A recent Delaware Court of Chancery decision explained that: the general rule that a director is entitled to communications with counsel for the board has exceptions, but the threshold issue is whether the attorney involved represents the whole board–or just selected board members. In Gilmore v. Turvo, Inc., C.A. No. 2019-0472-JRS (Del. Ch. Aug. 19, 2019), the court restated the general rule that a Delaware corporation “cannot assert the privilege to deny a director access to legal advice furnished to the board during the director’s tenure.” See footnote 19. The court acknowledged that there are three exceptions to that general rule, but an important condition to the general rule is that the legal advice be furnished to the whole board. See Slip op. at 7.
In this case, a law firm was hired to conduct an internal investigation only by certain stockholders and only the representative(s) of those stockholders on the board–but the court determined that the firm conducting that internal investigation did not represent the board as a whole, and therefore, the board member who filed a motion to compel in this case was not entitled to attorney/client communications with that firm because the firm was not representing the whole board at the relevant time during which the communications were sought.
The court also reasoned that the director did not have a reasonable expectation that the attorneys in question were representing all members of the board. Therefore, the court denied the motion to compel those communications.
This opinion should be contrasted with the many cases highlighted on these pages that discuss the general rule that a board member usually enjoys “unfettered access” to corporate documents, with exceptions. See, e.g., Chancery decision in Papa John’s case highlighted on these pages.