Corporate Securities Law Blog

In Ryan v. Gifford, C.A. No. 2213, 2007 WL 4259557 (Del. Ch. Nov. 30, 2007), the Delaware Chancery Court ruled that the presentation of a Special Committee report to the full Board of Directors of Maxim Integrated Products, Inc., including individual director defendants and their counsel, waived the attorney-client privilege as to all communications between the Special Committee and its lawyers.  This decision is significant because of its implications for special committee practice.  After Ryan, there is a considerable risk that the attorney-client privilege will not be available to a Special Committee and its counsel when conducting an internal investigation if the Special Committee chooses to give a report to the full board with named defendants in attendance.

In Ryan v. Gifford, C.A. No. 2213-CC (Del. Ch. Nov. 21, 2007), the Delaware Chancery Court ruled that it could not exercise personal jurisdiction over certain nonresident officers of a Delaware corporation pursuant to 10 Del. C. § 3114(b).  That statute authorizes the exercise of jurisdiction in Delaware over a nonresident officer of a Delaware corporation if the cause of action arises out of the allegedly wrongful conduct of that officer accrued after January 1, 2004 (Section 3114(b)’s effective date) and if the officer’s conduct was in his official capacity.  The decision is noteworthy because of the court’s fairly narrow reading of Section 3114(b).  Ryan stands for the proposition that passively receiving, holding and allowing to vest allegedly backdated stock options does not constitute a continuing wrong that might satisfy the post-January 1, 2004 conduct requirement of Section 3114(b).