Court Opinion

ID: 5748572
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:53:25.99997+00
Date Added: 2024-06-11T08:41:13.299304
License: Public Domain

McGuire, J. (concurring).
As Magistrate Judge Scoville stated after surveying the law of Delaware, “Delaware law recognizes a broad right in corporate directors to access corporate records and documents,” a right that “extends to documents otherwise protected by the corporation’s attorney-client privilege” (Glidden Co. v Jandernoa, 173 FRD 459, 473 [WD Mich 1997]). Thus, “directors have a right to access attorney communications of the company relating to the time that they served as directors” (id.). Accordingly, Greenberg and Smith have the unequivocal right under Delaware law to review relevant materials generated by or for AIG’s attorneys while they served as directors of AIG (id.; Moore Bus. Forms, Inc. v Cordant Holdings Corp., 1996 WL 307444, *4, 1996 Del Ch LEXIS 56, *12-13 [1996], appeal refused 682 A2d 625 [Del 1996]). In Moore, the court explained its holding as follows:
“Because the attorney-client privilege belongs to
*208the client, it would be perverse to allow the privilege to be asserted against the client. To adopt the defendants’ position would achieve precisely that result. The client in this case is the Holdings board. [The former director] was a member of that board, having the same status as the other directors. No basis exists to assert the privilege against him” (1996 WL 307444 at *6, 1996 Del Ch LEXIS 56 at *18).
As the majority notes, moreover, a Delaware court recently addressed the same question presented in this case and held squarely in favor of Greenberg and Smith. In an unpublished order issued in related litigation, Teachers’ Retirement Sys. of La. v Greenberg (C.A. No. 20106 [July 11, 2007]), Vice Chancellor Strine directed AIG to produce otherwise privileged documents to Greenberg, Smith and another former director, and explained that the production of the documents would not constitute a waiver of the privilege “because, under Delaware law, the . . . former directors . . . are entitled to access to certain of AIG’s privileged documents generated during their tenure as directors of AIG by virtue of their status as former directors and/or to support their Section 141 (e) defense.”
Of course, Vice Chancellor Strine’s ruling also refutes AIG’s contention that only former directors of closely held corporations enjoy such a right of access to privileged materials. But even putting Teachers’ Retirement System aside, nothing in the text or reasoning of any of the Delaware cases suggests such a limitation (see e.g., Moore, supra; AOC Ltd. Partnership v Horsham Corp., 1992 WL 97220, 1992 Del Ch LEXIS 110 [1992]; Kirby v Kirby, 1987 WL 14862, 1987 Del Ch LEXIS 463 [1987]). For this same reason, AIG is not persuasive in seeking to limit this right of access to derivative actions against former directors. Moreover, as is clear from the Delaware cases, and as Vice Chancellor Strine expressly stated in Teachers’ Retirement System, this right is a “substantive right.” It does not spring into being only when a plaintiff of a particular kind sues a former director.
Similarly, the fortuity that Greenberg and Smith have been sued in New York should not deprive them of this substantive right. As Justice Sullivan stated, “[o]ne of the abiding principles of the law of corporations is that the issue of corporate governance ... is governed by the law of the State in which the corporation is chartered” (Hart v General Motors Corp., 129 *209AD2d 179, 182 [1987], lv denied 70 NY2d 608 [1987]). The issue of “access to minutes and corporate records” by directors “essentially involves corporate governance” (cf. Rubinstein v Bullard, 285 AD2d 366, 367 [2001]). Accordingly, the law of Delaware is controlling (Hart v General Motors, supra; Kikis v McRoberts Corp., 225 AD2d 455 [1996] [“plaintiffs claims are governed by the laws of Delaware as issues of corporate governance are determined by the State in which the corporation is chartered”]; Glidden, 173 FRD at 471 [“New York courts apply the law of the state of incorporation ... to determine . . . issues involving a corporation’s internal affairs”]).
