Feuding Directors Can Access Privileged Communications Under Delaware Law

A company’s directors have the right under Delaware law to access all corporate attorney-client communications originated during their terms as directors—even if their interests in the current suit are adverse to the company itself.

The communications at issue in Del Giudice v. Harlan were emails exchanged between members of the board of directors and the company’s counsel. The plaintiffs, who were current directors of the company, expected these emails to assist them in challenging certain distributions paid under the operating agreement. However, the decision, made by a federal magistrate judge in Manhattan, has even broader implications. The order hints that where a discord arises among directors in a company regarding management or control, none of them should expect any of their communications with corporate counsel to be kept confidential in accordance with the privilege.

The defendants argued that the plaintiffs should not be able to gain access to the privileged emails because the plaintiffs’ interests in the suit were adverse to the company and they only sued to enforce their individual interests.

However, Delaware case law does not make distinctions when addressing a director’s right to legal advice provided to the corporation during the director’s term. Therefore, it does not matter that the plaintiffs were serving their own interests when bringing a suit versus serving the interests of the company.

The defendants rejected this argument, urging the court to follow New York law instead of Delaware because New York differs materially and might have generated a different outcome. The judge disagreed and concluded that Delaware law controls due to a choice of law provision in the operating agreement.

To read the full opinion, click here.

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