Delaware Court of Chancery Addresses Outside Director’s Use of Another Entity’s Email Account for Board Communications

Wilson Sonsini Goodrich & Rosati

The Delaware Court of Chancery recently addressed whether an outside director’s use of another entity’s email account would require the director to turn over emails from that account in stockholder litigation relating to his board service. The ruling dovetails with another decision from the court late last year finding that use of another email account waived the attorney-client privilege. The decisions provide important guidance for outside directors, any of their related entities, and the companies on whose boards they serve. 

The latest ruling arose in a stockholder lawsuit challenging a decision by an independent committee of Dell directors to approve a recapitalization at Dell.1 The stockholder plaintiff sought nearly 1,000 emails from an outside director, who had used his former employer’s email account for his Dell-related communications. The plaintiff asserted that because the other company’s email policy allowed the company to access emails in some circumstances, the director did not have a reasonable expectation of privacy, and the attorney-client privilege—which only protects confidential communications—did not apply as a result.

Drawing on a line of prior case law, the court applied a four-factor test to determine whether the director’s use of the email account had waived the attorney-client privilege: 1) whether the employer corporation maintains a policy banning personal or other objectionable use or providing that the account is not private at all, 2) whether the employer corporation monitors the employee’s use of computer or emails, 3) whether third parties have a right to access the employee’s computer or emails, and 4) whether the employee was aware of the policy.

The court concluded that the Dell director had not waived the privilege because, under the terms of the other company’s email policy, the employee had a reasonable expectation of privacy with respect to the communications related to his Dell board service. Importantly, the policy allowed for the use of company email accounts for limited personal use. Other factors, including that the company reserved the right to monitor emails if necessary and the Dell director was aware of the policy, weighed in favor of finding that privilege had been waived, but the court reasoned that the first factor was the “dominant” factor and outweighed the other factors, serving to preserve privilege in this instance. It appeared significant to the court that the former employer had allowed the Dell director to continue to use his account following his retirement as CEO, which signaled that the parties understood that the account would be used for personal reasons.

In contrast, in a decision last year, the court concluded that employees of defendant company SoftBank had waived privilege over communications involving SoftBank business where they had used their email accounts with their other employer, Sprint, for those communications.2 In that situation, Sprint’s email policy was stricter, specifying that employees had no expectation of privacy when they used their Sprint email accounts. The decision also could have been influenced by the different facts at issue there.

These decisions offer several important insights for directors and companies:

  • The latest decision indicates that, depending on the facts, the use of a separate entity’s email account for board or company communications will not necessarily waive the attorney-client privilege over those emails.
  • At the same time, if directors and the companies on whose boards they serve want to avoid the type of fact-intensive analysis that could result in having to produce privileged emails, directors could consider either using an email account provided by the company on whose board he or she serves or setting up a separate email account through Google or a similar provider for board service. Throughout the latest ruling, the court signaled that a “Gmail” account, or other similar type of account that is generally private and not subject to monitoring, would be the safest “corporate hygiene.”
  • The court referenced, but did not directly address, whether a director who serves on multiple boards would be best served to establish a separate account for each board’s communications. While not always practical, directors who serve on multiple boards could consider whether a separate email account may be prudent for matters that are particularly sensitive, such as special committee engagements.
  • At a minimum, if a director chooses to use a separate email account that may be subject to third-party access, a director—and potentially the company on whose board he or she serves—may want to take steps to understand the policies governing that account and ensure the policies are consistent with all parties’ expectations.
  • Companies or firms that have employees who sit on the boards of other entities should consider their email policies and whether changes should be made to reflect the parties’ common understanding that company email accounts will be used for such purposes. 

[1] In re Dell Technologies Inc. Class V Stockholders Litigation, C.A. No. 2018-0816-JTL (Del. Ch. Sept. 30, 2021).

[2] In re WeWork Litigation, 2020 WL 7624636 (Del. Ch. Dec. 22, 2020).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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