A Delaware Supreme Court panel recently reversed the dismissal of an Amazon.com Inc. shareholder’s books and records action, finding that the complaint’s alleged violations of antitrust law established a “credible basis” from which the Court of Chancery could have inferred wrongdoing Roberta Ann K.W. Wong Leung Revocable Trust v. Amazon.com Inc., Del. Supr., No. 487, 2024 (July 28, 2025).

Writing for a three-member high court panel, Justice Christopher Griffith ruled that Chancery should not have endorsed a magistrate’s recommendation to grant Amazon’s motion to reject the plaintiff shareholder’s Section 220 request without fully evaluating the strength of the suit’s anti-competition allegations.

Corporate law specialists should review the high court’s distinction between Section 220 complaints based on mere allegations of monopolistic actions and suits such as this one by an Amazon investor who cited alleged violations of antitrust laws that largely survived a motion to dismiss—establishing a credible basis to infer wrongdoing.

Background

According to the high court, “In recent years, Amazon has faced regulatory scrutiny in the United States and internationally for purported anticompetitive activities. These government inquiries have led to challenges from Amazon’s stockholders alleging possible wrongdoing and mismanagement by its fiduciaries.”

In October 2023, the Roberta Ann K.W. Wong Leung Revocable Trust Dated 03/09/2018 demanded to inspect Amazon’s books and records under Section 220 of the Delaware General Corporation Law to investigate possible wrongdoing and mismanagement. The stockholder claimed that Amazon had engaged in anticompetitive activities in the United States and Europe.

A Magistrate in Chancery held a one-day trial and concluded in a final report that plaintiff did not meet its burden prove a “credible basis” to investigate wrongdoing. When the stockholder appealed, a vice chancellor adopted that conclusion without addressing the magistrate’s credible basis analysis and instead found the plaintiff’s inspection purpose was so “overbroad” that it was “facially improper” and not “lucid.”

The high court panel disagreed, highlighting two key areas.

History of monopolistic behavior

The panel said even if most of the allegations investigated by shareholders and government agencies cited did not result in judgments against Amazon and its fiduciaries, the company has accumulated a “history of monopolistic behavior”. Even so, the combined effect of those investigations and findings could produce the impression of anti-competitive behavior, the justices said.

The Federal Trade Commission Action

 “Central to the demand is a complaint filed by the Federal Trade Commission against Amazon alleging twenty violations of state and federal antitrust laws,” the panel noted. In September 2023, the FTC—joined by seventeen states—filed a complaint in the Western District of Washington, alleging that Amazon had a “durable monopoly power” in the “online superstore market” and the “online marketplace services market.”

According to the court record, before filing its complaint, the FTC conducted a four-year-investigation during which Amazon produced millions of pages of documents and more than one-hundred pages of written interrogatory responses. In September 2024, the district court granted in part and denied in part Amazon’s motion to dismiss the FTC complaint, with most claims surviving the motion-to-dismiss stage. The high court noted that in that decision, “The federal claims under the Sherman Act and the FTC Act survived”, and nearly every state law claim survived or was dismissed without prejudice with leave to amend.

Clarified discovery standard

The panel said the standard of review for discovery is that: [t]he inspection such stockholder seeks is for a proper purpose and, “A proper purpose is a ‘purpose reasonably related to such person’s interest as a stockholder.’” It observed, “this Court has stated that “corporate wrongdoing . . . in and of itself” is “a legitimate matter of concern”.

“Delaware caselaw shows that meeting this burden often requires more than a mere untested allegation of wrongdoing but does not require that the underlying litigation result in a full victory on the merits against the company,” the panel emphasized in clarifying the discovery demand standard.

The high court cited In re Facebook, Inc. Section 220 Litig., 2019 WL 2320842 (Del. Ch. May 30, 2019), Lebanon Cnty. Emps.’ Ret. Fund v. AmerisourceBergen Corp., 2020 WL 132752 (Del. Ch. Jan.13, 2020), aff’d, 243 A.3d 417 (Del. 2020), and several other cases as examples of how to meet that standard, noting that, “As these cases reveal, the credible basis standard remains a highly fact-intensive analysis that by its nature resists a brightline rule.”

However, the justices added, ‘’But where a stockholder presents evidence of ongoing investigations and lawsuits, and those investigations and lawsuits have advanced beyond untested allegations, then the evidence can be sufficient to meet the credible basis standard, especially when liability or fines could result in a corporate trauma.”

Frank Reynolds, who has been covering Delaware corporate decisions for various national publications for over 40 years, prepared this article.