A recent Chancery Court decision underscores the broad scope of a director’s right to information, even where he is a plaintiff in litigation action against the corporation. In Kalisman v. Friedman, C.A. No. 8447-VCL (Del. Ch. Apr. 17, 2013), the court held that a corporation could not assert the attorney-client privilege or work-product doctrine to withhold documents from a director who had been frozen out of the deliberative process on a controversial recapitalization plan.

The underlying dispute concerned the company’s adoption of a recapitalization plan in the face of a prospective challenge to the incumbent board from the company’s largest single common stockholder. The plaintiff, Jason Taubman Kalisman, was a director of the nominal defendant, Morgans Hotel Group. Kalisman was also a founding member of the co-plaintiff, OTK Associates, and served on the board as its designee. In 2011, the board established a special committee to evaluate potential strategic alternatives. Kalisman was appointed to the committee, which retained a separate financial adviser and legal counsel. When the process stalled, OTK announced in 2013 that it would nominate candidates for the board and make certain business proposals at the upcoming annual meeting. According to the opinion, the defendants then began in secret to develop a recapitalization plan that, if approved, would result in an investor group controlled by another director becoming the largest common stockholder. During the development of the plan, Kalisman was kept in the dark, and when he asked for information, was told that nothing was in the works.

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