An entity’s minority shareholders or partners obviously look to the entity’s governance documents when assessing their rights and obligations. On the privilege front, minority owners sometimes aggressively seek the entity’s privileged documents.
A doctrine called the “fiduciary exception” (or the “Garner” doctrine in the corporate setting) sometimes permits minority shareholders or similarly situated minority investors to access privileged communications between the entity’s management and its lawyers. In AmBase Corp. v. 111 W. 57th Sponsor LLC, the court understandably found that minority partners suing the managing partner could not satisfy the “fiduciary exception” standard — because “Plaintiffs do not dispute that all fiduciary duties had been contractually waived” and that “an implied duty of good faith and fair dealing — which is inherent in every contract — does not trigger the type of fiduciary relationship that can vitiate attorney-client privilege between the entity and its counsel.” No. 652301/2016, 2024 NY Slip Op 34400(U), at *4 (N.Y. Sup. Ct. Dec. 12, 2024).
This denial of a minority owner’s aggressive efforts to obtain privileged communications between management and the entity’s lawyers highlights the sometime limited reach of the “fiduciary exception.”
