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The Delaware Supreme Court recently issued an epic opinion, ending the lengthy saga of litigation involving efforts by some stockholders of Wal-Mart to pursue claims in connection with alleged improprieties relating to the Mexican subsidiary of Wal-Mart, in California State Teachers’ Retirement System v. Alvarez , Del. Super., No. 295, 2016 (Jan. 25, 2018).  Multiple prior decisions in this matter have been highlighted on these pages over the last several years. The unusual procedural history included multiple appeals of various aspects of Section 220 litigation in which the plaintiffs in Delaware sought books and records prior to filing a plenary complaint.

This most recent decision of Delaware’s high court in the matter must be read by anyone interested in the latest iteration of Delaware law on the topic of issue preclusion, which is also referred to in some circles as collateral estoppel. (A photo of the Supreme Court building in Dover is shown nearby.)

For purposes of this cursory blog post, and in light of the lengthy procedural history of this case, which is presumed to be familiar to readers (or which can be reviewed at the foregoing link by accessing highlights of prior decisions in this matter), the most efficient way to catalog this matter for future reference is with the following bullet points that highlight key aspects of the most recent ruling in this case.

  • Following a familiar pattern, after an article in the New York Times indicating apparent misfeasance by the Mexican subsidiary of Wal-Mart that called into question the compliance by the board of directors with their fiduciary duties, multiple lawsuits were filed in multiple fora. A final decision in a case filed in the U.S. District Court in Arkansas dismissed claims filed in that court based on failure to satisfy the standard of demand futility.
  • A later decision of the Delaware Court of Chancery found that the decision in Arkansas had a preclusive effect on the derivative action filed in Delaware.
  • The Delaware plaintiffs followed the advice of the Delaware courts by employing the tools of DGCL Section 220 to obtain books and records prior to filing their plenary complaint. In contrast, the plaintiffs in Arkansas did not do so, and therefore, were able to proceed more quickly with their plenary complaint.
  • A cynical wag might conclude that an unintended consequence of this decision will be to encourage some plaintiffs to file stockholder suits in courts “anywhere but Delaware” without the added expenditure of time and money using the tools of Section 220 before filing their plenary complaint.
  • The court carefully considered the many policy considerations implicated, including the serious constitutional criteria of Due Process, and the Full Faith and Credit required to be given to judgments of the courts in other states.
  • Also importantly, the court in this opinion concluded that based on the facts and circumstances of this case, the failure of the plaintiffs in Arkansas to use Section 220 before filing their complaint, in this particular instance, did not constitute the type of “grossly deficient representation” of the plaintiff class such that the preclusive effect of the judgment was avoided.

Procedurally Important Point: Footnote 184 should be of great interest to corporate and commercial litigators because it cites to a Supreme Court rule, (that has potential analogs in decisions by the Court of Chancery), that if a particular argument is confined to a footnote only in a brief on appeal, as opposed to appearing in the body of the brief, that argument will be considered waived.

As Frank Reynolds of Thomson Reuters reports, the long-running effort of a stockholder to obtain additional documents from Wal-Mart in a Section 220 proceeding appears to have reached a conclusion, though it may still be the subject of second appeal. Frank Reynolds reports that the Court of Chancery ruled from the bench on May 7 that Wal-Mart should not be held in contempt and the plaintiff was not correct in asserting that Wal-Mart failed to comply with the Supreme Court opinion.

Prior posts on these pages have highlighted the Delaware Supreme Court decision ordering Wal-Mart to produce certain documents in response to a Section 220 demand, with exceptions applicable to the attorney-client privilege. Subsequently, the stockholder argued in the Court of Chancery that Wal-Mart did not comply with the ruling of the Supreme Court to the extent that the retailer did not produce all the documents that ruling required.

Delaware decisions have often instructed lawyers to use DGCL Section 220 as one of the “tools at hand” to acquire details and data about potential claims before filing a plenary lawsuit. The saga of the Wal-Mart proceedings involving Section 220, and other cases noted on these pages over the last ten years, support the observation that Section 220 can be a blunt instrument, more akin to a sledgehammer than a scalpel, and utilization of the instrument is often expensive and time-consuming as well as unsatisfying.

