A guest post from Nixon Peabody’s Commercial Litigation Alert by Stephen M. LaRose, Troy K. Lieberman, and Christopher E. Queenin
The Massachusetts Supreme Judicial Court (“SJC” or the “Court”) issued a recent decision that clarifies the circumstances in which members of a board of directors can access the company’s attorney-client privileged communications. In Chambers v. Gold Medal Bakery, Inc., SJC Docket No. 11231, a pair of directors in a close corporation, Gold Medal Bakery, Inc. (“Gold Medal”), sought privileged materials on the basis that, as directors and shareholders, they are entitled to view the advice of the company’s counsel. However, the directors seeking the information were embroiled in a lawsuit with the company over a buyout of the directors’ shares. The Court held that a general rule exists that gives directors access to the advice of the company’s counsel, however, that rule assumes that the interests of the directors are not adverse to the interests of the corporation on a given issue.
In this set of circumstances, because the directors’ interests were adverse to the company’s interests on the issues in the litigation, the SJC said the privilege must be preserved in favor of the company, and vacated a lower court order that had compelled production of the privileged materials to the directors.