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Hyde Park Venture Partners Fund III, L.P. v. FairXchange, LLC
Citation: Not availableDocket: C.A. No. 2022-0344-JTL
Court: Court of Chancery of Delaware; March 8, 2023; Delaware; State Appellate Court
Original Court Document: View Document
In a legal proceeding involving Hyde Park Venture Partners Fund III, L.P. and FairXchange, LLC, the Court of Chancery of Delaware ruled on a motion to compel the production of documents withheld under attorney-client privilege. The case revolves around Ira Weiss, a director of FairXchange, Inc., who was involved in discussions regarding an acquisition proposal from Coinbase Global, Inc. While Weiss sought to engage an investment banker and explore alternatives, other board members excluded him from the decision-making process and ultimately facilitated his removal from the board. Weiss, who was also managing funds that had invested significantly in FairXchange, could not compartmentalize his knowledge between his roles, leading to complications when the funds initiated an appraisal proceeding post-acquisition. During discovery, FairXchange claimed attorney-client privilege to withhold documents from Weiss's tenure as director. The court clarified that the primary issue was not Weiss's access to materials as a former director but whether FairXchange could assert privilege against the funds. Under Delaware law, since 1987, a corporation and its board members are considered joint clients regarding privileged materials created during a director's tenure, meaning they have no expectation of confidentiality from one another. Consequently, a Delaware corporation cannot invoke privilege against a director to withhold information generated during that time. Furthermore, Delaware law recognizes that directors representing investors implicitly share the expectation of information exchange, particularly in the context of venture capital and private equity investments. Thus, the court found that FairXchange could not withhold the requested documents under attorney-client privilege. Information sharing occurs when a director representative holds dual roles, as their singular cognitive capacity leads to the inherent sharing of information. Director representatives assume personal risk in utilizing and disseminating information, facing potential liability for breaches of fiduciary duty if the information is misused. Under the joint client approach, an investor is typically included within the confidentiality sphere alongside the director, preventing the corporation from invoking attorney-client privilege against the investor for materials created during the director's service. Corporations can modify this default rule via three methods: 1) by contractual agreements like confidentiality agreements; 2) by forming a committee that excludes the director for confidential consultations with counsel; or 3) once a conflict of interest is recognized, the director cannot rely on corporate counsel, allowing the corporation to assert privilege against the director. If a corporation identifies such a conflict, it can notify the director, enabling them to seek independent counsel and potentially challenge information access through litigation. In this case, the Company did not take necessary steps to maintain attorney-client privilege. Weiss and the associated funds remained within the confidentiality circle during his directorship, leading to the conclusion that the Company cannot claim privilege against the funds in this matter. Consequently, the motion to compel is granted. Factual background reveals the Company as a Delaware corporation operating a futures exchange, founded by Neal Brady and Clifford Lewis, with Brady as CEO and Lewis as Chairman. The Company issued preferred stock to investors, including Hyde Park Venture Partners Fund III, L.P. and Hyde Park Venture Partners Fund III Affiliates, L.P., collectively owning about 15% of the Company's equity. Weiss, designated by the preferred stockholders and a partner at Hyde Park Venture Partners, joined the Board on November 14, 2019, receiving privileged communications from DLA Piper LLP, the Company’s legal counsel, which were not shared with management contemporaneously. In 2021, the Company evaluated a potential investment from Coinbase, which later proposed an acquisition instead. Following due diligence, Coinbase issued a letter of intent on October 28, 2021, that was revised the next day to increase both the overall purchase price and cash consideration significantly. The revised letter of intent increased the cash consideration for key employees at closing from 25% to 35% and decreased the post-closing portion from 25% to 15%, enhancing overall employee benefits and aggregate consideration. On November 4, 2021, Weiss communicated with other directors and DLA Piper regarding FairX's sales process, highlighting a surprise unsolicited offer from Coinbase received on October 29, which he viewed as validation of FairX's business model. Weiss emphasized the need to ensure that any potential sale maximizes shareholder value and questioned the timing of the offer, given upcoming product launches that could elevate the company's worth. He expressed discomfort with the current process and indicated a lack of board consensus on the offer, suggesting that the company should retain an investment banker to conduct a market check and explore financing options as alternatives. Weiss proposed that an unbiased party be present in negotiations with Coinbase to safeguard management incentives. However, the Board rejected his recommendation. During discussions about the Coinbase proposal, DLA Piper clarified that they represented the board, including