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Over on DealLawyers.com, I recently blogged about the Delaware Chancery Court’s decision in ATG Capital Opportunities Fund LP v. Lane, (Del. Ch.; 8/26), which involved an activist’s successful challenge to an effort its slate of nominees under the terms of the company’s advance notice bylaw. This Sidley memo focuses on an interesting aspect of the case – in addition to the board minutes, the company apparently had an AI transcription of its board meeting, and both were introduced into evidence. As this excerpt from the memo explains, they didn’t match, and that didn’t help the board’s argument:

The court had two written records of what happened in the boardroom: the official minutes and AI-generated transcripts of the same meetings. The minutes described the board’s decisions in the way minutes typically do, recording the action taken and the stated reasons for it. The AI transcripts purported to capture the discussion itself. At one meeting, for example, the minutes recorded that a defensive measure was adopted to protect stockholders; the AI-generated transcript recorded the chairman describing it as “necessary in order for the board to remain in its position.”

Notwithstanding common warnings about inaccuracies in AI-generated material, nothing in the opinion suggests that the admissibility or reliability of the transcripts was contested; they were joint trial exhibits, cited alongside testimony without qualification. After reviewing the record, the court ruled for the investor on its challenge to the board’s rejection of the nomination notice.

In the court’s view, the board’s concerns were matters for stockholders to weigh in the election rather than grounds to exclude the nominees from the ballot. Although the AI transcripts did not decide the case, they informed the court’s account of the board’s deliberations, and the court cited them in the portion of the opinion assessing the board’s motivations.

The memo identifies several practical takeaways for companies from the decision, including the need to decide deliberately when and how AI transcription can be used, and to treat board and other sensitive meetings with particular caution. In addition, the memo says that companies should articulate a risk-based policy for AI transcription, decide whether AI transcripts should be kept as corporate records, and train directors and officers to speak knowing a transcript may exist, and to draft minutes with that in mind as well.

– John Jenkins