In a little over a week, the Court of Chancery issued two decisions addressing the at-issue exception to the assertion of attorney-client privilege. The at-issue exception applies when: (1) a party injects privileged communications into the litigation; (2) a party injects an issue into the litigation, the truthful resolution of which requires analysis of privileged communications. Applying this standard, the Court of Chancery reached different conclusions regarding the applicability of the at-issue exception in In re Comverge Shareholders Litigation, C.A. No. 7368-VCP (Del. Ch. Apr. 10, 2013), and JPMorgan Chase & Co. v. American Century, C.A. No. 6875-VCN (Del. Ch. April 18, 2013).
In Comverge, Vice Chancellor Donald F. Parsons Jr. denied the plaintiffs’ motion to compel documents based upon the at-issue exception. The plaintiffs were stockholders of Comverge and alleged that the Comverge directors breached their fiduciary duties by failing to enforce the terms of a standstill provision in a nondisclosure agreement (NDA) between Comverge and H.I.G. Capital LLC, Peak Holding Corp. and Peak Merger Corp. The plaintiffs sought documents relating to communications about the NDA, including documents discussing how to interpret the NDA. In response to the Comverge defendants logging these documents as privileged, the plaintiffs argued that the Comverge defendants had waived the attorney-client privilege by asserting a reliance on the advice of counsel defense at the preliminary injunction stage of the proceedings. The Comverge defendants had stated that they consulted counsel throughout the underlying transactions. Applying the first prong of the at-issue exception, the court found that the Comverge defendants had not injected or sought to inject specific attorney-client communications into the litigation. The plaintiffs, not the Comverge defendants, had initially raised whether the Comverge defendants consulted counsel at all and the Comverge defendants simply responded to that contention.
