                               COURT OF CHANCERY
                                     OF THE
    SAM GLASSCOCK III          STATE OF DELAWARE                      COURT OF CHANCERY COURTHOUSE
     VICE CHANCELLOR                                                           34 THE CIRCLE
                                                                        GEORGETOWN, DELAWARE 19947



                             Date Submitted: March 11, 2020
                              Date Decided: June 15, 2020


    Ned Weinberger, Esq.                             Rudolf Koch, Esq.
    Mark Richardson, Esq.                            Kevin M. Gallagher, Esq.
    Thomas Curry, Esq.                               RICHARDS, LAYTON & FINGER, P.A.
    LABATON SUCHAROW LLP                             One Rodney Square
    300 Delaware Ave., Suite 1340                    920 North King Street
    Wilmington, Delaware 19801                       Wilmington, Delaware 19801



                 RE: In re Straight Path Communications Inc. Consolidated Stockholder
                 Litigation, C.A. No: 2017-0486-SG

Dear Counsel:

         Before me is the Plaintiffs’ Motion to compel. The Plaintiffs seek thirty-one

(31) documents previously produced by Defendant IDT Corporation (“IDT”) to the

Federal Communications Commission (“FCC”) in 2016 in connection with an

investigation pertinent to this Action.1 IDT agreed to produce to the Plaintiffs here

all 14,000 documents produced to the FCC subject to a privilege review, and after

such privilege review, IDT withheld only the thirty-one documents at issue here as




1
 Pls.’ Reply in Further Support of their Mot. to Compel Disc. from Def. IDT Corp., D.I. 257, Ex.
36, IDT Log Entries Reflecting Communications Produced to the FCC.
attorney-client privileged. The Plaintiffs do not contend the documents were not

privileged when created. They argue, however, that any privilege was waived by

disclosure to a third party, the FCC, in the investigation referred to above. IDT bears

the burden of proving that the documents at issue are privileged. 2 I find they have

not done so here, and accordingly order production of the documents in question. I

note that to the extent the Plaintiffs bear the burden to show waiver, they have done

so here.

       The attorney-client privilege is an exception to the broad rule that relevant

documents are discoverable in litigation.3 The privilege is meant to preserve a

bedrock principle of our system of jurisprudence; that for that system to operate

justly a lawyer and her client must be able to communicate freely, without the threat

of disclosure of those communications, even when relevant to issues in litigation.4


2
  Glassman v. Crossfit, Inc., 2012 WL 4859125, at *2 (Del. Ch. Oct. 12, 2012) (citing Mayer v.
Mayer, 602 A.2d 68, 72 (Del. 1992)) (“[T]he party asserting a privilege bears the burden of proving
that the material in question is privileged.”).
3
  Riggs Nat. Bank of Washington, D.C. v. Zimmer, 355 A.2d 709, 713 (Del. Ch. 1976) (“[C]ourts
have noted that the [attorney-client] privilege is an exception to the usual rules requiring full
disclosure and its scope can be limited where circumstances so justify.”); Frank v. Engle, 1998
WL 155553, at *2 (Del. Ch. Mar. 30, 1998) (“The second limitation upon Rule 26’s liberal policy
is the right of the responding party to protect relevant documents, if the circumstances allow the
responding party to raise an affirmative defense such as attorney-client privilege . . . . A party who
successfully asserts attorney-client privilege can deny the other party access to otherwise relevant
documents.”).
4
  In re Kennedy, 442 A.2d 79, 91 (Del. 1982) (“The purpose of the privilege is to foster the
confidence of a client and to permit him to communicate freely with his attorney, without fear,
while seeking legal advice.”); In re Fuqua Indus., Inc., 2002 WL 991666, at *2 (Del. Ch. May 2,
2002) (quoting Zirn v. VLI Corp., 621 A.2d 773, 781 (Del. 1993) (“The purpose of the attorney-
client privilege is ‘to encourage full and frank communication between clients and their
attorneys.’”).
                                                  2
That principle does not obtain however, where the holder of the privilege, the client,

has chosen to share the communication with a third party. 5 Because that sharing

vitiates the integrity of confidential attorney-client communication, it is generally

held that the disclosing client has manifested an intent to waive the privilege

thereby.6 There are exceptions to this rule, however.