Weiss as a director. Throughout November 2021, Weiss claimed he was excluded from significant negotiations with Coinbase. On December 7, 2021, he sent a letter requesting detailed information regarding the potential transaction, including documents on negotiations and any special benefits for current officers and directors resulting from the deal. Brady and Lewis sought documents related to the Company or Board's deliberations on hiring an investment banker or financial advisor for a Potential Transaction, as well as any evaluations of mergers, sales, or asset dispositions involving the Company since January 1, 2021. They were aware that Coinbase aimed for a unanimous Board recommendation in favor of the Company's sale and viewed Weiss as an impediment, collaborating with preferred stockholders to remove him. Following Weiss's demand letter on December 7, 2021, a majority of preferred stockholders removed him from the Board on December 8, 2021. The Company subsequently deemed Weiss's request for books and records “no longer relevant” due to his removal. The merger between the Company and Coinbase was unanimously approved by the Board on January 11, 2022, with the merger closing on February 1, 2022. Post-merger, the Company provided documents including a Confidential Information Statement and notices pursuant to the Delaware General Corporation Law. On February 3, 2022, the Funds sought an appraisal of their shares, initiating an appraisal proceeding. During discovery, the Company claimed attorney-client privilege over documents from Weiss's directorship, with DLA Piper supporting these objections. The Company also claimed the Funds had privileged information from Weiss and instructed them to destroy it. After unsuccessful attempts to resolve the issue, the Funds filed a motion to compel, while the Company countered with a motion to compel the Funds to destroy any privileged materials they possessed. Court of Chancery Rule 26(b) governs discovery scope, allowing parties to obtain relevant, non-privileged information. The Company contended it could withhold documents under attorney-client privilege, which is recognized under Delaware law, specifically Rule of Evidence 502(b), defining the scope of this privilege in communications related to professional legal services. D.R.E. 502(b) establishes that the attorney-client privilege requires (1) a communication, (2) that is confidential, (3) made to facilitate professional legal services to the client, and (4) between the client and attorney. The burden of proof lies with the party asserting this privilege. The current issue involves the confidentiality aspect. Delaware’s Joint Client Rule dictates that a corporation’s directors have unfettered access to corporate information, including privileged communications. Directors are regarded as "joint clients," meaning they share the responsibility for corporate management and can access legal advice received by the corporation. This shared access undermines any reasonable expectation of confidentiality among directors concerning communications with the attorney. Delaware's Rules of Evidence state that no privilege exists for communications relevant to a common interest among multiple clients when made to a shared attorney. Once a joint client relationship ends, the absence of confidentiality persists. Directors, while in office, are within the circle of confidentiality and cannot assert privilege against each other regarding communications made during their tenure. However, upon leaving, a director exits this circle of confidentiality for future communications, though past communications remain unaffected. This joint client approach was notably outlined in the case Kirby v. Kirby, where siblings serving as directors faced a dispute over document production withheld under attorney-client privilege during a conflict regarding corporate membership. The removed directors sought access to documents generated before their removal, which the corporation claimed were privileged. Justice Berger ruled on the validity of the removal of former directors by assuming they had been removed. She supported the motion by determining that the removed directors, alongside the corporation and an additional sibling director, were joint clients regarding privileged materials produced during their time in office. The pivotal question was not whether the documents were privileged but whether the directors were considered clients at the time the legal advice was provided. The defendants failed to provide evidence to the contrary. The ruling emphasized that all directors share responsibility for corporate management and should collectively be regarded as joint clients when legal advice is rendered. Subsequent cases further developed the joint client doctrine in Delaware law. In AOC Limited Partnership v. Horsham Corp., the court ruled against the invocation of privilege to shield communications from the AOC Fund, noting that since the AOC Fund's representatives were board members, they were equally clients of the attorney and entitled to access the same information. In another significant case, Moore Business Forms, Inc. v. Cordant Holdings Corp., the court reinforced that a director’s designee is also a joint client with the corporation. Consequently, the corporation could not claim attorney-client privilege to deny the designee access to legal advice received during their tenure. Justice Jacobs clarified the concept of client privilege in the context of corporate governance, stating that while the Kirby Court referred to directors as "joint clients," a more accurate interpretation is that the entire board acts as a single "client." When a director seeks information shared with the board, they