Chaile Steinberg v. Andy D. Bryant ( 2017 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
MORGAN T. ZURN
MASTER IN CHANCERY
LEONARD L. WILLIAMS JUSTICE CENTER
500 NORTH KING STREET, SUITE 11400
WILMINGTON, DE 19801-3734
Final Report: December 7, 2017
Date Submitted: December 6, 2017
Stuart Grant, Esquire
Christine Mackintosh, Esquire
Grant & Eisenhofer, P.A.
123 Justison Street
Wilmington, DE 19801
Kenneth J. Nachbar, Esquire
John P. DiTomo, Esquire
Richard Li, Esquire
Morris, Nichols, Arsht & Tunnell, LLP
1201 N. Market Street
Wilmington, DE 19899-1347
Re: Chaile Steinberg v. Andy D. Bryant, et al.
C.A. No. 2017-0736-SG
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
C.A. No. 2017-0736-SG
December 7, 2017
Page 2
recommend the Court order the shareholder to publicly file an unredacted
complaint.
I. Background1
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.
1
This background is drawn from the redacted complaint and the reporters’ requests.
2
See In re Caremark Int’l Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996).
C.A. No. 2017-0736-SG
December 7, 2017
Page 3
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.
3
Docket Item (“D.I.”) 10.
4
Scott Higham & Lenny Bernstein, The Drug Industry’s Triumph Over the DEA, The
Washington Post, Oct. 15, 2017, available at https://www.washingtonpost.com/graphics/2017/
investigations/dea-drug-industry-congress/?utm_term=.11f25fc8b480; 60 Minutes: The
Whistleblower (CBS television broadcast Oct. 15, 2017), https://www.cbsnews.com/videos/the-
whistleblower/.
5
D.I. 10.
C.A. No. 2017-0736-SG
December 7, 2017
Page 4
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
6
D.I. 14.
7
Id. (citing The Pulitzer Prizes, The 2017 Pulitzer Prize Winner in Investigative Reporting, Eric
Eyre of Charleston Gazette-Mail, Charleston, WV, http://www.pulitzer.org/winners/eric-eyre).
8
D.I. 15.
9
D.I. 17.
10
Al Jazeera America, LLC v. AT & T Servs., Inc., 2013 WL 5614284, at *1 (Del. Ch. Oct. 14,
2013), appeal dismissed 2014 WL 2521897 (Del. 2014).
C.A. No. 2017-0736-SG
December 7, 2017
Page 5
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 not otherwise meet the requirements of Rule 5.1.16
McKesson does not oppose the filing of an unredacted complaint.17
11
See id.12
Id.13
Id. at *3 (quoting Delaware Court of Chancery, Protecting Public Access to the Courts:
Chancery Rule 5.1, at 1 (Jan. 1, 2013), available at https://www.delawarelitigation.com/files/
2012/11/U0056911.pdf).
14
Ct. Ch. R. 5.1(b)(3).
15
D.I. 15.
16
Al Jazeera, 2013 WL 5614284 at *3.
17
D.I. 17.
C.A. No. 2017-0736-SG
December 7, 2017
Page 6
This Court is therefore free to fulfill its public function and make the
redacted allegations in this case available to the public. I have reviewed the
redacted material and do not believe it merits continued confidential treatment.
Because no party wishes to maintain confidential treatment, and because this case
is assigned to a different judicial officer, I will refrain from characterizing the
redacted allegations any further. I recommend that the Court order Plaintiff to
publicly file an unredacted complaint by 5:00 p.m. on Friday, December 8, 2017.
III. Conclusion
For the foregoing reasons, I recommend that the Court grant the reporters’
requests and order Plaintiff to publicly file an unredacted complaint by 5:00 p.m.
on Friday, December 8, 2017. This is a final report pursuant to Court of Chancery
Rule 144. Any party taking exception shall file a notice of exceptions by 5:00 p.m.
on Thursday, December 7, 2017.18
Respectfully,
/s/ Morgan T. Zurn
Master in Chancery
cc: Mr. Sam Hornblower (via e-mail)
Mr. Eric Eyre (via e-mail)
18
See Ct. Ch. R. 144(d)(2).