Although the majority suggests otherwise in seeking to defend its holding that New York law is controlling on the issue of Greenberg and Smith’s right to access the privileged materials, Delaware has the paramount interest in this dispute between AIG and two of its former directors (cf. Hart, 129 AD2d at 185 [“it is Delaware, not New York, which has an interest superior to that of all other States in deciding issues concerning directors’ conduct of the internal affairs of corporations chartered under Delaware law” (footnote omitted)]). By contrast, New York has no substantial interest in the outcome of this dispute. Indeed, the absence of any such interest is dramatically if not conclusively demonstrated by the Attorney General’s statement at the outset of the brief he submitted to this Court: “Plaintiffs [the People of the State of New York and the Superintendent of Insurance of the State of New York] take no position on the merits of this discovery dispute between Defendants and AIG.” This neutrality reflects no lack of zeal on the part of counsel for the plaintiffs. Rather, it reflects the reality that, putting aside the general interest of the State of New York in seeing legal obligations honored and in broad discovery in actions brought in its courts, New York has no particular interest in whether AIG honors or denies the rights of Greenberg and Smith to access the privileged materials.
Delaware has at least two clear and substantial interests at stake in this dispute: its interest in the ability of directors of its corporations to defend themselves against accusations of misconduct, and its interest in encouraging full and frank communications between directors of its corporations and the attorneys who represent the corporations. This latter interest, of course, is an instance of the larger purpose served by the *210attorney-client privilege: “to encourage full and frank communication between attorneys and their clients and thereby promote broader interests in the observance of law and administration of justice” (Upjohn Co. v United States, 449 US 383, 389 [1981]). Delaware’s ability to vindicate these interests should not be dependent upon the vagaries of the law of evidence or privilege in other states. To conclude otherwise, as Greenberg and Smith aptly state, “would undermine the ability of Delaware officers and directors to act on behalf of Delaware corporations in every state.”
For no apparent reason other than the convenience of New York courts, the majority accepts AIG’s position and concludes that New York law bearing on the attorney-client privilege is controlling. Apart from its inconsistency with both the “abiding principle” stressed in Hart v General Motors and the other cases cited above, the majority’s approach is flawed for other reasons. There is no issue in this case about whether the materials Greenberg and Smith seek to review are privileged or not. They are privileged and the issue in dispute is not a point of procedure or a subtlety of evidence law. Rather, what is at stake is the substantive right of access of former directors of Delaware corporations to privileged materials generated during their tenure.*
*211Accordingly, I would reverse and grant the motion to compel without reaching the question of whether Greenberg and Smith would be entitled to review the documents if New York law were controlling.
Mazzarelli, J.E, and Andrias, J., concur with Malone, J.; Friedman and McGuire, JJ., concur in separate opinions.
Order, Supreme Court, New York County, entered October 2, 2006, reversed, on the law, with costs, the joint motion of individual defendants Greenberg and Smith to compel AIG to produce certain legal memoranda prepared during their tenure at AIG granted, and the matter remanded for further proceedings consistent herewith.

 If the Delaware corporation is not a party to the action in New York against a former director, it will not matter what the analogous New York law is or whether it should be controlling. After all, the Delaware corporation would either honor a demand by the former director for access or refuse the demand. In the latter event, the former director presumably could sue the corporation in Delaware and obtain access. If the Delaware corporation is a party to the action in New York against a former director but honors its obligation under Delaware law to provide access, it will not matter what the analogous New York law is and whether it is controlling. Thus, only if the Delaware corporation is a party to such an action and refuses to honor that obligation can the nature and potential applicability of New York law be of any moment. Of course, my view is that New York would not have any legitimate interest in permitting the corporation to refuse to honor its obligation. But even assuming that New York law on the privilege would deny access to a former director and that it would be controlling, it is far from clear that former directors of Delaware corporations would be stymied by a holding to that effect. Presumably, after a New York court first so held, former directors who feared being or are sued by the corporation in New York would bring their own action in Delaware to vindicate their substantive right under Delaware law. If the consequences of such a hypothetical holding could be so readily avoided, that would underscore the insubstantiality of any interest New York might have in applying its law to such disputes between Delaware corporations and their former directors.