CrossFit, a distributor of fitness and training regimens, is owned ‘by an artificial entity, the marital community enjoyed by Greg and Lauren Glassman’. That marital community hasn’t been so enjoyable lately; the pair are in the course of getting divorced in Arizona, making board deliberations a bit fraught (the couple being the sole directors of the company). Mrs Glassman agreed to sell her inchoate 50% share of the business to a venture capital outfit called Anthos LLP, subject to her actually being awarded 50% of the company. Corporate governance issues ensued: the two disagreed about the purchase of a corporate jet, and Mr Glassman claimed that his spouse had breached her fiduciary duties in providing information to Anthos. Wanting to buy her out, he sought to enjoin the sale to Anthos and disclosure of communications between Mrs Glassman and Anthos. She asserted that the communications were protected by a common-interest privilege, on the grounds that they were created in furtherance of a deal that might be affected by the Arizona divorce proceedings and partly with a view to a joint defence against possible legal action by Mr Glassman.
Glasscock J rejected the claim of privilege in Glassman v CrossFit Inc, 2012 Del CH LEXIS 248 (12 October 2012). In Delaware, a common-interest privilege will not protect a business deal that might be subject to or affected by litigation. And in any event, documents in the privilege log assembled by Mrs Glassman were ambiguous in terms of their relation to litigation. In the judge’s words, ‘communications about a business deal, even where the parties are seeking to structure a deal so as to avoid the threat of litigation, will generally not be privileged under the common-interest doctrine.’ He also declined to apply a privilege for ‘business strategy’ which Delaware courts have invoked under their inherent jurisdiction, generally (and only then reluctantly) in order to prevent discovery of time-sensitive information in the context of a take-over bid. Canadian courts have proved more willing to recognise a common-interest privilege in the context of a business transaction (see, for example, Barclays Bank plc v Metcalfe & Mansfield Alternative Investments VII Corp, 2010 ONSC 5519), but there isn’t a lot of authority out there; as a general proposition the Delaware approach may be unhelpfully narrow.
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