Carrie Huff and Sarah Mallett in Bloomberg BNA: Who’s Afraid of the Big, Bad Wolfinbarger?

Two Recent Delaware Cases Apply ‘Garner v. Wolfinbarger’ to Permit Shareholders Access to Corporate Attorney-Client Privileged Communications

07/27/2015

In Section 220 books and records actions filed by shareholders seeking documents from Wal-Mart and lululemon, Delaware courts recently applied the U.S. Court of Appeals for the Fifth Circuit’s 1970 opinion in Garner v. Wolfinbarger to provide shareholders with corporate privileged communications. In Garner, the Fifth Circuit created a qualified exception to the corporate attorney-client privilege in suits by shareholders, holding that privileged communications between management and corporate counsel may be subject to disclosure under a ‘‘fiduciary exception’’ to privilege if the shareholder shows ‘‘good cause’’ why the privilege should not be invoked in the particular instance. The ‘‘good cause’’ standard is evaluated by considering a number of factors, a process that varies by factual circumstances, thereby necessarily creating unpredictable results. 

While the so-called Garner fiduciary exception has been in existence for 45 years, the case has not been widely followed to permit shareholders access to a corporation’s privileged communications. However, Garner has gained new traction with the recent adoption of the doctrine by the Delaware Supreme Court in the Wal-Mart decision, which was followed by the Delaware Chancery Court in the lululemon opinion. This article describes the Garner decision, addresses the Delaware courts’ recent embrace of Garner, explains other courts’ rejection of Garner and summarizes takeaways for corporations facing a shareholder’s demand to access attorney-client privileged communications under the Garner fiduciary exception.

Excerpted from Bloomberg BNA. To read the full article, click here.

Email Disclaimer