We have previously written on these pages about the long-running saga in the Delaware courts involving stockholders of Wal-Mart seeking books and records from the retail giant regarding an imbroglio with its Mexican subsidiary. Bottom line: They were ordered to produce some documents. Wal-Mart told the Court of Chancery recently that they produced all documents in compliance with the court’s order. According to the stockholders, however: not so. Now the Chancellor must decide who is correct.
Frank Reynolds of Thomson Reuters provides an excellent overview of the situation in a recent article. Yours truly is quoted but nonetheless Frank provides a helpful update on this saga.

Oklahoma Firefighters Pension & Retirement System v. Citigroup Inc., No. 9587, final report issued (Del. Ch. Sept. 30, 2014). This decision by a Master in Chancery is of importance to the extent it is the first trial court decision to apply the recent Delaware Supreme Court’s Wal-Mart decision, highlighted on these pages, in connection with the types of data a shareholder can demand from a corporate board whose foreign subsidiary is credibly accused of wrongdoing, pursuant to DGCL Section 220. This ruling is subject to de novo review by the Court of Chancery. The money quote from the decision follows:

Having established a proper purpose for its inspection, Plaintiff bears the additional burden of showing that the books and records it seeks are “necessary and essential” to the stated purpose. The Delaware Supreme Court [in the Wal-Mart case] recently explained:

Documents are “necessary and essential” pursuant to a Section 220 demand if they address the “crux of the shareholder’s purpose” and if that information “is unavailable from another source.” Whether documents are necessary and essential “is fact specific and will necessarily depend on the context in which the shareholder‟s inspection demand arises.”40

To reiterate, I recommended in my draft report that the Court order Citigroup to produce for inspection (1) board and committee minutes and materials provided to the board or committees, (2) meeting preparation materials as defined above, and (3) policies and procedures, but only to the extent those books and records related to the following topics: (a) the Banamex fraud, (b) the BSA/AML matters at Banamex USA, (c) Citigroup‟s fraud detection and prevention efforts, and (d) Citigroup‟s BSA/AML compliance.

Frank Reynolds of Thomson Reuters provides an article with an insightful overview about the case.

Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, Del. Supr., No. 614, 2013 (July 23, 2014).

This Delaware Supreme Court en banc opinion requires Wal-Mart to produce documents about an alleged bribery scandal involving their Mexican subsidiary. Even though the initial focus of this case was on DGCL Section 220 and what documents a stockholder of Wal-Mart could demand, the most noteworthy aspect of this decision, about which we will write more later, is that for the first time the Delaware Supreme Court directly addressed and recognized an exception to the rule that documents protected by the attorney/client privilege do not need to be produced. It is referred to as the Garner exception after a case of that name from the Fifth Circuit.

In this case, the Delaware high court said that the well-established attorney/client privilege does not apply to bar production, or is subject to an exception, if a stockholder needs the otherwise inaccessible information to sue a director for breach of fiduciary duty. A similar analysis was applied to documents otherwise protected by the work-product doctrine. This opinion will have lasting importance for corporate and commercial litigators regarding this topic.

Frank Reynolds of Thomson Reuters has published an insightful article on the case that provides a helpful overview.

Michael Scher of the FCPA Blog has written extensively on the background of this case, and has provided commentary on this decision as well.

UPDATE: The venerable Professor Bainbridge observes a sampling of the commentary on this case thus far, and wonders what all the fuss is about. It may prompt me to reconsider the need to supplement this short post.

Postscript: Yours truly published an article on this case for Directorship, a publication of the National Association of Corporate Directors. That article focuses on the attorney/client privilege aspects of this decision.

Wal-Mart Stores, Inc. v. Indiana Electrical Workers, Del. Supr., No. 614, 2013.

A pending appeal before the Delaware Supreme Court addresses a claim under DGCL Section 220 for books and records of Wal-Mart in connection with allegations regarding misdeeds in their Mexican subsidiary.  While he was the Chancellor, the current Delaware Chief Justice made a preliminary ruling requiring the disclosure by Wal-Mart of some of its books and records.  The Delaware Supreme Court will decide if Wal-Mart is required to release the files of senior executives to determine in part what the board knew or did not know about the alleged impropriates in their Mexican subsidiary.  Michael Scher of the FCPA blog has written a helpful article about the case.  See link to his April 21, 2014 post.

This post was prepared by Frank Reynolds, who has been following Delaware corporate law, and writing about it for various legal publications, for over 30 years.

The Delaware  Court of Chancery recently refused most of B. Riley Financial, Inc.’s motion to dismiss an ex-officer and director’s complaint for indemnification for his settlement of underlying breach-of-duty and fraud charges against him and companies he had founded and later sold to Riley in Wunderlich v. B. Riley Financial, Inc., et al., No. 2020-0453-PAF (Del. Ch. March 24, 2021).

