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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
Morris James Blogs
Chancery Denies Director Access to Privileged Materials Involving Counsel to Preferred-Appointed Directors
As several Delaware decisions teach, each director, as a member of the larger deliberative body that is the board, has a fundamental right to access corporate information to carry out his or her fiduciary duties. Thus, as a general rule, a Delaware corporation “cannot assert the privilege to deny a director access to legal advice furnished to the board during the director’s tenure.” There are several exceptions to this rule.
As this letter decision explains, there also is a critical predicate: the at-issue legal advice must be furnished to the board; it is not enough that some members received legal advice from their own counsel. According to Gilmore, the director requesting access must show he or she had a reasonable expectation that the counsel in question was representing all members of the board at the time of the relevant privileged communications. The director in this case failed to make that showing regarding the firm representing two preferred-appointed directors in their effort to remove the complaining director from his officer role, and even though the company later agreed to cover their fees. While the decision is short, it offers important guidance to preferred-appointed directors and the attorneys representing them.