do so as part of this collective body rather than in an individual capacity. Thus, confidentiality expectations do not extend to the board as a whole. To establish a director's expectation of confidentiality, corporations may either enter into confidentiality agreements or appoint a special committee with the knowledge of excluded directors, allowing that committee to retain separate legal counsel with protected communications. In the case of Moore Business Forms, the corporation failed to establish such an expectation through either method, making its designee part of the joint client circle, which prevented the company from asserting attorney-client privilege against him. Justice Jacobs also addressed the implications of the lawsuit being initiated by Moore, the stockholder who appointed the director designee. He concluded that there was no distinction between Moore and the designee since the Stockholders’ Agreement defined the relationship. Rogers, as a designee, was understood to act on Moore's behalf, and the agreement did not restrict Moore from accessing any information shared with Rogers. Consequently, Moore's right to discovery in litigation against Holdings was equivalent to Rogers’ rights as a director. Additionally, Jacobs referenced the AOC case to support the principle that Holdings could not claim privilege against Moore more than it could against Rogers. He further noted a related precedent in SBC Interactive, where issues of privilege arose concerning partnership communications after a formal notice of withdrawal, demonstrating the ongoing relevance of the joint client doctrine in corporate legal contexts. Justice Jacobs determined that SBC could not reasonably believe it had an attorney-client relationship with the partnership's in-house counsel after serving its withdrawal notice, as the partnership's interests had become adverse. The court contrasted this with the Moore Business Forms case, where a director was excluded from access to legal advice without any prior dispute, allowing for a reasonable expectation of being a client. In SBC Interactive, however, the partnership explicitly communicated to the partner that their interests were viewed as adverse, specifically instructing that all communications be routed through counsel, thereby excluding the partner from confidentiality. This action eliminated the partner's reasonable expectation of being a joint client, allowing the partnership to assert attorney-client privilege concerning withdrawal rights. The decision introduced a third method for corporations to establish confidentiality expectations under the joint client framework: if a corporation notifies a director of adverse interests, the director cannot assume confidentiality in related matters. Directors may then choose to seek separate counsel or contest the corporation's stance under Section 220(d) of the DGCL, which provides a presumptive right to corporate information. The principles set forth in cases like Kirby, AOC, Moore Business Forms, and SBC Interactive have consistently guided corporate privilege against directors and affiliated stockholders. In Kalisman v. Friedman, the court ruled that Kalisman, a director and stockholder, was a joint client of the corporation and thus entitled to the same information as other directors. The court found no exceptions applied that would allow the corporation to assert privilege against Kalisman since he had not been informed of any adverse interests, nor had confidentiality been established until after he was excluded from a subcommittee. The court determined that prior to March 20, the corporation could not claim attorney-client privilege against Kalisman, as there was no reasonable expectation of confidentiality. It noted that the defendants lacked standing to invoke privilege against OTK, which Kalisman represented, because a director acting as a stockholder’s designee typically shares information with the stockholder. Citing In re CBS Corp. Litigation, the court reinforced that directors affiliated with a controlling stockholder are considered joint clients with the corporation, thus the corporation cannot assert privilege against them. Chancellor Bouchard articulated that the controlling stockholder is entitled to the same discovery as their director designees, highlighting the impracticality of separating information in the context of litigation. He also recognized that special committees had established confidentiality expectations, allowing them to assert privilege over certain matters. However, he refrained from making broad privilege rulings due to the potential for past adversities. In In re WeWork Litigation, the court reiterated that directors have presumptive access to the corporation's privileged information as joint clients, rejecting the idea that senior management could invoke privilege against a director. The cases of Kalisman, CBS, and WeWork exemplify the joint client principle and the conditions under which a corporation can assert attorney-client privilege against its directors. A faction of a company's board cannot assert attorney-client privilege against another faction due to both being considered joint clients with the company. Legal advice provided to the corporation through its officers or directors is typically privileged as if given to joint clients. Courts have applied a joint client framework, examining exceptions to this rule in various cases. A corporation's ability to invoke privilege against stockholders associated with a director is limited by the expectation that such a director will share information with the stockholder. This principle has been established in Delaware law for approximately forty years. In this case, the company cannot