In a March 24 letter ruling, Vice Chancellor Paul Fioravanti Jr. ruled that Riley’s dismissal bid cannot rely on the limits in its interpretation of an indemnification contract plaintiff Gary Wunderlich signed as part of his companies’ 2017 merger with that financial services firm, since it is not the only reasonable reading.

In addition, Wunderlich makes a plausible argument that Riley took over his investment and securities companies’ indemnification obligations when it made them subsidiaries, and Riley had been paying Wunderlich’s legal costs until the two parted ways in Nov. 2018 and Wunderlich was hit with a $10.5 million arbitration award, the vice chancellor said. The Chancery Court let Wunderlich continue to pursue his indemnification claim but dismissed as unripe a declaratory judgment count seeking to hold Riley separately liable for any judgment in the arbitration action.

The opinion could be of value to advancement and indemnification specialists in how it employs Delaware contract law principles to determine the scope of rights and responsibilities in the various indemnification agreements.

Background
Gary Wunderlich founded Wunderlich Investment Company, Inc. and parent Wunderlich Securities, Inc. in 1996 and sold them to Riley in May 2017 but two months later investment and merchant banking firm Dominick & Dickerman LLC brought an arbitration proceeding against Wunderlich and his two companies in the Financial Industry Regulatory Authority. At the time, he was an officer and director of his companies and Riley; Riley initially took over attorney selection and payment, the vice chancellor said.

After the April 2020 award of $10.5 million jointly and severally against Wunderlich and his companies, the claimants filed a petition to confirm the award in May and Riley petitioned to vacate it the next day in the U.S. District Court for the Southern District of New York. Meanwhile, Wunderlich, in April 2020, formally demanded that B. Riley “confirm” that it would indemnify him for “all costs, expenses, awards, losses and liabilities incurred by reason of the fact that he was an officer or director” of B. Riley, WIC, and WSI.

Riley threatened to pursue claims against Wunderlich for actions relating to the Arbitration and to recover from Wunderlich amounts Defendants paid in the Settlement Agreement, and Wunderlich filed this indemnification action in June seeking indemnification from his two companies, and Riley under the merger agreement.

The suit includes claims for:
•Reasonable attorneys’ fees and other expenses incurred in connection with defending against and pursuing vacatur of the Award and negotiating the terms of the Settlement
•Wunderlich’s fees and expenses incurred in this action, or “fees-on-fees.”
•A declaratory judgment obligating Defendants to indemnify Wunderlich for any contribution claim that Defendants “may seek to assert against him in connection with the Arbitration
•B. Riley’s alleged failure to tender payment in response to Wunderlich’s indemnification demand breached the Indemnification Agreement.

Declaratory judgment on contribution
The vice chancellor said “our courts will decline ‘to enter a declaratory judgment with respect to indemnity until there is a judgment against the party seeking it.’” quoting Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 572 A.2d 611, 632 (Del. Ch. 2005). He said, “Defendants have not asserted a contribution action against Wunderlich, and Wunderlich does not presently owe any amounts to be paid in connection with the Settlement Agreement.” If the defendants do not assert a contribution claim against Wunderlich “judicial intervention may be unnecessary.”

Breach of the Indemnification Agreement
“Defendants principally argue that Wunderlich waived his indemnity rights when he executed the Severance Agreement,” the court said. “Central to this decision is whether the indemnification provisions in the bylaws are preserved through a carve-out in the Severance Agreement, which, in turn, requires the construction of the terms of the Merger Agreement.”

But ‘[d]ismissal, pursuant to Rule 12(b)(6), is proper only if the defendants’ interpretation[s] [are] the only reasonable construction[s] as a matter of law” and that is not the case here the court said. “Wunderlich has stated a claim for indemnification…because he has advanced a reasonable interpretation of the WIC Bylaws, the Merger Agreement, and the Severance Agreement.”

Defendants rely on Julian v. Julian for the proposition that the only rights that “arise under” a contract are those that exist within its four corners,” Vice Chancellor but “Julian is factually inapposite because the relevant language in the Merger Agreement and the Severance Agreement are different from the arbitration provision at issue in Julian. Julian v. Julian, 2009 WL 2937121 (Del. Ch. Sept. 9, 2009).

