The Delaware Supreme Court’s decision in Paramount Global v. Rhode Island Office of General Treasurer on Behalf of Employees’ Retirement System of Rhode Island, 2026 WL 820647 (Del. Mar. 25, 2026), is a significant development for Delaware books-and-records litigation under 8 Del. C. Section 220). In its decision, the Delaware Supreme Court addressed two questions regarding a stockholder’s right to inspection: when (and how) courts may consider events and evidence that arise after a demand is served, and the circumstances in which reporting—often based on confidential sources—can help establish the “credible basis” needed to suspect wrongdoing. The decision provides important guidance for both companies responding to Section 220 demands and stockholders seeking to investigate potential conflicts in complex transactions.
Background
This case involved Paramount Global (Paramount), a Delaware corporation, owner of Paramount Pictures, CBS Television Network, and other popular networks and streaming services. The majority of Paramount’s voting stock was owned by National Amusements Incorporated (National Amusements). Shari Redstone controlled National Amusements and, by extension, Paramount. In May 2023, facing financial pressure, Paramount cut its dividend by nearly 80%. This dividend was the primary source of income for National Amusements and, correspondingly, for Redstone. National Amusements continued to struggle financially throughout 2023, so Redstone began considering options to potentially sell its controlling stake in Paramount.
In late 2023 and early 2024, newspapers reported potential deals involving both Paramount and National Amusements, citing information from confidential sources. A special committee was formed to consider the various proposals. As more bids came in, news sources, like The Financial Timesand The Wall Street Journal, reported that Redstone and the special committee had rejected or refused to consider offers to acquire the entirety of Paramount and instead agreed to exclusive negotiations with Skydance Media to acquire National Amusements and merge with Paramount.
On April 5, 2024, based on the information reported by news outlets, the Employees’ Retirement System of Rhode Island (Rhode Island), a holder of a nonvoting class of Paramount stock, served Paramount with a books and records demand under Section 220, expressing concern that “Shari Redstone and National Amusements have used third parties’ interest in acquiring some or all of Paramount to usurp Paramount’s corporate opportunity by marketing National Amusements to buyers who otherwise would be interested in Paramount or its assets.” After Paramount rejected Rhode Island’s demand, claiming that it failed to state a proper purpose, Rhode Island filed a complaint in the Delaware Court of Chancery seeking to enforce its rights to inspect Paramount’s books and records.
After the lawsuit was filed, media outlets continued reporting on the National Amusements and Paramount transactions. The Wall Street Journal reported that four Paramount board members—three of whom were members of the special committee—would step down and that Paramount’s board had removed the CEO, purportedly due to his resistance to the Skydance deal. It was reported that Skydance would purchase National Amusements for $2.4 billion, then merge with Paramount. The deal was described as favorable to National Amusements but not as generous for holders of nonvoting stock.
The Court of Chancery’s Decision
At trial, Rhode Island sought to rely on pre-demand articles describing the Skydance transaction and post-demand articles and securities filings. Following trial, the Magistrate in Chancery determined that when evaluating whether Rhode Island had a proper purpose for its books and records demand, the Court of Chancery could consider only evidence available at the time the demand was served, excluding post-demand evidence. Rhode Island took exceptions to the magistrate’s report.
The Vice Chancellor declined to accept the magistrate’s recommendation, determining that the Court of Chancery could consider post-demand evidence in limited circumstances. The Court of Chancery found that the general rule is that a stockholder is limited to the evidence identified in its demand or what was known at the time of the demand. However, “there are settings when a stockholder can legitimately rely at trial on post-demand evidence, such as when a material event occurs after the demand but before trial and when the stockholder’s reliance on those post-demand events does not prejudice the corporation.” The Court of Chancery also determined that the articles from reputable publications were sufficiently reliable evidence, even though the articles’ sources were confidential and anonymous. Ultimately, the Court of Chancery concluded that Rhode Island’s demand presented a credible basis on which to suspect that Redstone and National Amusements may have breached their duty of loyalty by diverting potential buyers from a Paramount-level transaction to a National Amusements-level transaction.
The Court of Chancery certified two issues for interlocutory appeal: whether the Court of Chancery can consider events disclosed or taking place after service of a books and records demand when determining if a stockholder has shown a credible basis to suspect wrongdoing, and whether a credible basis can be sufficiently reliable when based, at least in part, on hearsay reported in news articles from reputable publications.
The Delaware Supreme Court’s Analysis
On the first issue, the Delaware Supreme Court affirmed the Court of Chancery’s conclusion. Reviewing the text of Section 220 and prior case law, the Delaware Supreme Court determined that neither of these dictated an outright prohibition on post-demand evidence. The Delaware Supreme Court recognized that permitting consideration of post-demand evidence could encourage fishing expeditions and potentially lead to premature demands in the hope of “backfilling” the demand with additional information later. But that consideration was counterbalanced by the judicial efficiencies gained by permitting a stockholder to rely on new evidence instead of starting the process over by serving a new demand and the Delaware Supreme Court’s confidence in the Court of Chancery’s ability to both discourage abuses of Section 220 and use its discretion to determine when to consider or reject post-demand evidence. While the general rule remains that a stockholder is limited to evidence available at the time of the Section 220 demand, in “exceptional circumstances, the Court of Chancery may, in the exercise of its sound discretion, consider post-demand evidence that is material to the court’s credible basis inquiry and not prejudicial to the corporation.”
The Delaware Supreme Court also upheld the Court of Chancery’s decision on the second issue, confirming that a stockholder may rely on hearsay statements so long as there are sufficient guarantees of trustworthiness. Contrary to Paramount’s claim, this would not create a “shortcut” for consideration of any hearsay recounted by a prominent publication. Instead, the article’s source can be one factor in the Court of Chancery’s reliability analysis. Here, that analysis included the fact that there were 47 articles presented as evidence, that there was no indication any statement was unreliable or conspiratorial, that public filings confirmed the information, and that Paramount relied on articles from similar news organizations.
Takeaways
While the holding here allows the Court of Chancery to consider post-demand events and evidence in Section 220 actions, stockholders should not serve books-and-records demands with the expectation that they can later bolster their demand with newly uncovered information. Paramount limits the use of post-demand evidence to exceptional circumstances, and so it is still important for stockholders to articulate a proper purpose at the time of serving the demand.
Reprinted with permission from the May 6, 2026 edition of “Delaware Business Court Insider” © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.