Court ruling highlights confidentiality risks for non-employee directors who use outside email addresses
February 4, 2021
Authored by: Jonathan Potts and R. Randall Wang
A recent decision by the Delaware Court of Chancery highlights risks for outside directors in using third-party email systems when communicating about confidential company matters. In that case, the court ruled that attorney-client privilege was lost because of the lack of a reasonable privacy expectation.
The case arose out of a tender offer by Softbank for shares of WeWork that was oversubscribed but terminated prior to closing. During discovery, the plaintiffs sought documents from Softbank in the custody of “dual hat” employees of Softbank and its majority-owned subsidiary, Sprint. The documents – which related to Softbank and not Sprint – were sent to or from Sprint email accounts but withheld by Softbank on the basis of its attorney-client privilege.
The court explained that the privilege issue turned on whether the employees had a reasonable expectation of privacy in their work email accounts, which must be decided on a case-by-case basis, and applied the four-factor test established in In re Asia Global Crossing, Ltd.:
(1) does the corporation maintain a policy banning personal or other objectionable use, (2) does the company monitor the use of the employee’s computer or e-mail, (3) do third parties have a right of access to the computer or e-mails, and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies? [322 B.R. 247, 257 (Bankr. S.D.N.Y. 2005)]
In this case, the court found that a number of factors supported production of the documents: