Recently, the Delaware Court of Chancery held in Icahn v. Illumina that a director was not permitted to share confidential and privileged information he received in connection with his board service with the activist stockholders that nominated him for election.
The case involved a derivative lawsuit brought against Illumina by funds controlled by activist investor Carl Icahn in connection with Illumina’s decision to close its acquisition of GRAIL, Inc. despite antitrust regulatory opposition. Prior to filing the complaint, the Icahn funds, which collectively owned less than 2% of Illumina’s stock, had launched a proxy contest for three seats on Illumina’s board and one of their nominees, an employee of a different Icahn-controlled entity (the “Icahn Director”), was ultimately elected by stockholders. After his election, the Icahn Director shared confidential and privileged information he received about Illumina in his capacity as a director with the Icahn funds.
The court began by acknowledging that the Icahn Director, like all directors, possessed a broad right to information about Illumina while serving on its board, including the right to access privileged information as ell as information predating the director’s tenure on the board if there is a present fiduciary need for it. This broad right to information can be limited only in certain recognized ways, including by ex ante agreement, through the use of a special committee or in the event “sufficient adversity” exists between the director and the company. The Illumina defendants did not dispute that the Icahn Director was entitled to access the privileged information that was contained in the complaint, so the issue before the court was whether the Icahn Director was permitted to subsequently share that information with the Icahn funds that nominated and employed him.
The court noted… Read more
