The Delaware Court of Chancery, Delaware Supreme Court, and Delaware Bankruptcy Blog

On December 22, 2020, the Delaware Court of Chancery issued a discovery decision regarding the production of emails sent and received via non-company email accounts used by employees who were also employees of a different/ second / separate / company. The decision provides useful guidance to companies regarding the preservation of the attorney-client privilege for email communications with employees working for more than one company and outside directors.

The underlying case, In re WeWork Litigation, Consol. Civil Action No. 2020-0258-AGG, seeks to resolve whether two defendant entities, SBG and/or SoftBank Vision Fund (“SBG”) breached an agreement to use reasonable best efforts to complete a tender offer by SBG to purchase The We Company’s (“WeWork”) stock from plaintiffs Adam Neumann and We Holdings LLC (“Neumann”) and other stockholders. The tender offer opened on November 22, 2019 and was terminated by SBG on April 1, 2020 without accepting any shares.

Neumann moved to compel production of 89 documents withheld by SBG on attorney-client privilege grounds. The 89 documents were emails sent to or from email accounts of Sprint, Inc. used for non-Sprint purposes. Sprint is not a party to the litigation and had no role in the facts giving rise to the dispute.

From mid-2019 until April 1, 2020, SBG owned approximately 84% of Sprint. During that same period, SBG’s Chief Operating Officer also served as Chairman of both WeWork and Sprint. Further, Sprint’s CEO, Michael Combes, assisted SBG’s Chief Operating officer on WeWork matters. Finally, two additional employees of Sprint worked for SBG as the Chief Operating Officer’s Chief of Staff, Christina Sternberg, and SBG’s Staff Operations Director, Forrest Wilson.

According to SBG, “[w]hile acting on SBG’s behalf, Combes and Sternberg sought and received legal advice from SBG’s internal and external counsel regarding WeWork.” The resultant emails were sent to or from Sprint email accounts used by Combes and Sternberg. None of the emails at issue in Neumann’s motion to compel production concerned Sprint or contained legal advice for Sprint’s benefit. Sprint’s Code of Conduct provided that its employees should have no expectation of privacy when using Sprint email accounts and that it had the right to review employee email accounts at any time.

Chancellor Bouchard adopted the test first laid out in 2005 by the United States Bankruptcy Court for the Southern District of New York in In re Asia Global Crossing, Ltd., which asks four questions to assess an employee’s expectation of privacy when using a company email account:

• Does the corporation maintain a policy banning personal or other objectionable use?
• Does the company monitor the use of the employee’s computer or e-mail?
• Do third parties have a right of access to the computer or emails?
• Did the corporation notify the employee, or was the employee aware, of the use and monitoring policies?

The decision noted that: (i) Sprint’s clear Code of Conduct, (ii) the lack of evidence that Sprint did not monitor employee emails, and (iii) the high positions within Sprint held by Combes and Sternberg creating a presumption that they were aware of Sprint’s Code of Conduct, all weighed in favor of stripping the otherwise privileged attorney-client communications of their protected status. The Chancellor also noted that, “the record suggests SBG also was aware of the risks to maintaining privilege when commingling the resources of separate corporate entities, including email accounts.”.

A few takeaways . . .

First, companies need to be ever vigilant in how its lawyers (in house and outside) communicate with its employees, especially when company employees also work for or are seconded to other, separate companies such as parents, subsidiaries, or affiliates. To that end consider the following:

• Work closely with legal counsel and IT to map out and identify the players who wear more than one company hat and create protectable methods of communication.
• Ensure that the modes of attorney-client communications, including email accounts and systems or server portals, are maintained by the company receiving legal advice. Simple directives to employees and company counsel along the lines of, “all attorney-client email communications by and between XYZ Company and its employees with counsel for XYZ must use XYZ email accounts” could serve to protect these attorney-client privileged communications.
• If there is any doubt about whether a method of communication (text email instant messaging) is protectable, consult with counsel. 

Second, the decision should raise awareness in companies of how other non-legal, yet confidential and sensitive communications, are disseminated to outside company directors. 

• Consider communication directives as part of the onboarding process for outside directors.
• Consider assigning company email accounts to all outside directors with guidance that all communications with the company (or its counsel) regarding company matters be carried out solely on company email accounts.