2020 Q4 Decisions Update

Pettry v. Gilead Sciences, Inc., C.A. No. 2020-0173-KSJM (Del. Ch. Nov. 24, 2020)


In 2001, Gilead received FDA approval for a life-saving HIV drug, Viread® (tenofovir disoproxil fumarate (TDF)). In late 2019 and early 2020, four sets of plaintiffs sent Gilead books and records demand under Section 220 of the Delaware General Corporate Law. The demands alleged that Gilead sought to protect the market for TDF by delaying market entry of generic versions of TDF and delaying the development of a safer substitute of TDF, tenofovir alafenamide (TAF). The plaintiffs sought to inspect documents relating to these allegations.

After Gilead declined to provide documents in response to the demands, each of the plaintiffs filed suit. Gilead answered the complaints and requested that the court order the plaintiffs to coordinate their efforts, which the parties subsequently stipulated to do. Gilead moved for a protective order against discovery requests directed at it, which the court denied. The court held a trial on June 23, 2020 and the parties completed post-trial briefing on August 26, 2020.

Based on all the evidence before it, the court ordered that Gilead produce certain categories of documents and pay the plaintiffs’ attorneys fees. In Delaware, “[w]hen a stockholder seeks inspection for the purpose of investigating wrongdoing, the stockholder must demonstrate a credible basis to suspect possible wrongdoing.” The “credible basis” standard imposes “the lowest possible burden of proof,” which does not require a stockholder to prove that the wrongdoing “actually occurred,” or “to show by a preponderance of the evidence that wrongdoing is probable.” The court concluded that the plaintiffs met this standard, rejecting all of Gilead’s arguments, which the court characterized as largely going to the merits of the dispute. Ultimately, the court found that the plaintiffs had put forward sufficient evidence to demonstrate that there was a “credible basis” to seek books and records from Gilead under Section 220. In addition, the court granted the plaintiffs leave to move for fee-shifting.

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