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Court of Chancery Permits Privileged Documents For "Good Cause" Under "Mutuality of Interest" Exception

In re Freeport-McMoran Sulphur, Inc. Shareholder Litig., C.A. No. 16729, 2005 WL 225040 (Del. Ch. Jan. 26, 2005). This discovery-related action involves a claim of access to defendant-corporation's documents listed in its privilege log through a motion to compel. The court granted the motion in part, but denied production of the shareholder repurchase document. This matter arose between former shareholders of a corporation ("plaintiffs"), its former directors and the corporation's sister entity into which the corporation ("FSC") merged. Plaintiffs contended that FSC's directors breached their fiduciary duties to them when they approved the merger and that the entity into which FSC merged ("MOXY") aided and abetted that breach. Plaintiffs demanded 15 documents listed in defendants' privilege log, claiming that they were created when a mutuality of interest existed between FSC and its shareholders at the time of the merger. Exploring the law of "mutuality of interest" to the attorney-client privilege in a fiduciary duty setting, the court held that shareholders could obtain such documents by showing "good cause." The court held that the plaintiffs' motion to compel succeeded on this set of facts because, not only were the plaintiffs successful in showing a "mutuality of interest," but they also succeeded in showing "good cause" to deflect the attorney-client shield. The court applied the non-exclusive seven-factor "good cause" test laid down by Garner v. Wolfinbarger, 430 F.2d 1093, 1104 (5d Cir. 1970), finding that there was a colorable claim for breach of fiduciary duty, that the documents were unavailable from other sources and it was not a blind fishing expedition. The court however denied the request pertaining to the shareholder repurchase plan of FSC because the doctrine of "mutuality of interest" did not apply to it. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com