Corporate investors often have the right to designate individuals to serve on their investees’ boards of directors. In Hyde Park Venture Partners Fund III v. FairXchange, 2023 WL 2417273, (Del. Ch. Mar. 9, 2023), the Delaware Court of Chancery issued a valuable reminder that companies generally will not be permitted to assert privilege or immunity to withhold information generated during a director’s tenure from the directors or his or her appointing investor in litigation. Corporate boards and investors alike will benefit from an understanding of the principles articulated in this ruling, as well as from careful consideration of the steps that can be taken to alter the joint client rule or to guard against a privilege waiver resulting from the production and use of privileged information in litigation.

Background

At all relevant times for purposes of the court’s analysis, FairXchange LLC had a three-person board of directors, which included an individual by the name of Ira Weiss. Weiss had been designated as a director by investors Hyde Park Venture Partners Fund III L.P. and Hyde Park Venture Partners Fund III Affiliates LP (together, the funds).