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Steinberg v. Bryant

Court of Chancery of Delaware

December 7, 2017

Chaile Steinberg
v.
Andy D. Bryant, et al.

          Date Submitted: December 6, 2017

          Stuart Grant, Esquire Christine Mackintosh, Esquire Grant & Eisenhofer, P.A.

          Kenneth J. Nachbar, Esquire John P. DiTomo, Esquire Richard Li, Esquire Morris, Nichols, Arsht & Tunnell, LLP.

          Morgan T. Zurn Master in Chancery.

         Dear Counsel:

         Pending before me are two requests from reporters seeking access to redacted pleadings in which a shareholder of an opioid wholesaler alleges the company's board and senior officers breached their fiduciary duties of oversight. The shareholder takes no position on the requests and the wholesaler does not oppose the filing of an unredacted complaint. For the reasons that follow, I recommend the Court order the shareholder to publicly file an unredacted complaint.

         I. Background[1]

         On October 17, 2017, plaintiff Chaile Steinberg ("Plaintiff"), a shareholder of McKesson Corporation ("McKesson"), filed under seal a derivative complaint alleging McKesson's board of directors and senior officers (collectively, "Defendants") breached their fiduciary duties of oversight in the distribution of opioids.[2] Plaintiff filed a public redacted version of the complaint on October 20, 2017. McKesson is a wholesale distributor of pharmaceuticals, including opioids. Plaintiff alleges that even after McKesson entered into settlements with regulators in 2008, McKesson did not have proper oversight mechanisms in place to identify and report suspicious opioid orders. Plaintiff alleges that investigations into these shortcomings led to a second set of regulatory settlements in 2017. Plaintiff concludes that McKesson's board and senior officers breached fiduciary duties of oversight and caused harm to the company in the form of severe sanctions imposed in the 2017 settlements and potential liability in numerous civil lawsuits. Defendants filed a motion to dismiss on November 7, 2017, which the parties have not yet briefed.

         On December 4, 2017, Sam Hornblower, a reporter for the CBS News program "60 Minutes, " filed a request for an unredacted version of Plaintiff's complaint.[3] On October 15, 2017, 60 Minutes and The Washington Post released a collaborative report asserting that the opioid crisis was fueled by the drug industry, including McKesson, and that industry lobbyists and Congress derailed regulators' efforts to stop the crisis.[4] Hornblower states that 60 Minutes and The Washington Post are developing a wide-ranging followup report, "specifically on those companies that are alleged to have been culpable in fueling the epidemic."[5]Hornblower asserts that due to the public health crisis regarding opioids, there is a compelling public interest in allowing public access to the unredacted complaint in this action. Hornblower sought expedited review in advance of the followup report's scheduled release in two weeks. On December 5, 2017, Vice Chancellor Glasscock directed the parties to respond by the end of the day on December 6, 2017.

         On December 6, 2017, a second request for access to the unredacted complaint was submitted by Eric Eyre of the Charleston Gazette-Mail.[6] Eyre's Pulitzer Prize-winning reporting has focused on the role of opioid distributors, including McKesson, in the opioid crisis.[7] He asserts Plaintiff's allegations would inform the public and help the state of West Virginia confront the opioid crisis. Chancellor Bouchard assigned review of these requests to unseal the complaint to me.

         On December 6, 2017, Plaintiff and McKesson filed responses to the requests. Plaintiff stated his view that the redacted material did not meet the requirements for continued confidential treatment, but took no position on releasing an unredacted version due to a confidentiality and nondisclosure agreement with McKesson.[8] McKesson does not oppose the public filing of the unredacted complaint.[9] This is my final report.

         II. Analysis

         The Court of Chancery, like any public court, "serves not only the litigants before it; it has a public function as well."[10] The reporters' requests seek to vindicate that public function.[11] Tension created by these public and private interests is addressed by Court of Chancery Rule 5.1.[12] "Rule 5.1 makes clear that most information presented to the Court should be made available to the public."[13]Rule 5.1(f) provides that "[a]ny person may challenge the Confidential Treatment of a Confidential Filing by filing a notice raising the challenge with the Register in Chancery." When an objection is filed, the party endeavoring to maintain confidential treatment bears the burden of convincing this Court that good cause exists to maintain confidential treatment.[14]

         In this case, no party seeks to maintain confidential treatment. Plaintiff asserts the redacted information in the complaint does not satisfy the requirements for confidential treatment, but takes no position on the reporters' requests, citing a confidentiality and nondisclosure agreement with McKesson.[15] The existence of such an agreement does not compel continued confidential treatment where the information at issue does ...


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