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For some reason, I’ve got a real weakness for articles about best practices for keeping board minutes – which is kind of strange because of all the routine tasks I did as a corporate lawyer, this was the one I disliked most. Anyway, whatever bizarre neurosis may be the cause, I’m always very interested in pieces like this recent Skadden memo, which has plenty of good advice about board minutes.

Writing minutes is drudgery, but it’s important to get them right – and doing that often requires a lot of judgment calls. One area that requires judgment is how to handle legal advice provided to the board at a meeting. You want the minutes to reflect that the board sought and received legal advice at the meeting, but you also don’t want to do anything to inadvertently waive privilege in the event that you have to produce the minutes through a books and records request or otherwise.  This excerpt from Skadden’s memo highlights a potential pitfall that may arise by the way a lawyer’s advice to the board is characterized in the minutes:

It is important to ensure that the fact that legal advice was given to the board is reflected in the minutes at least at a high level, but boards need to guard against waiving the attorney-client privilege. Although privileged information is typically redacted when minutes are produced to plaintiff stockholders, legal advice may at some point become an issue in litigation if the board asserts that it relied on that advice.

To protect privileged information from disclosure, minutes reflecting legal advice should be characterized as an outside attorney or in-house counsel “providing legal advice” about a matter as opposed to “advising the board” to take a certain action, because advice from a lawyer that is not legal in substance — say, advice on business strategy — potentially may not be protected by the privilege.

The memo’s point about the possibility that legal advice may at some point become an issue in litigation is an important one to keep in mind. That means that when thinking about privilege, you need to think about not only how to protect privilege in board minutes, but also how best to use the minutes to help manage a decision to waive privilege as part of a litigation strategy.

Why might a company do that? Well, one reason is that Delaware courts have made it clear that the advice directors receive from lawyers and other professionals is often central to determining the reasonableness of the board’s actions, and an unwillingness to share the substance of that advice can have significant negative consequences, including a prohibition on asserting the content of the legal advice that the board was provided in the defense of the plaintiffs’ claims. See, e.g., Chesapeake v. Shore (Del. 2/00).

In light of this position, some practitioners suggest referencing the fact that legal advice was given in the minutes, but also providing a summary of the advice in separate privileged minutes. Writing that summary presents challenges of its own, but in appropriate circumstances, that approach may both help avoid inadvertent production and enable the board to provided contemporaneous evidence of the advice provided by counsel if the company determines to waive the privilege.

– John Jenkins