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Chancery Grants Access to Facebook Board Emails in Books and Records Action

Employees’ Retirement System of Rhode Island v. Facebook, Inc., C.A. No. 2020-0085-JRS (Del. Ch. Feb. 10, 2021)

In this opinion, the Court of Chancery confirms that it will grant access to emails in a books and records action where the corporation’s board minutes and other materials are insufficient for the plaintiff’s purposes. Here, a stockholder of Facebook, Inc. requested books and records to investigate Facebook’s $5 billion settlement with the Federal Trade Commission for the unauthorized sale of customer information to Cambridge Analytica and other data breaches. The plaintiff sought to investigate whether Facebook overpaid in its settlement to shield its chief executive Mark Zuckerberg from personal liability. 

The parties stipulated to narrow the issues for trial to whether the plaintiff was entitled to emails among Board members concerning Facebook’s negotiation of the settlement with the FTC. The Delaware Supreme Court had previously held in Palantir that “the Court of Chancery should not order emails to be produced when other materials (e.g., traditional board-level materials, such as minutes) would accomplish the petitioner’s proper purpose.” In this case, however, the Court of Chancery concluded that the non-privileged emails were necessary and essential to the plaintiff’s purpose. Contrary to Facebook’s arguments, the materials that Facebook had already produced were not sufficient to allow the plaintiff to investigate whether Facebook’s decision to accept the $5 billion settlement was motivated, in part, by the goal of shielding its chief executive from personal liability. Although some of the documents that Facebook produced, such as its board minutes, provided a basic outline of Facebook’s settlement negotiations, the documents were redacted heavily and so lacked relevant substantive information. Additionally, the plaintiff’s assertions that it already had enough information to bring a plenary action did not prevent the plaintiff from receiving additional information to plead its complaint more completely. Finally, the Court held that the Garner exception to the attorney-client privilege, which applies in suits between corporations and their stockholders, did not allow the plaintiff to receive privileged communications in this case. The plaintiff could not show the privileged documents were necessary to its purpose and unavailable from other sources; it was likely able to obtain the same information from the non-privileged communications that the Court had already ordered Facebook to produce.

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