SERVICES INSIGHTS OFFICES CAREERS MENU LEGAL ALERT Delaware Court Limits Former Directors' Access to Privileged Information by David J. Margules and R. Michael Lindsey November 18, 2021 Share Delaware’s Chancery Court recently blocked two former directors from obtaining privileged communications between a corporation and its counsel in the context of the former directors’ pursuit of personal claims against the entity. Delaware has consistently held a director’s access to information is “essentially unfettered,” e.g. Kalisman v. Friedman (Del. Ch. Apr. 17, 2013). In SerVaas v. Ford Smart Mobility LLC (Del. Ch. Nov. 9, 2021), Vice Chancellor Lori W. Will noted three exceptions: (i) a contract limiting access; (ii) the existence of a special committee, of which the director is not a member, and which retains separate counsel; and (iii) and where “sufficient adversity exists between the director and the [entity] such that the director could no longer have a reasonable expectation that he was a client of the board’s counsel.” Op. at 6. The SerVaas plaintiffs claimed they were wrongfully terminated shortly before deferred compensation rights were scheduled to vest, and sought discovery of all privileged documents from when they were directors. Explaining that “[a] director’s right to information is ‘correlative with his duty to protect and preserve the corporation,’” the Court applied the third exception and held that granting plaintiffs access “to pursue personal breach of contract claims would be inconsistent with the purpose of director information rights.” Op. at 7. The Court did not address whether “adversity” is determined as of the time of the director’s service, or as of when the demand for access is made. Ballard Spahr can help Delaware entities minimize the risk present or former directors who are adverse to the entity will invade the entity’s attorney-client relationship. For assistance and more information, please contact our attorneys. Subscribe to Ballard Spahr Mailing Lists Get the latest significant legal alerts, news, webinars, and insights that affect your industry. SUBSCRIBE Copyright © 2021 by Ballard Spahr LLP. www.ballardspahr.com (No claim to original U.S. government material.) All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher. This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have. CONTACTS David J. Margules PARTNER margulesd@ballardspahr.com TEL 302.252.4431 Elizabeth A. Sloan PARTNER sloane@ballardspahr.com TEL 302.252.4458 Peter Jaslow PARTNER jaslowp@ballardspahr.com TEL 215.864.8737 April Hamlin PARTNER hamlina@ballardspahr.com TEL 612.371.3522 RELATED AREAS Securities Enforcement and Corporate Governance Litigation Securities and Capital Markets Litigation SUBSCRIBE ©2021 Ballard Spahr LLP RETURN TO TOP Ballard360 Access Portal Alumni Client Portal Privacy Attorney Advertising Copyright & Legal Info