A court ordering a party to produce documents that the party claimed to be protected by the attorney-client privilege may not seem terribly important. But, the Delaware Supreme Court's recent decision in Wal-Mart Stores, Inc. v. Indiana Electrical Workers Pension Trust Fund is notable because the court ordered the production of the documents before any litigation was even filed, as part of a putative plaintiff's investigation into whether it should bring a derivative action. In other words, the corporation was ordered to produce sensitive documents to a party deciding whether to sue the corporation.

In Wal-Mart, the document requests were made under Section 220 of the Delaware General Corporation Law, a unique provision that allows any stockholder to inspect the books and records of a corporation "for a proper purpose." "Proper purpose" has been defined to include an investigation into alleged corporate misconduct. In Wal-Mart, a pension fund requested information about a bribery scandal reported on by the New York Times, involving Wal-Mart's Mexican subsidiary. In response to the request, Wal-Mart produced some documents but withheld or redacted many more under the attorney-client privilege and work-product doctrine. The pension fund sued to compel Wal-Mart to produce all of these documents.

The Chancery Court granted the pension fund's request and the Delaware Supreme Court affirmed. In doing so, the Supreme Court expressly adopted the so-called "Garner Doctrine," first announced by the US Court of Appeals for the Fifth Circuit in Garner v. Wolfinberger, 430 F.2d 1093 (5th Cir. 1970). As the Delaware Supreme Court noted in Wal-Mart, the Garner Doctrine is a fiduciary exception to the attorney-client privilege that "allows stockholders of a corporation to invade the corporation's attorney-client privilege in order to prove fiduciary breaches by those in control of the corporation upon showing good cause." It has not been universally accepted in jurisdictions outside of the Fifth Circuit, and some have actually criticized and rejected it, but Delaware is not one of them.

In Wal-Mart, the Delaware Supreme Court ruled that the pension fund had demonstrated good cause sufficient to compel the production of the documents because: it had a colorable claim against Wal-Mart; the information requested was necessary to that claim and was not available from other, non-privileged sources; the attorney-client communications that the fund sought were identified with some specificity and were not part of a "fishing expedition;" and there was little, if any, risk that producing the documents would reveal any of Wal-Mart's trade secrets or confidential information. Accordingly, Wal-Mart was ordered to produce all of the attorney-client information that the pension fund requested.

As noted above, this decision is only the beginning of the story for Wal-Mart and thepension fund, as the Delaware Supreme Court's decision just requires Wal-Mart to produce documents, it does not even touch on the merits of any future claim against Wal-Mart or the discovery that might be conducted in furtherance of that claim. Nonetheless, this is an important decision for corporations, particularly those organized under Delaware law, and corporations should be aware of it as they respond to potential crises and respond to the pre-litigation demands from shareholders.