Lessons from Twitter v. Musk on Access to Directors’ and Executives’ Emails

Gail Weinstein is Senior Counsel, and Scott B. Luftglass and Philip Richter are Partners at  Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Luftglass, Mr. Richter, Mr. Steven Epstein, Mr. Brian T. Mangino, and Ms. Erica Jaffe and is part of the Delaware law series; links to other posts in the series are available here.

In a letter opinion issued in connection with discovery matters in Twitter v. Musk (Sept. 13, 2022), the Delaware Court of Chancery ruled that Twitter is not entitled to obtain Elon Musk’s communications on his email accounts at two other (i.e., non-Twitter-affiliated) companies about the deal and his intention to terminate it. The court held that the emails were protected by the attorney-client privilege and that the companies’ policies allowing company access to personal communications on the company email accounts did not defeat the privilege given that the policies were not applied to Musk.

Twitter has claimed that Musk’s termination of the merger agreement pursuant to which he agreed to acquire Twitter is invalid as his alleged reasons for terminating the agreement are a pretext for a change of heart about proceeding with the deal after a steep decline in the stock price of technology companies, including Twitter, that occurred after the agreement was signed. Musk communicated about the termination of the Twitter merger agreement on his email accounts at Space Exploration Technology Corp. (SpaceX) and Tesla, Inc.—both of which are companies that Musk controls. Musk refused to produce the emails, asserting that they were protected from disclosure under the attorney-client privilege. Chancellor Kathaleen St. J. McCormick explained that, to support a claim of attorney-client privilege, Musk had to demonstrate that he had “an objectively reasonable expectation of confidentiality in the SpaceX and Tesla emails.” The court held that, based on the expectation of privacy that Musk had with respect to his SpaceX and Tesla email accounts, his personal emails on those accounts are not discoverable by Twitter.

SpaceX and Tesla had written policies stating that employees had no privacy interest in their emails on the company’s email account and that the company reserved the right to monitor such emails. Twitter argued that, based on the plain language of those policies, Musk had no reasonable expectation of privacy in his emails. However, the court relied on testimony from Tesla and SpaceX employees (including the heads of the IT/security and legal departments) who stated that, notwithstanding the company’s written policies with respect to employees generally, in the case of Musk (who was the CEO and controller of both companies), each company’s practice, as Musk had been told, was that no one at the company would ever access his emails without his consent (unless the company was legally required to access them). Based on that testimony, the court found that Musk’s expectation of privacy was objectively reasonable, and it ruled that the emails remained protected by the attorney-client privilege and thus were not discoverable.

The court acknowledged that “a cynic” might question the reliability of this testimony, as it came from Musk himself and three of his direct reports, with no corroboration in any of the corporate books and records. The testimony “rang true” to the court, however, as there was “little doubt that neither SpaceX nor Tesla view [Musk] as on par with other employees, that he has the power to direct operational decisions, and that nobody at either company would access his information without first obtaining his approval.” The court wrote: “One can debate whether this corporate reality makes for good ‘corporate hygiene,’ but it is difficult to discredit the recitation of the facts.”

The court utilized the analysis in a bankruptcy court’s decision, Asia Global, to determine “whether a company’s policies or practices reduce an employee’s expectation of privacy in the employee’s work emails.” The court did not address the plaintiff’s primary argument that Asia Global should not apply where, as in this case, the party that is seeking to pierce the attorney-client privilege is an outsider to the corporate entity owning the email accounts at issue. The court also did not address the plaintiff’s fallback argument that Asia Global does not extend to “work product.” The suggested “course correction” reflected in these arguments “raises interesting issues worthy of extensive discussion,” the court wrote, but, with the press of time in these expedited proceedings, the court utilized the “more direct approach of resolving the parties’ dispute” by addressing whether Musk had met the burden under Asia Global of establishing that he had an objectively reasonable expectation of privacy in his Tesla and SpaceX emails.

The court cited the following as mitigating considerations that “blunted” the effect of the broad language in the companies’ policies as to the lack of privacy for emails. First, despite the companies both having a policy reserving the right to monitor employee emails, they also both had policies limiting the grounds for monitoring employee emails, which, in the court’s view, could suggest that an employee might expect privacy over personal communication unless the employee was acting contrary to company guidelines. Second, and more significantly in the court’s view, as discussed, the policies did not apply to Musk, as each company had adopted “Musk-specific” rules.

The decision underscores that company policies and practices (with respect to employees generally and specific executives or a controller) relating to the company’s right to access personal emails on company email accounts may affect whether any attorney-client privilege that otherwise would protect such emails from discovery in litigation.

Practice Points

  • Directors and officers should keep in mind that any personal email communications on a corporate email account will retain an attorney-client privilege (or other confidentiality-based privilege) only if there is a reasonable expectation of privacy. In many cases, corporate policies permit the company to access and monitor personal emails without consent, thus potentially eliminating an expectation of privacy (and accordingly any confidentiality-based privilege), unless there are limitations to the company’s policy that may revive an expectation of privacy and/or the policy is not applicable to the individual in question. As highlighted in Twitter, a company’s adoption of a practice of not accessing the emails of a specific executive or director, with that practice articulated to the executive or director, may be deemed by the court to create an expectation of privacy for such emails that would support invoking the attorney-client privilege such that the court would not order production of the emails in litigation. The adoption of any such policy or practice would have to be considered carefully, balancing other corporate interests in having the ability to access and monitor such emails.
  • The appropriate use and content of emails should be a routine part of, and emphasized during, the initial onboarding and ongoing training for directors and officers. It should be kept in mind that emails (including personal emails) may be discoverable in litigation. Generally, corporate policies and training should direct directors and officers not to use the corporate email account for personal emails. Also, as a general rule, humor, irony, sarcasm, or other comments that may be misinterpreted should be avoided in emails.
  • A board, together with legal counsel, should consider the benefits of more, rather than less, detailed board minutes. Notably, in several recent decisions, the Delaware courts have drawn negative inferences from the absence of certain details in board minutes and, in those circumstances, have been more inclined to permit access to personal emails or other communications. In addition, contemporaneous emails, disclosure to stockholders, board minutes, and other books and records should be consistent with one another. Where they are not, the Delaware courts recently have been inclined to permit access to emails to resolve inconsistencies.
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