claim privilege regarding information generated while Weiss served as a director, as he was a joint client and part of the confidentiality circle. The company had no expectation of confidentiality with respect to Weiss or his affiliates. Weiss received multiple communications regarding company matters, including direct representation from the law firm DLA Piper, which confirmed him as a joint client. Thus, Weiss had a reasonable expectation of being within the confidentiality circle regarding privileged communications. Weiss expressed the intention to hire an investment banker and consider alternatives to a Coinbase offer, prompting the Company's management and counsel to exclude him from communications. Despite this exclusion, Weiss retained his informational rights, remaining within the confidentiality circle and entitled to the same information as other directors. The Company failed to undertake necessary steps to establish an expectation of confidentiality regarding Weiss, such as forming a transaction committee or notifying him of any adverse interests. Weiss perceived a lack of communication, leading him to request information on December 7, 2021, after which he was removed from the board the next day. The Funds acknowledge that Weiss became adverse to the Company upon sending his request for books and records and accept that they do not seek privileged communications related to that request. They also agree that Weiss fell outside the confidentiality circle following his removal on December 8, allowing the Company to assert attorney-client privilege from that date onward. Weiss served on the Board as a representative of the Funds, who were also within the circle of confidentiality due to Weiss's dual role. Legal precedents establish that communications made during joint representation are discoverable when former joint clients become adversaries, and Delaware law supports this by stating no privilege exists for communications relevant to a common interest among clients in such circumstances. The Funds’ pursuit of appraisal does not alter the established confidentiality circle prior to December 8, 2021. Consequently, the Company cannot invoke attorney-client privilege to withhold materials created between November 14, 2019, and December 8, 2021, during Weiss's directorship, except for communications concerning Weiss's books-and-records request. The Company presents three arguments in response, referencing a separate body of law regarding the impact of a transaction on the authority to assert attorney-client privilege. The Company asserts that, as the surviving entity from a merger, it has inherited the rights to assert attorney-client privilege previously held by the constituent entities. While it is acknowledged that the surviving entity does inherit such rights, the Company incorrectly concludes that the absence of specific provisions in the merger agreement allowing former directors access to privileged information grants it the authority to invoke privilege against Weiss and the Funds. In transformative transactions like mergers, the control of privilege is a complex issue. According to Section 259(a) of the Delaware General Corporation Law (DGCL), the surviving corporation retains all rights, privileges, and interests from the merging entities, including attorney-client privilege. However, the interpretation of “privileges” in this context has historical roots, suggesting that it refers broadly to the rights and powers conferred by the DGCL rather than specifically to attorney-client privilege. Historical cases indicate that "privileges" encompasses a range of rights granted by a corporation's charter, emphasizing that such privileges are intended for public benefit. Section 123 of the Delaware General Corporation Law (DGCL) empowers corporations to own stock in other entities and to exercise all associated rights, including voting. INA’s common stock consists of two classes, with Class B shareholders entitled to elect two-thirds of the board of directors. Historical legal precedents affirm that corporations possess the rights and privileges of ownership, including voting rights, as established in cases such as Aldridge v. Franco Wyo. Oil Co. and Philadelphia, Wilmington, B.R. Co. v. Kent Cnty. R. Co. Additionally, the concept of "privileges" is paralleled in the Privileges or Immunities Clause of the U.S. Constitution, reflecting the influence of corporate charters on constitutional frameworks. The text critiques Great Hill’s interpretation of "privileges" while agreeing with the case's outcome. It emphasizes that privileges held by a constituent company prior to a merger transfer to the surviving company unless explicitly stated otherwise in a contract. Under Delaware law, particularly section 259 of the DGCL, this transfer includes privileges related to pre-merger communications. The Company argues that the merger resulted in Weiss losing his status as a former joint client, thereby limiting his access to privileged information. The underlying legal question pertains to which entity has the right to assert privilege rather than the existence of that privilege itself. The privilege in question pertains to the ability of a surviving corporation to invoke attorney-client privilege following a merger. Section 259 establishes that the surviving corporation inherits the privilege rights of the constituent corporations without expanding those rights. Consequently, the surviving entity's ability to invoke privilege against Weiss, a former director, is no greater than it was before the merger. Weiss was part of the confidentiality circle during his time on the Board, meaning the Company cannot shield information from him generated during that