Access to Directors’ Personal E-Mails Granted

Directors will have to turn over e-mails sent from their private accounts to comply with shareholder books and records requests unless the Delaware Supreme Court overturns a recent ruling by the Delaware Chancery Court. E-mails, text messages, Twitter direct messages, Snapchats and other electronic communications are covered by the ruling as long as they concern board issues. Attorneys are urging board directors to pay closer attention to what information they send and receive on their personal e-mail accounts, and some are even recommending that directors use separate smartphones for each board they serve on. In recent years, the Delaware courts have encouraged shareholders to make demands for corporate records before filing derivative lawsuits to determine whether they have a worthwhile case. But until a February ruling by Chancery Court vice chancellor Travis Laster, directors’ private electronic communications were off-limits. No longer. “A corporate record retains its character regardless of the medium used to create it,” Laster wrote in his ruling on Amalgamated Bank v. Yahoo. “What matters is whether the record is essential and sufficient to satisfy the stockholder’s proper purpose, not its source.” Directors will likely find themselves subject to more shareholder demands for personal files related to board decisions, experts say. In fact, the ruling may signal the comeback of the bike messenger business as communication on board issues moves away from electronic means and back to shreddable paper documents, says Stephen Bainbridge, a professor at the UCLA School of Law. “This is going to force people to fundamentally rethink how they use e-mail and how they store e-mail,” Bainbridge says.