Palantir at 100 Hamiliton in Palo Alto, Photo: Jason Doiy/ALM.

The Delaware Supreme Court on Tuesday ordered Palantir Technologies to turn over director emails to a company run by Marc Abramowitz, reversing the Chancery Court's earlier ruling that the electronic communications were off limits for investigating fraud and mismanagement at the Silicon Valley software firm.

In a 49-page opinion for a unanimous court, Chief Justice Leo E. Strine said that Palantir, which specializes in big data analytics, had a history of not observing corporate formalities and conducted most of its board-level business electronically, making the emails necessary to satisfy KT4's demand.

“If a company observes traditional formalities, such as documenting its actions through board minutes, resolutions, and official letters, it will likely be able to satisfy a [books-and-records] petitioner's needs solely by producing those books and records,” Strine wrote. “But if a company instead decides to conduct formal corporate business largely through informal electronic communications, it cannot use its own choice of medium to keep shareholders in the dark about the substantive information to which” the law entitles them.

The ruling granted more access to Abramowitz, an early investor in Palantir, and his KT4 Partners, which had sued in 2015 to obtain corporate information after a falling out with Palantir CEO Andrew Karp. That dispute has since sparked litigation in a California state court, where Palantir accused Abramowitz of using his influence as a major investor to extract sensitive trade secrets.

Typically, Delaware books-and-records actions are resolved in the span of just a few months, as long as a plaintiff establishes a narrow cause for enforcing stockholder inspection rights under Delaware state law. But the fraught nature of Abramowitz's suit has drawn the case into a protracted legal fight over the scope of his investigation, with both sides trading accusations of wrongdoing.

Abramowitz had accused Palantir, among other things, of failing to convene stockholder meetings and improperly barring Abramowitz and other investors from selling stock while allowing sales by Karp and other executives. Abramowitz also asked for documents in order to investigate the value of the firm and Karp's compensation as its chief executive.

Palantir countered that Abramowitz's inspection demand was unrelated to KT4's interests as a stockholder. Rather, the company said, Abramowitz was trying to gain leverage in the California suit and obtain pre-suit discovery on breach of contract and tortious interference claims he planned to bring against Palantir.

Last February, Vice Chancellor Joseph R. Slights III ordered Palantir to produce a swath of documents, finding that KT4 had demonstrated a “credible basis” to suspect corporate wrongdoing. However, Slights blocked access to company emails related to changes to Palantir's investor rights agreement and ruled that any information that was secured in the books-and-records action could not be used in litigation outside of Delaware.

In Strine's decision, he faulted Palantir for implying in the lower court that some other set of corporate documents, other than emails, could be produced to satisfy KT4's request. However, Strine said, Palantir reversed course on appeal, admitting that “there are no board-level documents,” though “there may very well be emails” related to the amendments.

“At bottom, the Court of Chancery found that KT4 had legitimate reasons for wanting to know how and why Palantir made the September 2016 Amendments, which gutted KT4's rights under a key stockholder agreement. If the only documentary evidence of the board's and company's involvement in the amendments comes in the form of emails, then those emails must be produced,” Strine said.

On Tuesday, Strine also lifted the Chancery Court's “jurisdictional use restriction” ruling, which limited the use of Palantir's corporate materials to Delaware litigation. The alleged misconduct, he said, involved actions taken in California, where Palantir had itself sued KT4, and Palantir had no forum selection clauses in its charter that would require claims to be litigated in Delaware.

Attorneys for both sides did not immediately return calls Tuesday afternoon seeking comment on the ruling.

KT4 partners was represented in the Delaware action by Barry S. Simon and Jonathan B. Pitt of Williams & Connolly in Washington, D.C., and Bartholomew J. Dalton and Andrew C. Dalton of Dalton & Associates.

Palantir was represented by Kevin J. Orsini and Rory A. Leraris of Cravath, Swaine & Moore in New York, and Blake Rohrbacher, Kevin M. Gallagher and Kelly L. Freund of Richards, Layton & Finger.

The case was captioned KT4 Partners v. Palantir Technologies.