Chancery Re-Affirms That Director-Designating Investor Is Entitled to Privileged Communications From Company Counsel in Appraisal Litigation
In Hyde Park Venture Partners Fund III v. Fairxchange, the Delaware Court of Chancery reaffirmed the joint client concept of corporate privilege and held that the company could not assert privilege against a former director or his designating investor except as to a books and records demand in which the company and the director were contemporaneously adverse.
April 12, 2023 at 09:00 AM
6 minute read
ContributorsAn employee, agent or principal of an investor is often designated to serve on a company's board of directors when that company receives an investment or acquires the investor. That board member then becomes privy to legal advice the company receives from its counsel. If the director leaves the board he or she is no longer within the circle of confidentiality that entitles the director to have access to the company's future privileged communications. What happens however when there is a cash out merger, the investor seeks appraisal and then seeks privileged communications its designee received while on the board related to the transaction that spawned the appraisal action? In Hyde Park Venture Partners Fund III v. Fairxchange, C. A. No. 2022-0343-JTL (Del. Ch. March 9, 2023) the Delaware Court of Chancery reaffirmed the joint client concept of corporate privilege and held that the company could not assert privilege against a former director or his designating investor except as to a books and records demand in which the company and the director were contemporaneously adverse.
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