In Eric Gilmore v. Turvo, Inc., C.A. No. 2019-0472-JRS, the Delaware Court of Chancery denied a director’s Motion to Compel seeking attorney-client privileged communications between Turvo Inc.’s (“Turvo”) Preferred Directors, officers, or employees and an outside law firm. The general rule in Delaware is that all directors are within the umbrella of privilege between the Board and its counsel and, as a result, a Delaware corporation cannot assert privilege to deny a director access to legal advice furnished to the board during the director’s tenure. The communications in question took place before the Board meeting where the Preferred Directors removed plaintiff as CEO and retained the outside law firm as counsel to the Board. Plaintiff argued that, even though the Board had longstanding counsel, the outside law firm’s advice was being furnished to the Board prior to the formal engagement of the outside law firm by Turvo and therefore Plaintiff was entitled to the communications. The Court disagreed, holding that there was no basis to conclude that outside counsel had been retained by the Board before the meeting because there had been no act by the Board to hire the firm before the meeting. The Court found that any advice provided by outside counsel prior to being engaged by Turvo was in connection with its representation of one specific Preferred Stockholder of Turvo and the director it had appointed. As a result, Plaintiff was an outsider to the relationship and had no right to pierce it.
The Court’s ruling is a reminder to Delaware corporations of the weight the Court of Chancery will place on Board actions and engagement formalities in determining the availability of privilege in Board communications.
A link to the full case is below.
