of information serves as a tool that the shareholders can use to ensure that directors of a corporation are acting in good faith when performing their duties.12 Information rights, such as a Section 220 demand, prevent directors from intentionally withholding material information and making decisions that can hurt the shareholders.13 In a situation where, for example, a director is involved in an inappropriate work relationship, the shareholders would be entitled to information related to this scandal because the relationship may cause an adverse impact on the corporation.14 If the shareholders are privy to this information, it protects the shareholders, directors, and integrity of the corporation.15 This Comment will discuss various ways in which the courts can broaden the type of information required in a Section 220 demand in an effort to increase transparency and preserve the director-shareholder relationship. First, Section II of this Comment will begin with a discussion of the fundamental rights of a shareholder – specifically access to 8. DEL. CODE ANN. tit. 8, § 220 (2021). Once the shareholders of record have made a demand in writing stating the information sought and a proper purpose, if the directors do not comply with the demand, the shareholders have a right to file a Section 220 proceeding seeking to compel compliance with the demand. Stephen A. Radin, The New Stage of Corporate Governance Litigation: Section 220 Demands-Reprise, 28 CARDOZO L. REV. 1287, 1310 (2006). 9. Highland Select Equity Fund, Ltd. P'ship v. Motient Corp., 906 A.2d 156 (Del. Ch. 2006) (arguing that a demand for “books, records, and correspondence . .” is unreasonably broad and burdensome). 10. Francis G.X. Pileggi, Kevin F. Brady, & Jill Agro, Inspecting Corporate "Books and Records"