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Federal Court Applies California Privilege Law To Delaware Corporation

Lawyers often speak of the attorney-client privilege in the singular as if there is only one privilege.  Given the multiplicity of fora in which actions may be brought, it is best to think in the plural.  There are many versions of the attorney-client privilege and the one that is applied to your case may not be the one that you expect.  Such was the case in Swortwood v. Tenedora de Empresas, S.A. DE C.V. 2014 U.S. Dist. LEXIS 29247 (March 6, 2014).

The plaintiffs in Swortwood asked the court to order a third party to produce certain communications between a third party, Neology, and its attorneys based on the fiduciary duty and crime fraud exceptions.  Neology is a Delaware corporation and, according to the plaintiff, Delaware recognizes a fiduciary-duty exception pursuant to which a stockholder litigating against a corporation may be entitled to discovery of attorney-client privileged materials upon a showing of “good cause”.  Although both the plaintiffs and the defendant agreed on the application of Delaware law, Neology (a third party) did not.

Magistrate Judge Barbara L. Major, citing Hoiles v. Superior Court, 157 Cal. App. 3d 1192 (1984), ruled that California does not permit shareholders to discover privileged communications upon a showing of good cause.  Having concluded that a true conflict exists between the laws of Delaware and California, she ruled that California law should be applied because California has the greater interest and would suffer a greater impairment if its law was not applied.

Lawyers with an interest the contours of the attorney-client privilege in the corporate setting (including mergers and acquisitions) should check out my article on the subject in the current issue of the California Business Law Practitioner.

Plato may not have been amused . . .

Plato may not have been amused, but I was, by this ancient Greek music video of “Let It Go” from CLASSOC at the University of Auckland.  It turns out the Plato was a bit of a snob when it came to music:

By compositions of such a character, set to similar words, they bred in the populace a spirit of lawlessness in regard to music, and the effrontery of supposing themselves capable of passing judgment on it.  Hence the theater-goers became noisy instead of silent, as though they knew the difference between good and bad music, and in place of an aristocracy in music there sprang up a kind of base theatrocracy.

Plato, Laws 3.700e – 3.701 (translated by R.G. Bury. Cambridge, MA, Harvard).

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume IV, Number 154


About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...