The Court of Chancery’s recent decision in Ryan v. Gifford puts corporate boards and their attorneys on notice that the attorney-client privilege may not protect corporate investigations from discovery in shareholder suits.

A special committee of the board of directors of Maxim Integrated Products, Inc., engaged Orrick Herrington & Sutcliffe LLP to conduct an investigation into alleged options backdating at Maxim. Orrick produced a final report to the special committee, and shared that report with the full board of directors. The plaintiffs in a shareholder derivative suit sought to compel production of the report and all communications concerning the investigation between Orrick and the special committee or Maxim.

Chancellor William B. Chandler, III held that that the special committee could not assert the attorney-client privilege against the shareholder plaintiff under the Garner v. Wolfinbarger theory, which allows shareholders to access their corporation’s privileged information in certain circumstances. In any event, the court held, the committee had waived its attorney-client privilege by sharing its report with the full board of directors of Maxim, some of whom were the subject of the investigation. The court further ruled that the presentation of the report to the full board resulted in a waiver of all other privileged communications relating to the investigation.

The Chancellor’s ruling can be accessed here.