period. In its second argument, the Company contends that since Weiss is a former director, he should no longer access privileged information. However, the Company misapplies principles from Section 220(d), which allows current directors access to corporate records relevant to their duties. Delaware case law restricts this access to current directors and limits its use to purposes related to their directorial responsibilities. The Company suggests that similar principles should restrict a former director's ability to obtain discovery in litigation, asserting that only when pursuing litigation as a fiduciary can a former director access privileged information. This argument is based on the premise that if a director’s purpose for accessing information is not related to their duties, they cannot invoke Section 220(d) or similar standards in civil discovery. A director cannot utilize Section 220(d) for informal discovery that bypasses work-product protections and privileges, as established in *Chappell v. FCB I Hldgs. Inc.* and *Gunther v. 5iSciences, Inc.*, where requests for information were deemed excessive or motivated by conflicts of interest. A former director lacks the right to obtain privileged information acquired during their tenure, as they no longer hold a fiduciary duty. This position echoes arguments previously rejected in *Kirby*, where the court affirmed that the rights under Section 220(d) are not limited by a director's status and that discovery in support of a legitimate claim is permissible unless exempted by privilege. The court clarified that Section 220(d) and discovery rules, particularly Rule 26, govern separate processes, and a former director's claims for information under Section 220(d) do not equate to discovery rights in litigation contexts. The current case focuses on whether the Company can deny discovery to the Funds based on privilege, despite Weiss and the Funds being part of the confidentiality circle when the materials were generated. The Company’s reliance on *SerVaas* misapplies Section 220(d) principles to a discovery dispute context. In the case of SerVaas v. Ford Smart Mobility LLC, the Delaware Chancery Court issued a letter ruling that reaffirmed existing legal principles without altering Delaware law regarding a director's access to information. The plaintiffs, former executives of the defendant entity, sought access to privileged investigations after being terminated for cause shortly before their deferred compensation was set to vest. The court denied their motion to compel access to these privileged documents based on several key considerations: the executives were not acting in the best interests of the companies or shareholders, did not invoke their fiduciary status, did not claim that the documents would have informed their decisions as directors, and had no reason to believe they were joint clients of the company’s counsel. The ruling emphasized that discovery decisions, including privilege determinations, are discretionary and based on case-specific facts. The Company, however, interpreted SerVaas as establishing a new standard akin to the Garner doctrine, which allows stockholders to challenge corporate privilege under certain conditions. This interpretation contrasts with the joint client approach, which maintains that directors inherently possess access to privileged information due to their role within the company. Under the joint client framework, directors are presumed to be within the circle of confidentiality unless specific exceptions apply, unlike stockholders, who must demonstrate good cause to access privileged materials. The court's analysis highlighted the critical differences between these two approaches to privilege and access to information. Key considerations include the necessity for stockholders to access information and its availability from other sources, the nature of potential wrongful actions by the corporation (criminal, illegal but not criminal, or of doubtful legality), and the nature of communications concerning litigation. The extent to which communications are identifiable versus speculative is also significant, particularly concerning the risk of revealing trade secrets. Under the joint client approach, a director maintains their privilege as long as their tenure continues; however, once the director's tenure ends, this joint client relationship dissolves, and no privilege exists between former joint clients in adversarial litigation. The company’s interpretation of relevant case law starts from a flawed foundation, misapplying considerations from the SerVaas case as elements of a Garner-style test. Section 220(d) requires directors to pursue informational rights for proper purposes aligned with the corporation's interests. A former director seeking information in discovery does not rely on Section 220(d) but rather on discovery rules. The corporation’s ability to invoke privilege hinges on the law of privilege, particularly regarding joint client status and confidentiality. The exception established in SBC Interactive indicates that once a director is aware of conflicting interests, they cannot assume they remain a joint client of the corporation’s counsel. The joint client analysis focuses on the circumstances present when the communication occurred, contrasting with the company's proposed framework. In the context of attorney-client privilege, if adversity does not exist, a director is considered a joint client, and confidentiality applies, negating the privilege. The determination of privilege is made at the time of communication, not at the time of discovery. The Company proposes a test that evaluates the existence of adversity at the time of the lawsuit for discovery