He said he cannot determine as a matter of law that the Severance Agreement only released the indemnification rights listed in the Merger Agreement to the exclusion of any indemnification rights but he doesn’t need to at this stage.

Fees on Fees
Wunderlich’s claim for fees-on-fees in enforcing his indemnification rights, need not be dismissed just because he has not identified any applicable indemnification provisions, the court said, because under Section 145 of the DGCL, “without an award of attorneys’ fees for the indemnification suit itself, indemnification would be incomplete” and Wunderlich’s indemnification requires WIC to provide indemnification “to the fullest extent permitted by the Delaware General Corporation Law”.

This post was prepared by Frank Reynolds, who has been following Delaware corporate law, and writing about it for various legal publications, for over 30 years.

The Delaware Chancery Court recently allowed a Facebook Inc. shareholder plaintiff to inspect the directors’ electronic communications concerning how the company ended up paying $5 billion for a 2019 board settlement with government regulators that would cover founder/CEO Mark Zuckerberg’s liability in Employees Retirement System of Rhode Island v. Facebook Inc., No. 2020-0085-JRS memorandum opinion (Del. Ch. Feb.10, 2021).

Vice Chancellor Joseph R. Slight’s February 10 post-trial opinion granted part of an investor’s motion for access to two remaining groups of board-level documents in one of the long-running books-and-records battles under Section 220 of the Delaware General Corporation Law stemming from Facebook’s record-breaking settlement of Federal Trade Commission charges over the company’s data privacy practices.

Background

The Vice Chancellor’s ruling on whether Employees’ Retirement System of Rhode Island could inspect the directors’ decision to pay $4.9 billion more than the $104 million their defense firm advised was necessary to settle liability for Facebook alone was his second in two years on the scope of discoverable documents on whether the board had overpaid to get a settlement that would shield Zuckerberg.

In Vice Chancellor Slights’ May 2019 ruling, a consolidated set of shareholders in a parallel Section 220 action seeking documents and communications relating to Facebook’s Cambridge Analytica data privacy debacle won access to other categories of board level documents. In re Facebook, Inc. Section 220 Litig., 2019 WL 2320842, at *19 (Del. Ch. May 31, 2019).

And then there were two

The February ruling is important because the pension fund plaintiff asserted that the communications that would prove the directors breached their duty by wasting corporate assets to insulate their CEO in the settlement could now only be in two remaining categories:

1. Electronic communications from, to, or copied to a member of the board concerning Facebook’s settlement negotiations with the FTC

2. Hard-copy documents exclusively provided to, or generated by, any member of the Board relating to Facebook’s negotiations with the FTC.

Since his February ruling allowed the pension fund to inspect Facebook’s non-privileged electronic communications, if ERSI does not find the proof it seeks there, it could set up a future final Section 220 battle – likely combining all plaintiffs — over access to the final category— consisting of attorney-client privileged and attorney work-product documents.

The plaintiffs have argued that Facebook intended to make the attorney-client/work-product category the vault for all the sensitive communications and documents that exposed the directors’ plan to use corporate assets to shield Zuckerberg from personal liability. However, the Vice Chancellor said in the February ruling that as long as it is still possible that any other category of documents might contain the information the plaintiffs seek, it is too soon to open that vault.

Plaintiff “has not demonstrated good cause under the Garner fiduciary exception to the attorney-client privilege to justify compelling the company to produce privileged documents for inspection” the Vice Chancellor said in the February opinion, referring to the 5th U.S. Circuit Court of Appeals’ Garner decision that plaintiffs could not examine privileged documents until all non-privileged sources had been searched. Garner v. Wolfinbarger 430 F.2d 1093. That Garner decision and its principle were adopted by the Delaware Supreme Court in Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW 95 A.3d at 1278–79.

In his February opinion, Vice Chancellor Slights said he granted access to all non-privileged board communications because “the documents already produced provide no insight into why Facebook would pay more than its (apparently) maximum exposure to settle a claim.”

No penalty for confidence

According to Facebook, the documents produced prior to this litigation, coupled with Plaintiff’s own trumpeting of confidence that it could survive a motion to dismiss in a plenary action by pleading the facts it already possesses, reveals that Plaintiff has received more than “sufficient” information to fulfill its stated purposes for inspection.

But the court said, “that a stockholder plaintiff believes it has a basis in facts already known to pursue claims of wrongdoing against company fiduciaries does not mean the stockholder should be denied use of the tools at hand to develop those facts further.”

