What’s Mine Is Not Yours: Former Officers And Directors And A Corporation’s Attorney–Client Privilege

An officer or director's company exit often feels like a divorce, with post-departure monetary payments and document-custody issues dominating the immediate aftermath. Companies are quick to enforce non-compete agreements and protect trade secrets as the divorce unravels, but often do not consider protection of legal communications in which the officer or director participated. And when it comes to discovery of a company's privileged communications in post-departure litigation, what's mine is not always yours.

Former officers and directors inherently maintain insider knowledge, including the contents of privileged emails and other communications that they created or received. The officer/director may personally possess these privileged documents because he extracted them prior to exiting the company, or he may request such documents during the discovery process.

The corporate attorney–client privilege belongs to the corporation, but corporations can only act and communicate through its officers, directors, and agents. In post-divorce litigation between the company and its former officer/director, the question arises whether the corporation may prevent use of privileged, officer/director-created communications or whether the privilege equally belongs to the former officer/director turned adversary. Courts grappling with these issues take one of two positions—the collective-corporate-client approach or the entity-as-client approach.

The Collective-Corporate-Client Approach

The collective-corporate-client approach, first recognized in the Delaware Chancery Court, follows the legal rationale supporting the joint-client doctrine and holds that former officer/directors may discover privileged documents in which they were involved. Kirby v. Kirby, 1987 WL 14862 (Del. Ch. July 29, 1987). Courts premise this approach on the theory that "there is one collective corporate client which includes the corporation and each individual member of the board of directors rather than just the corporation alone." Montgomery v. eTreppid Techs., LLC, 548 F. Supp. 2d 1175, 1183 (D. Nev. 2008).

Dissident former officers/directors turned adversaries assert that the collective-corporate-client approach entitles them to privileged documents. They argue that, at the time they communicated with corporate attorneys, the corporation was a client and the then-current officers/directors were also clients. Under this theory, they ask courts to consider the entity and the officer/director as joint clients and incapable of asserting the privilege against each other.

Where a former officer or director takes this approach, the entity's legal structure becomes important—with partnerships being more susceptible to the collective-corporate-client approach and limited liability companies and corporations being less susceptible. Montgomery, 548 F. Supp. 2d at 1180–83. Courts will also look...