purposes, suggesting that if a director's lawsuit is adverse, they cannot access the discovery. This approach diverges from Delaware law, which adheres to the Kirby standard, focusing instead on whether the director's interests conflict with the corporation's. The Company also misinterprets the SerVaas decision by conflating access to documents with the requirement of a proper purpose for inspection under Section 220(d). The Kirby case clarifies that discovery issues pertain not to obtaining information for informed decision-making as a director, but to litigating a case, allowing for discovery unless a valid privilege claim exists. If a party was within the circle of confidentiality when the communication occurred, privilege cannot be invoked. A former director remains within the circle of confidentiality regarding communications made during their tenure, hence privilege is not applicable. The Company’s attempts to apply Section 220(d) considerations to civil discovery fail, particularly when assessing whether documents were shared with other board members or whether a director believed themselves to be a joint client of company counsel. The burden of proof is improperly shifted by the Company; under Kirby, a director starts as a joint client within the circle of confidentiality. A corporation resisting the production of documents must demonstrate that circumstances existed to sever joint client status, thereby excluding the director from confidentiality protections. Specifically, sufficient adversity must exist to alert the director that reliance on company counsel was inappropriate. The burden of proof lies with the corporation to show that the director's request is motivated by an improper purpose, as stipulated in 8 Del. C. 220(d). The company’s proposed framework suggests that a director loses access to privileged information upon leaving office, which contradicts the statutory structure and could hinder a former director's ability to leverage expert legal advice under Section 141(e) of the DGCL. This section protects directors who rely in good faith on corporate records and information from qualified sources. The company’s position overlooks that Chancery Court Rules govern the retrieval of information in civil proceedings, and it is not about a former director's independent right to access information but whether the corporation can assert privilege against someone with whom it held no confidentiality expectations. The company also attempted to liken this situation to former Presidents and Vice Presidents losing access to confidential documents post-office, but this analogy is inadequate as it ignores the specific legal framework established by the Presidential Records Act that governs presidential materials. Presidents of the United States, starting with George Washington, have historically regarded their presidential papers as personal property, transferring them within their families through bequests. This precedent suggests that former directors might similarly claim ownership of documents, which the Company seeks to contest by advocating for a Garner-like framework that limits access for former directors while allowing current directors to maintain privileges. The Company's proposed approach would significantly alter existing law, which aligns with Delaware’s joint client doctrine. To support its position, the Company references Section 220(d) and the SerVaas decision, along with federal cases Wychocki v. Franciscan Sisters of Chicago and Milroy v. Hanson, arguing that former directors lack entitlement to privileged documents they accessed during their tenure. The Company’s arguments have been previously dismissed in cases like Kirby and Moore Business Forms, where distinctions were made regarding how privilege is interpreted in Delaware compared to federal law. The federal perspective on privilege originates from Commodity Futures Trading Commission v. Weintraub, which clarifies that control over a corporation’s attorney-client privilege lies with its current management. It asserts that displaced managers cannot claim privilege against the current management's decisions, and similar principles were applied to bankruptcy scenarios, emphasizing that once privilege is waived by current managers, former managers cannot reclaim it. However, Weintraub did not address whether privilege could be asserted against someone who had previously held access to privileged materials as a director. Subsequent legal decisions have broadened the application of the Weintraub rule, asserting that former directors cannot access privileged materials created during their tenure because the corporation, as an entity, is the sole client and holder of the privilege. This entity approach, which is now the predominant rule in the United States, posits that current management is the only means through which a corporation acts. The Restatement (Third) of the Law Governing Lawyers reinforces this, stating that while directors are not agents of the corporation in many contexts, they can act as agents when communicating with the corporation's counsel for its benefit. Delaware law, however, does not classify directors as agents, asserting that they control the corporation while fulfilling their fiduciary duties to shareholders. This perspective creates an analytical inconsistency if directors were treated as agents when they act as fiduciaries. The law recognizes that the board collectively acts as the decision-maker for the corporation, establishing that the joint client rule applies for determining whether a corporation can assert privilege against its directors. Directors are viewed as analogous to trustees for shareholders, and while there are occasional references to