Too soon for Garner exception

“While the attorney-client privilege may be asserted by a corporation that has sought legal advice, the privilege is not absolute and an oft-invoked exception applies in suits by minority shareholders,” the court said in finding that the availability of the privilege must “be subject to the right of the stockholders to show ‘good cause’ why the privilege should not apply.”

While Garner identifies multiple factors, the court might consider when assessing whether the stockholder has demonstrated “good cause,” which focuses the good cause inquiry on three factors:

(i) whether the claim is colorable,

(ii) the necessity or desirability of information and its availability from other sources and

(iii) the extent to which the information sought is identified as opposed to a blind fishing expedition.

But the Vice Chancellor noted that whether the privileged information sought “is both necessary to prosecute the action and unavailable from other sources” has been described as “the most important” of the Garner factors. ERSRI argued but could not demonstrate the privileged information it seeks is unavailable elsewhere “because it has not seen the responsive, non-privileged electronic communications that Facebook is withholding.”

Takeaways

The court thought it was “likely that non-privileged electronic communications among board members can provide ERSRI insight into why the board decided to enter the 2019 settlement without exposing the advice of counsel upon which, at least in part, that decision was based.”

But there are two other possibilities: the board’s discussions that led to its $5 billion settlement decision are restricted to the “privileged” vault, or they somehow reached a consensus with little or no formal discussions. Either possibility could lead to a novel third Facebook Section 220 ruling in the future.

 

A recent Delaware Court of Chancery post-trial opinion addressing a demand for books-and-records by an LLC member did not attract my attention for the rather routine legal issues it decided, but it provides an opportunity to rely on it as a launchpad for broader commentary generally on this common type of Delaware corporate and commercial litigation. This post is intended for advanced readers of these pages who have followed at least some of the 200-plus highlights on this blog regarding Delaware decisions on DGCL Section 220 over the last 15 years, and a fewer number of case highlights regarding the analog to Section 220 in the Delaware LLC Act: Section 18-305.

In Riker v. Teucrum Trading, LLC, C.A. No. 2019-0314-AGB (Del.Ch. May 12, 2020), the Court determined after trial that only some of the requested data requested by the LLC member, and not yet provided, was required to be produced, although the case followed a familiar pre-trial pattern: The company initially refused to produce most of the documents requested prior to the suit being filed; then additional documents were produced after suit was filed, but not as many as requested. At trial, the Court needed to determine how many of the documents still requested were required to be produced.

Procedural History

The complaint was filed in April 2019. Court guidelines suggest a trial date within 90 days of the complaint for summary proceedings such as these, but through no fault of the court, that timetable may not always be possible. In this case, a pre-trial mediation took place that resulted in additional documents being produced, and that process added additional months to the timetable for trial. Post-trial briefing was also submitted.

Highlights of Decision

  • The Court held that all the “form and manner” requirements of the statute were met, in terms of stating a proper purpose, for example. See pages 8-18.
  • Valuation was recognized as a well-established statutory proper purpose, so the focus was on whether the documents requested were necessary in order to perform a valuation using the DCF method, which the plaintiff testified he was qualified to perform. The Court held that he was entitled to only one of the documents requested–most of them already having been produced. See generally, Lim v. PowerWise, highlighted on these pages, a 2010 Chancery decision that determined what documents were necessary to pursue the proper purpose of valuation in the context of that case.
  • The second purpose was recognized as proper–investigation of mismanagement–but a prerequisite for pursuing such a purpose is presenting a “credible basis” of wrongdoing which the plaintiff in this case did not establish in connection with the documents requested for this category of requests. See pages 21-28.

General Commentary on Section 220/Books-and-Records Cases

Hundreds of highlights on these pages, over the last 15 years, of Delaware decisions on demands for books and records–based on both the corporate statute and the LLC Act–and the many cases of this type that I have handled over the last 30 years or so, reveal a few common themes:

