Plaintiffs Warn of Scenario Causing Dismissal Of Wal-Mart Suit Before Records Produced

By Michael Greene

Oct. 1 — A Delaware derivative action and two related actions in Arkansas could be dismissed if Wal-Mart does not release internal documents before it is required to under a Delaware Supreme Court order, according to a recent letter sent to the Delaware Chancery Court (Ind. Elec. Workers Pension Trust Fund IBEW v. Wal-Mart Stores, Inc., Stipulation Order Granted 9/29/14; In re Wal-Mart Stores, Inc., Stipulation Order Granted 9/29/14).

Counsel for the Delaware plaintiffs sent a Sept. 3 letter to Chancellor Andre G. Bouchard stating that the schedule for producing the documents subject to the supreme court's July order should be accelerated so that the plaintiffs' other claims are not dismissed before the documents are produced.

Collateral Estoppel?

On July 23, the Delaware Supreme Court issued an order requiring Wal-Mart Stores Inc. to release internal documents about what directors and officers knew about alleged bribes made by executives at its subsidiary in Mexico (12 CARE 857, 7/25/14). The court ordered Wal-Mart to produce the books and records by Oct. 29.

According to the plaintiffs' letter, the Arkansas federal and state court with related lawsuits pending before them may address the issue of demand futility before the required production date. The plaintiffs argue that if the Arkansas claims are dismissed on this ground, it is likely that the related Delaware derivative action will also be dismissed under the collateral estoppel doctrine.

The letter claims that this could create a scenario where the Arkansas court would be “deciding the important issues of Delaware law raised in this litigation, particularly without the benefit of books and records.” The plaintiffs argue that “given the hundreds of millions of dollars that Wal-Mart has already spent in connection with investigations of the matters that underlie this litigation, we believe that Wal-Mart should be capable of producing the books and records required by the Final Order right away (at least on a rolling basis), instead of delaying its production until October 29, 2014.”

‘Unreasonable and Unworkable'

In response, Wal-Mart's counsel sent a Sept. 10 letter to the Delaware Chancery Court, claiming that it is “unreasonable and unworkable” to accelerate the required production. The letter further states “as a practical matter, it would be impossible for the Company to complete the substantial collection and review efforts required under the Final Order before October 29, 2014.”

Wal-Mart additionally filed a Sept. 22 motion requesting that the chancery court clarify the supreme court's document production order. The court Sept. 29 granted a scheduling stipulation, setting up briefing on the matter.

Catch 22

Michael Scher a senior editor of the FCPA Blog, sent a Sept. 29 letter to Wal-Mart addressing concerns over the potential scenario in which the derivative actions are dismissed before the documents are produced for court review.

Scher claims that Wal-Mart's failure to produce any of the records covered by the Delaware Supreme Court's order stands in contrast to the company's “new world-class global compliance and ethics program.”

“Without [the records], the litigation is in danger of being dismissed prematurely because it is too vague, lacking the detailed description of the past events that may be in the withheld files, a ‘Catch 22' situation. The company's and the public's interests are served only by having the allegations of the past resolved on the merits,” Scher writes.

‘Completely Untrue'

Randy Hargrove, a spokesperson for Wal-Mart, told Bloomberg BNA Sept. 30 that the assertion that Wal-Mart is stalling the release of the documents “is completely untrue.” He further added that Wal-Mart is “following the court's order,” stating that “we've tried to get the Arkansas Court to stand down so that we could move forward in Delaware.”

According to court documents, in the Arkansas federal case, the U.S. District Court for the Western District of Arkansas is currently reviewing a motion to dismiss based on demand futility; the final briefing on that matter was filed Sept. 8 (In re Wal-Mart Stores, Inc.,W.D. Ark., 4:12-cv-4041, 9/8/14). Moreover, on Sept. 24, U.S. District Judge Susan O. Hickey granted a Wal-Mart motion to take judicial notice “of certain filings in the Delaware Court of Chancery that set forth the history and status of the Delaware proceedings.”

To contact the reporter on this story: Michael Greene in Washington at

To contact the editor responsible for this story: Ryan Tuck at

The plaintiffs' letter is available at

Wal-Mart's letter is available at

Michael Scher's letter is available at