Corporate director’s communications with his personal attorney using company email system are not subject to the attorney-client privilege according to the Delaware Court of Chancery.

In In re Information Management Services Derivative Litigation, C.A. No. 8168-VCL, slip op. (Del. Ch. Ct. Sept. 5, 2013), the Delaware Court of Chancery court dealt with a dispute between two families, the Burtons and the Lakes, that each owned 50% of IMF.  The Burtons accused the Lakes of breach of fiduciary duty in management of the company; they sought to obtain emails written by William and Andrew Lake to their personal attorneys using IMS email accounts.  The Lakes claimed attorney-client privilege in these emails.  The court rejected the claim of privilege.  Under Delaware law the attorney-client privilege does not apply unless the client had a reasonable expectation of privacy in the communication.  The court applied a four-factor test to determine whether the Lakes has such an expectation: (1) The company’s policy on personal use of email, (2) The company’s email monitoring practice, (3) Ease of third-party access; and (4) Employee’s knowledge of monitoring policies.  Based on these factors the court found that the Lakes did not have a reasonable expectation of privacy in the emails and therefore the privilege did not apply.  The court noted that its decision was limited to the facts of the case and might not apply to large corporations involved in derivative actions.  Nonetheless, it would be prudent (and perhaps ethically required) for a lawyer who represents a corporate officer or director personally to warn the official to use personal rather than corporate emails to communicate with the lawyer.  See ABA Formal Opinion #11-459 (“A lawyer sending or receiving substantive communications with a client via e-mail or other electronic means ordinarily must warn the client about the risk of sending or receiving electronic communications using a computer or other device, or e-mail account, where there is a significant risk that a third party may gain access.”).   The decision could also apply to communications between directors severing on special committees and attorneys representing such directors or the committees on which they serve.


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