Must Designated Directors Keep A Secret?

by Allen Matkins

Yesterday’s post concerned the attorney-client privileged issues in Vice Chancellor J. Travis Laster’s recent decision in Kalisman v. Friedman, 2013 Del. Ch. LEXIS 100 (April 17, 2013).  I found another statement in the decision even more intriguing -

When a director serves as the designee of a stockholder on the board, and when it is understood that the director acts as the stockholder’s representative, then the stockholder is generally entitled to the same information as the director.

This statement appears to be at odds with the statements of Chancellor William T. Allen in Holdgreiwe v. The Nostalgia Network, Inc., 1993 Del. Ch. LEXIS 71 (April 29, 1993), a case cited by Vice Chancellor Laster in Kalisman (albeit for a different proposition).  In Holdgreiwe, the corporation sought to condition inspection by one of its directors, Daniel Holdgreiwe, upon the signing of a confidentiality agreement.  Mr. Holdgreiwe was a nominee of one of the corporation’s stockholders, Concept Communications, Inc.  Chancellor Allen declined to impose that condition, saying:

But conditioning Holdgreiwe’s right to inspect Nostalgia’s corporate books and records on his entry into an agreement binding him not to disclose any of the information he obtains to any third parties, including AVI [an affiliate of Concept] and Concept, seems to me to add little.  He is already under an obligation to maintain the confidences of Nostalgia; to use its confidential information only to inform discussion among directors and action by the board or a committee.  Disclosure of such information to AVI is a violation of duty whether or not an undertaking is entered.  Thus, such an undertaking seems unnecessary.

On the one hand, Chancellor Allen seems to be saying that information conveyed to a director may be used only for the purposes of the corporation.  On the other hand, Chancellor Allen quite conspicuously (and I assume intentionally) refers solely to AVI when speaking about a potential breach of fiduciary duty (Concept, not its affiliate AVI, had elected Mr. Holdgreiwe).

In Kalisman, Vice Chancellor Laster cites Moore Bus. Forms v. Cordant Holdings Corp., 1996 Del. Ch. LEXIS 56  (June 4, 1996).  That case involved a stockholders’ agreement entitling a stockholder, Moore, to designate a director.  Moore designated Mr. Rogers. Vice Chancellor (now Justice) Jack B. Jacobs had this to say:

All parties understood that Mr. Rogers would be acting as Moore’s representative on the Holdings Board and that his tenure as a director would be at Moore’s pleasure.  The Stockholders Agreement cannot reasonably be construed otherwise.  Nothing in the Stockholders Agreement precludes Moore from receiving any information imparted to Mr. Rogers.  It therefore follows that if Mr. Rogers was entitled to the disputed communications by virtue of his position as a Holdings director, then Moore would also be entitled to these communications by virtue of the Stockholders’ Agreement.

There are still other Delaware cases on this topic and this blog is not intended to be an exegesis on any particular case.  For more on the subject, I suggest Cyril Moscow’s article, Director Confidentiality, 74 Law & Contemporary Problems 197 (2008).


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.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins

Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.