       Both the Plaintiffs and IDT rely heavily on this Court’s rationale of Saito v.

McKesson HBOC, Inc.7 Saito was an action by a stockholder to obtain books and

records of McKesson Corporation (“McKesson”), under 8 Del. C. § 220.8

McKesson attempted to withhold four groups of documents, one of which was

documents produced by McKesson to the Securities and Exchange Commission

(“SEC”) in connection with an investigation regarding downward revisions of

financial information.9 Most of these documents were not disclosed to the SEC until

a confidentiality agreement was signed with the SEC—McKesson asserted work




5
  In re Quest Software Inc. S’holders Litig., 2013 WL 3356034, at *4 (Del. Ch. July 3, 2013) (“In
most instances, a party waives the attorney-client privilege by communicating privileged
information to a third party.”).
6
  Baxter Int’l, Inc. v. Rhone-Poulenc Rorer, Inc., 2004 WL 2158051, at *4 (Del. Ch. Sept. 17,
2004) (“In order for a communication to be privileged, it must be confidential . . . . When the
client makes a communication with the intention or expectation that it will be revealed to another
person who is not necessary for the rendition of the legal services or communication, this element
of confidentiality is lacking.”).
7
  2002 WL 31657622 (Del. Ch. Nov. 13, 2002).
8
  Id. at *1.
9
  Id. at *1–2.
                                                3
product privilege as to all of the documents in the group, and attorney-client

privilege as to four of them.10

       Similar to the Plaintiffs’ position here, the plaintiff in Saito contended that

production of otherwise-protected documents to the SEC constituted a waiver of

such protection.11 The bulk of Saito’s analysis concerning the documents produced

to the SEC regarded the work product doctrine. The Court in Saito held that work

product privilege was not waived as to those documents disclosed under a

confidentiality agreement with the SEC.                 The court reasoned that where the

production was for a limited purpose and was secure from further disclosure outside

of the purpose, via a confidentiality agreement, the rationale for the privilege

survived and no general waiver resulted.12                  McKesson retained a reasonable

expectation of privacy as to such documents because it “reasonably believed that its

disclosures would remain confidential.”13 Importantly, Saito held that “[w]hen

attorneys secure a confidentiality agreement before sharing their work product with

the SEC, as [McKesson’s] attorneys did, those attorneys can reasonably assume that

the SEC would not reveal those confidential disclosures to other adversaries.”14 But,

the court found, McKesson had no reasonable expectation of privacy as to those



10
   Id. at *2.
11
   Id.
12
   Id. at *6–7.
13
   Id. at *7. Saito referred to the disclosure as a “selective waiver.” Id. at *11.
14
   Id.
                                                  4
documents that were shown to the SEC before the confidentiality agreement was

entered. Accordingly, with respect to that subset of documents McKesson had

waived work product privilege.15

        I note that IDT in this action does not allege work product protection, as

McKesson did in Saito with respect to the documents discussed above. As to

documents over which McKesson claimed attorney client privilege—as IDT does

here—Saito’s analysis focused on a single document, because the others were

protected by the work product doctrine, and the court did not need to apply a

privilege analysis for such documents.16 The sole document not otherwise protected

by the work product doctrine was disclosed to the SEC prior to the entry of a

confidentiality agreement; thus McKesson had “manifested its intent for the

document not to remain confidential” and consequently had waived its attorney-

client privilege as to this document.17 In other words, none of the documents at issue

in Saito for which McKesson invoked only attorney-client privilege had been

produced to the SEC under a confidentiality agreement. Accordingly, the Saito court

did not reach the question of whether the privilege was preserved with respect to

such documents, as was the case for work product.




