Wilimington, Del—After explicitly adopting the Garner doctrine, an exception to the attorney-client privilege, the Delaware Supreme Court affirmed an order that Wal-Mart provide a shareholder with internal documents concerning company executives’ knowledge of an alleged bribery scheme. However, the July 23 decision, in Wal-Mart Stores Inc. v. Indiana Electrical Workers Pension Trust Fund IBEW, also required shareholder IBEW to return private documents that had been stolen from the company by a whistleblower.
The suit stemmed from a 2012 article in The New York Times, detailing Wal-Mart executives’ inadequate response to an alleged bribery scheme by officers at its Mexico subsidiary. In anticipation of pursuing a derivative suit, the IBEW filed a claim under Del. Code § 220 and demanded internal documents related to the scheme. The Chancery Court of Delaware ordered Wal-Mart to disclose a wide range of documents, including communications between Wal-Mart executives and attorneys. In its decision, the chancery court relied in part on the Garner doctrine, an exception to the attorney-client privilege that arises when a corporation is accused of acting inimically to a shareholder’s interest.
Adoption of the Garner Doctrine
On appeal, Wal-Mart argued that the supreme court had never adopted the Garner doctrine in a plenary proceeding, much less a § 220 claim. The Delaware Supreme Court acknowledged that it had never explicitly adopted the Garner doctrine. However, after noting the doctrine’s history, including previous chancery decisions that successfully relied on the doctrine in § 220 claims, the supreme court explicitly adopted Garner, holding it applicable in plenary suits and §220 actions. While the court also held that parties must meet the “necessary and essential” requirement to produce documents under §220 before consideration of the Garner doctrine and its “good cause” standard, it found that the chancery court properly made those separate determinations in the IBEW suit.
Return of Certain Whistleblower Documents
The decision also upheld the chancery’s court’s order requiring IBEW return whistleblower documents that had not been published by The Times or a subsequent federal congressional investigation. According to the supreme court, the documents, which Wal-Mart claimed had been stolen by a former employee, remained protected to the extent that they had not become available to the public. However, the court noted that the documents could later be found within the wide range of information Wal-Mart was required to disclose under the § 220 order.
Wal-Mart faces derivative suits throughout the country based on the bribery allegations, including federal suits in Texas and Arkansas, as well as state-law claims in Delaware.