shareholders as principals and directors as agents, these are metaphorical rather than doctrinal. Directors are required to disclose the amount and form of their compensation to ensure integrity in the relationship between stockholders (principals) and directors (agents). Stockholders can validate directors' actions through majority votes, which may be retrospective or prospective. While Section 141(a) of the Delaware General Corporation Law (DGCL) grants directors authority to manage corporate affairs, they are not merely agents of stockholders. Authorities, including Velasco and Bainbridge, support the assertion that directors have a broader role beyond that of agents. The Restatement acknowledges the complexities of attorney-client privilege in corporate contexts, noting that directors can be considered joint clients, though this approach is seen as an exception. Delaware's legal framework recognizes that directors collectively form the client for confidentiality purposes unless excluded by specific methods. Courts often prefer the entity approach to avoid chilling effects on communication between managers and counsel, although this raises concerns about discouraging legal consultations. The balance between the advantages of legal advice and the risk of losing privilege is crucial, as legal consultations can provide defenses under Delaware law and facilitate the invocation of privilege during discovery. Corporations typically assert privilege broadly when attorneys are involved in communications. Defendant’s evidence and an in camera review suggest that Plaintiff improperly claimed privilege over non-privileged communications merely because a lawyer was involved in preparing its privilege log. Corporate entities often assert privilege even when a lawyer is not part of the communication or is acting in a non-legal capacity, such as providing business advice or conveying facts. The document notes that corporations typically create extensive privilege logs, which raises concerns about the misuse of privilege as a means to withhold information from adversaries. Cited cases establish that attorney-client privilege only protects legal advice, not business or personal advice, and that underlying facts can be discovered despite the privilege. The rarity of litigation involving director privilege indicates that the risks associated with it are minimal. Although joint client materials lose privilege against the joint client, this does not affect the privilege for outside parties. Corporations can mitigate risks through careful planning, such as contracts or clear communications about adversity. Courts can also issue orders that prevent privilege waiver during litigation. The joint client rule does not hinder the invocation of privilege, as evidenced by Delaware’s experience since 1987, which shows no decline in privilege claims. The joint client approach has benefits, such as ensuring directors have access to pertinent discussions and materials, reinforcing their roles within the organization. A former director and the stockholder who appointed them should have straightforward access to materials generated during the director's tenure, without navigating complex privilege issues. Corporations have established methods to restrict information sharing, but the joint client approach is preferred, as it prevents lawyers from exerting authoritative control over directors. This case illustrates the issue when Company counsel directed director Weiss not to contact investment bankers, citing potential liability risks. While lawyers should advise directors on fiduciary duties and consequences, they should not issue orders. Directors are obligated to act according to fiduciary principles. Delaware courts support the joint client rule, which justifies this approach. The Company also argued that the Funds waived their right to challenge privilege due to a delayed response after receiving redacted minutes from a Board meeting. The Company invoked a laches-like argument asserting that the Funds cannot contest privilege now. However, the court clarified that filing an appraisal proceeding allows the Funds to seek discovery, regardless of timing. Under Rule 26(c), the court can issue protective orders to prevent undue hardship in discovery. The Company’s proposed requirement for immediate challenges to discovery positions is rejected, as it would create unnecessary burdens and disrupt court efficiency. The Funds did not waive their right to challenge the Company's claim of privilege, as ongoing discovery allows for such a challenge. The Funds filed a timely motion to compel, while the Company contends it faced prejudice due to the Funds' actions, arguing that it made litigation decisions based on the asserted privilege. However, the Company’s tactical choice to assert privilege deviated from the joint client approach recognized by Delaware courts, and this does not constitute sufficient prejudice to support a waiver. Regarding the Company's cross-motion to destroy privileged material received from Weiss, the court found that the material was not privileged. Weiss fell within the circle of confidentiality as a joint client and was expected to share information with the Funds. The Company failed to establish a different framework through a confidentiality agreement or other measures. Consequently, the court denied the Company's request for destruction of documents. In conclusion, the Funds' motion to compel is granted. The Company cannot assert attorney-client privilege for materials created between November 14, 2019, and December 8, 2021, except for communications related to Weiss’s books-and-records request made after December 7. The Company's request for destruction is denied.