Stockholder Derivative Litigation Update

The Plaintiff immediately served a subpoena on the SLC (a non-litigant) seeking everything the SLC obtained, considered, or prepared during its investigation, including the SLC's work product and privileged communications. The SLC objected, contending that its decision to cede control of the litigation to the Plaintiff obviated any need for the court or the parties to evaluate the SLC's independence, investigation, or determination, making discovery unnecessary. The SLC further asserted that the broad subpoena implicated a variety of privileged documents, including communications between the SLC and its counsel, and communications of third parties, including Oracle and other defendants.

Decision

The court framed its analysis around two questions: 1) to which communications is a plaintiff who controls a corporate claim presumptively entitled?; and 2) what communications may be withheld from production pursuant to valid objections? Addressing the first question, the court's touchstone was Delaware's regard of the control exercised by a corporate board over a corporate claim as control of a corporate asset. The value of a litigation asset, the court reasoned, " — like any other corporate asset — may be increased by the efforts of corporate fiduciaries." The court concluded that the SLC enhanced the value of the derivative claims through its evaluation and investigation of the claims, "was empowered to make a decision with respect to disposition of the litigation asset, and determined that Oracle's interests required it to be administered by the Lead Plaintiff on behalf of Oracle." Consequently, "it would be, at least in part, against Oracle's best interests to allow the Lead Plaintiff to proceed with the litigation asset stripped of all value created by the SLC."

Next addressing the information that must be made available to the Plaintiff, the court adopted a relevance standard narrower than what Lead Plaintiff sought: everything provided to or created by the SLC. Instead, the court consulted the basic relevance standard for discoverability to conclude that, subject to certain privilege limitations, the Lead Plaintiff was presumptively entitled only to relevant documents actually reviewed and relied upon by the SLC or its counsel in forming its conclusions concerning pursuit of the derivative claim. In determining the contours of relevance for a production to a stockholder plaintiff, the court distinguished between the expansive information often provided to a special litigation committee composed of corporate directors and a litigation production to a stockholder. "Allowing complete discovery of all documents provided to or created by a special litigation committee in situations such as these, as requested by the Subpoenas, could chill candor and access and limit the effectiveness of special litigation committees going forward." The "actually reviewed and relied upon" standard "separated, presumably, the ore of relevance from the overburden of available but irrelevant material. Those documents so screened, or created therefrom, form a handy proxy for identifying relevant documents." Recognizing that the SLC and its counsel were in the best position to identify which documents and communications fit this criteria, the court allowed them to identify and produce those documents.