  • Although a reading of DGCL Section 220 and Section 18-305 of the LLC Act may appear to the casual observer as relatively simple and straightforward, the many hundreds of published decisions interpreting those statutes tell a different story.
  • Exhortations in ample Delaware corporate litigation decisions instruct Delaware lawyers to “employ the tools at hand”, including Section 220,  prior to filing a plenary action, especially a derivative suit which requires that one plead with particularity why pre-suit demand is futile. But what a blunt instrument Section 220 can be. Notably, Section 220 case law is often used by analogy when applying Section 18-305.
  • Highlights on these pages of decisions on this topic recite the many nuances and prerequisites that must be mastered for a successful books and records claim under either statute, often added by judicial gloss, which are not obvious from a reading of the statutes only.
  • Having represented both companies and stockholders/members in these cases over the years, there are many traps for the unwary. Companies have many arrows in their quiver to oppose a request under either statute. In addition to challenging a proper purpose (which can include a defense that the stated purpose is not the “true” purpose), a fertile field for disputes in this area relates to whether each of the documents requested is necessary to accomplish the stated purpose.
  • These cases are not for the faint of heart because:

(i) As this case indicates, the litigation can last for a year or more (and some cases highlighted on these pages have lasted several years through appeal);

(ii) In connection with the litigation lasting as long as some plenary cases, the fees incurred in these cases can be substantial for matters such as discovery (however limited and circumscribed by the narrow scope and summary nature of these cases) and motion practice, for example, related to discovery disputes (though dispositive motions are strongly discouraged.);

(iii) As the instant case highlighted above exemplifies, the results of trial in these types of case are often unsatisfying to the extent that even if one is successful–which is never a certainty–the court merely orders the production of documents. This contrasts with a typical trial in which success often means a monetary award or substantive relief. So too, an order for production of records does not equate with receipt of records. It’s not uncommon that a continuing struggle ensues to enforce the production ordered by the court.

(iv) Truly egregious behavior, as an exception to the American Rule, must be presented before the court will engage in fee shifting–otherwise each party pays its own fees. Thus, the economics must support pursuing one of these cases through trial, and possible appeal.

UPDATE: Professor Stephen Bainbridge, a nationally-prominent corporate law professor whose scholarship is often cited in Delaware court opinions, kindly linked to this post on his blog.

Anyone interested in the most complete and recent explanation of the Garner exception to the attorney-client privilege needs to read the Delaware Court of Chancery’s ruling in Buttonwood Tree Value Partners, L.P. et al. v. R.L. Polk & Co., Inc., et al., C.A. No. 9250-VCG (Del. Ch. Jan. 10, 2018).

This letter ruling addresses a motion to compel production of communications that would otherwise be protected by the attorney-client privilege. In particular, the motion to compel was based on the Garner exception to the general rule that attorney-client privileged communications need not be produced during discovery.

Background:  The factual background involves derivative claims for breach of fiduciary duty in connection with a self-tender.  More detailed facts involving the underlying claims in this suit were highlighted in a synopsis of the prior Chancery decision in this matter on these pages.

Key Legal Principles:  The court recited the doctrinal underpinning and public policy reasons for Delaware Rule of Evidence 502(b) which codifies the attorney-client privilege, which stands in contrast to the bulk of the Rules of Evidence which are designed to provide for disclosure of relevant facts in a search for the truth.  Delaware recognizes the Garner “exception to the attorney-client privilege exception” to the general rule that relevant facts must be disclosed.

The Garner exception is based on the balancing of:  (i) the purpose of the attorney-client privilege that encourages open communication with counsel and client; with (ii)  the right of the stockholder to understand what advice was given to fiduciaries who are charged with breaching their duties.

There are nine factors that are generally considered in order for the court to determine whether to apply the Garner exception, but three in particular are given greater significance:  (1) The colorability of the claim; (2) The extent to which the communication is identified versus the extent to which the shareholders are blindly fishing; (3) The apparent necessity or desirability of the shareholders having the information, and availability of it from other sources.  (citing Salberg v. Genworth Fin., Inc., 2017 WL 3499807 at *5 (Del. Ch. July 27, 2017)). The Salberg case, also a very useful and thorough explanation of the Garner exception, from last year, was highlighted on these pages.

The Delaware Supreme Court had described the Garner exception as “narrow, exacting, and intended to be very difficult to satisfy.” See Wal-Mart Stores, Inc., 95 A.3d at 1278 (that decision was previously highlighted on these pages).

The court in this decision determined that the first two factors were satisfied but they were only “gatekeeper criteria.” The third factor was not satisfied in this case based on the court’s finding that the same information could have been obtained through depositions.

The court also explained why the “crime-fraud exception” to the attorney-client privilege did not apply. See footnote 29. See Rule of Evidence 502(d)(1) for codification of the crime-fraud exception to the work-product doctrine.

The court also noted that the Garner factors overlap with the required showing under Rule 26(b)(3) pursuant to the work-product doctrine.