15
   Id. at *11.
16
   Id. at *12.
17
   Id.
                                          5
       If I assume here that the Saito rationale applies to attorney-client

communications,18 nonetheless, I must still find that IDT has waived the protection

with respect to the documents in question here. In invoking attorney client privilege,

IDT has asserted that the productions to the FCC were designated as confidential.

IDT has pointed to a trio of Requests for Confidential Treatment of Submissions (the

“Requests”) sent to the FCC that appealed to that body to withhold the productions

from public inspection, specifically in reference to the Freedom of Information

Act.19 All three Requests state that “[t]he parties . . . respectfully requests that . . .

the [FCC] withhold from public inspection and afford confidential treatment to

attached material outlined below.”20

       To the extent that waiver of privilege could be avoided under Saito’s work

product rationale, there is, to my mind, a significant distinction between the Requests

cited by IDT and the confidentiality agreement cited by Chancellor Chandler in

Saito. The confidentiality agreement there was executed amongst McKesson, the

SEC, and the United States Attorney’s Office for the Northern District of

California.21     Saito found that McKesson acted reasonably in “expecting its

disclosures to the SEC under a confidentiality agreement would not reach the hands


18
   Generally, the immunity extended to work product is considered more essential to our system
of justice than is the attorney-client privilege. Thus, the latter is more readily waived. Id. at *8–
9.
19
   Def. IDT Corp.’s Opp’n to Pls.’ Mot. to Compel Disc., D.I. 246, Exs. B–D.
20
   Id.
21
   Saito, 2002 WL 31657622, at *1.
                                                 6
of its other adversaries” and thus had a reasonable expectation of privacy, thwarting

the production-as-waiver argument.22        But here, I find, IDT did not have an

analogous expectation of privacy because the documents were not produced to the

FCC under a confidentiality agreement. Instead, IDT merely requested that the

documents remain confidential. IDT had no non-disclosure agreements with the

FCC, and the Requests cited by IDT are insufficient to show that IDT reasonably

believed that the documents would not be revealed to other adversaries. In other

words, IDT found it advantageous to disclose the privileged documents to a third

party, the FCC, despite knowing that they could be disseminated. IDT did not have

a commitment, let alone an enforceable agreement, with the FCC to keep the

documents confidential. In that situation, IDT manifested its intent to waive any

privilege by disclosing the documents to a third party. I assume that IDT desired

that the thirty-one documents remain confidential, but such desire does not amount

to the reasonable expectation required to avoid a waiver under Saito, which is an

exception to the general rubric that outside disclosure vitiates the privilege.

      IDT has also cited cases that decline to find a waiver of privilege where

privileged documents were inadvertently produced.23 However, nothing in the

record indicates that IDT inadvertently produced the documents, instead IDT has


22
  Id. at *6.
23
  TCV VI v. TradingScreen Inc., 2015 WL 5674874 (Del. Ch. Sept. 25, 2015); In re Kent Cty.
Adequate Pub. Facilities Ordinances Litig., 2008 WL 1851790 (Del. Ch. Apr. 18, 2008).
                                            7
simply asserted that “[i]ts inclusion of a small number of privileged documents in

its voluminous production to the FCC does not waive privilege.”24 I find the cases

cited by IDT inapposite as to whether privilege was waived by IDT’s purposeful

production.

          Consequently, I grant the Plaintiffs’ Motion to Compel regarding the thirty-

one documents produced by IDT to the FCC.

          To the extent the foregoing requires an order to take effect, it is SO

ORDERED.


                                                      Sincerely,

                                                      /s/ Sam Glasscock III

                                                      Sam Glasscock III




24
     Def. IDT Corp.’s Opp’n to Pls.’ Mot. to Compel Disc., D.I. 246, at 8.
                                                  8
