Delaware Business Litigation Report

Chancery Orders Production of Privileged Emails Transmitted Using Third-Party Accounts

In re WeWork Litigation, Consol. C.A. No. 2020-0258-AGB (Del. Ch. Dec. 22, 2020)

This Court of Chancery discovery ruling illustrates the risks associated with directors and officers using non-company email accounts to communicate about company business, particularly as it relates to confidentiality and the attorney-client privilege.

The decision arose out of a breach of contract dispute involving claims by The We Company (“WeWork”) against the company’s putative controlling shareholders, SoftBank Group Corp. (“SBG”) and SoftBank Vision Fund (AIV MI) L.P. SBG owned 84% of Sprint during the relevant time period. Various records custodians under SBG’s control had roles at SBG and/or WeWork and Sprint, and used Sprint email accounts during the discovery time period. Two of those custodians obtained legal advice from SBG’s in-house and outside counsel regarding WeWork and SBG (not Sprint) using their Sprint email accounts. Nearly 90 documents resulting from these two accounts were withheld or redacted for privilege on this basis.  

On plaintiffs’ motion to compel, the question was whether the two custodians had a reasonable expectation of privacy when using their Sprint accounts for SBG-related business such that the documents would constitute “confidential communications” qualifying for privilege under Delaware Rules of Evidence, Rule 502(a)(2). In deciding the issue, the Court applied the four-factor test articulated in In re Asia Global Crossing, Ltd., specifically: (1) does the corporation maintain a policy banning personal or other objectionable use; (2) does the company monitor the use of the employee’s computer or e-mail; (3) do third parties have a right of access to the computer or e-mails; and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies?

The Court held that all four factors weighed in favor of production. Relevant to the Court’s decision was the Sprint Code of Conduct, which stated that employees had no expectation of privacy when using Sprint Email, and that Sprint reserved the right to review communications on its email system. Further, while the record lacked evidence regarding whether Sprint was exercising its express right to monitor employee email, this evidentiary gap weighed against SBG, who as the proponent of the privilege bore the burden of establishing it. Also relevant was the custodians’ failure to use other email accounts available to them and failure to take any steps to defeat access by Sprint—for example, by attempting to encrypt their communications. Finally, as senior executives at Sprint, the Court found no basis for concluding the custodians were unaware of Sprint’s Code of Conduct.

The decision involves common circumstances and serves as an important reminder for counsel to monitor how clients and their employees communicate regarding company business and whether the methods and medium of communication are designed to protect privileged information.

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