Delaware’s Adoption of Garner — and Practical Ways to Respond

On July 23, 2014, the Delaware Supreme Court in Wal-Mart Stores Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW held that plaintiff stockholders, who make a showing of good cause, can inspect documents concerning a corporation’s internal investigation even if those documents were otherwise covered by the attorney-client privilege and even if the plaintiffs’ inspection demands are made in Section 220 litigation. In so ruling, the Supreme Court expressly adopted the “fiduciary” exception to the attorney-client privilege first announced in a Fifth Circuit appellate decision dating from 1970, Garner v. Wolfinbarger. The court also ruled that Garner does not apply to efforts to protect non-opinion work product, which should be analyzed under Court of Chancery Rule 26(b)(3).

The Garner Exception to the Attorney-Client Privilege -

Over 40 years ago, the Fifth Circuit in Garner held that a stockholder, upon a showing of good cause, could overcome a corporation’s attorney-client privilege when suing the corporation for acting “inimically” to the stockholder’s interests. The plaintiffs in Garner had asserted class claims (under the Securities Act of 1933 and the Securities Exchange Act of 1934, among other statutes), all arising out of a corporation’s allegedly fraudulent public offering of stock; the corporation, in turn, had asserted derivative cross-claims against various of its directors, officers and control persons.

Originally published in Law360 on August 27, 2014.

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