In the recent decision in Salberg v. Genworth Financial, the Delaware Court of Chancery declined to compel the production of attorney-client privileged documents in a books-and-records action. In Salberg, Vice Chancellor Joseph R. Slights III was confronted with an unusual set of facts which culminated with a trial on the narrow issue of whether Genworth would be required to produce otherwise attorney-client privileged information under the Garner fiduciary exception. The court held that despite most of the factors in the Garner analysis being favorable to the plaintiffs’ position, those factors were not all-inclusive nor dispositive in every case. Ultimately, the court held that the plaintiffs failed to demonstrate the “good cause” necessary to satisfy the Garner test.
The plaintiffs in Salberg were stockholders of Genworth and, almost a year prior to making their Section 220 demand, commenced a derivative action asserting breaches of fiduciary duties against Genworth directors and officers in the Court of Chancery. By late 2016, the parties in the derivative action were submitting briefs related to the defendants’ motion to dismiss the complaint. However, before the motion to dismiss was resolved by the court, Genworth announced that it would be acquired by a Chinese company in an all-cash transaction. Following the announcement of the impending sale of Genworth, plaintiffs made their Section 220 demand upon Genworth, seeking books and records that would allow them to investigate if and how the directors valued the pending derivative claims in connection with the proposed merger. After a series of meet-and-confer sessions, Genworth produced a total of approximately 700 pages of documents. However, many of the documents were heavily redacted based on assertions of attorney-client privilege. After being unable to resolve their dispute over Genworth’s redacted production, plaintiffs filed a Section 220 complaint in January.
