How To Protect Emails to Directors and Officers From Production

This article was originally published on January 26, 2022, and has been updated as of July 24, 2024.

At a Glance

This guide addresses circumstances where the emails of directors and officers may be requested, and whether such sensitive materials must be produced.

What Is a Books and Records Demand?

• Delaware General Corporation Law Section 220 provides stockholders the right to inspect corporate records.
• Philosophy underlying inspection rights: “As a matter of self-protection, the stockholder was entitled to know how his agents were conducting the affairs of the corporation…” Shaw v. Agri-Mark, inc., 663 A.2d 464, 467 (Del. 1995).

What Are the Basic Requirements of a Books and Records Demand?

• The demanding party must be owner of record or beneficial owner of the stock.
• The 220 demand must be written and under oath.
• The 220 demand must state a proper purpose.
• The books and records sought after must be identified with rifled precision and be necessary and essential to the purpose stated. Amalgamated Bank v. Yahoo! Inc, 132 A.3d 752 (Del. Ch. 2016) (quoting Security First Corp. v. U.S. Die Casting & Dev. Co., 687 A.2d 563, 570 (Del. 1997); Espinoza v. Hewlett-Packard Co., 32 A.3d 365, 371-72 (Del. 2011).

Do Emails Qualify as Corporate Records?

• Courts have held that emails and other electronic communications shall not be produced when other materials (e.g., traditional board-level materials, such as minutes) would accomplish the petitioner’s proper purpose. KT4 Partners LLC v. Palantir Technologies Inc., 203 A.3d 738, 752-53 (Del. 2019).
• Traditional board-level materials typically suffice when the board handles its work through typical corporate processes and the meeting minutes are sufficient to understand the board’s deliberation and analysis.

In What Circumstances Would Emails and Other Electronic Materials Be Considered Corporate Records?

• Emails must be necessary and essential to accomplishing the stockholder’s purpose.
• The board generally, or with respect to the specific issue to be probed, appears to conduct its corporate business over email and other electronic media.
• The alleged wrongdoing appears to have occurred over or have been memorialized in email.
• There is no evidence that other materials — particularly more formal board-level documents — would be sufficient to accomplish the stockholder’s purpose.
• The need for or entitlement to the electronic communications of directors and officers is bolstered upon a showing that the company tends to ignore corporate formalities. See KT4 Partners LLC v. Palantir Technologies Inc., 203 A.3d 738, 756 (Del. 2019) (the Delaware Supreme Court found that the stockholder was entitled to emails and other electronic materials where the corporation had a habit of failing to hold annual meetings).
• Importantly, the stockholder does not need to show that the corporation acted only through electronic means.

Are There Any Circumstances (Beyond Books and Records Demands) Where Emails Among Directors and Officers Could Be Required To Be Produced and Disclosed in Litigation?

The short answer is, yes!

• It is not uncommon for an outside director of a company to also serve as an executive or director of another company.
• If an outside director sends or receives emails relating to Company A via an email address belonging to or managed by Company B, there could be a waiver of privilege that requires production in litigation.
• One example is In re WeWork Litig., 2020 WL 7624636 (Del. Ch. Dec. 22, 2020).
  • SoftBank owned a significant portion of WeWork and entered a stock purchase transaction, pursuant to which, SoftBank agreed to acquire additional WeWork stock.
  • When the deal collapsed, WeWork and its minority stockholders sued, accusing SoftBank of breaching the transaction agreement.
  • SoftBank owned approximately 84% of Sprint.
    • SoftBank’s COO served as chairman for both Sprint and WeWork.
    • Sprint’s CEO assisted SoftBank’s COO on matters related to WeWork.
  • In discovery, WeWork sought documents and emails involving SoftBank’s in-house and outside counsel, regarding SoftBank’s business, that were sent to or from the Sprint email accounts for SoftBank’s COO and Sprint’s CEO.
  • The court held that privilege over the emails was waived, in large part, due to use of the Sprint email accounts and because the Sprint Code of Conduct stated:
    • “Employees should have no expectation of privacy in information they send, receive, access or store on any of Sprint’s computer systems or networks” and
    • “Sprint reserves the right to review workplace communications (including but not limited to Internet activity, email, instant messages, social media or other electronic messages, computer storage and voicemail) . . . at any time.”
  • Given the code of conduct, the court held that the officers had no expectation of privacy when conducting business unrelated to Sprint on Sprint’s email servers.
  • Because the officers did not ensure the confidentiality of SoftBank’s privileged information, they waived privilege, and the plaintiffs were entitled to the documents at issue.

How Does My Company Protect Emails and Other Electronic Communications of Directors and Officers From Production?

• Respect corporate formalities. When a company ignores corporate formalities, it is easier for a court to conclude that a company does not necessarily do its business at board meetings, and that emails or other materials are necessary to understand corporate decision-making.
• Do not use emails to do anything other than schedule board meetings and share board-level documents. Refrain from engaging in deliberation or analysis over email.
• Craft detailed and timely board minutes. The more pertinent information a company includes in or attaches to board minutes, the less likely courts are to give credence to the notion that emails and other electronic materials are necessary to investigate or understand corporate conduct.
• Be proactive and intentional about the types of information to include in the corporation’s books and records concerning a transaction or other corporate conduct. If a company’s records contain enough information to address a stockholder’s purpose for inspecting those records, courts are unlikely to allow stockholders to review anything else.
• Develop, maintain and adhere to policies prohibiting the use of third-party emails to conduct corporate business. Even when using company-issued email addresses, limit the amount of deliberation and analysis that occurs over email regarding corporation transaction or strategy.
• Use secure data portals. There are many commonly used board portals and email services that can be used to communicate sensitive information to directors and officers.