Corporate takeover litigation provided the historical predicate for the business strategies immunity, also sometimes called the "white knight" privilege or business-strategies privilege. The doctrine first arose out of the efforts of target corporations to shield from discovery information pertaining to potential responses to hostile takeover bids, in particular alternative transactions under discussion with friendly third-party bidders, or so-called white knights. The doctrine soon expanded to protect, in appropriate circumstances, a wide range of time-sensitive information in the takeover context, including certain financial information; strategies, defenses, and alternate transactions under consideration by the target;1 and even certain counterdefensive measures being considered by the hostile bidder. Although the Delaware case law regarding the business-strategies immunity is nearly all unreported, much in the form of oral rulings from the bench, the basic parameters of the immunity are now well established.
As an initial matter, it should be emphasized that the business-strategies doctrine is not technically an evidentiary privilege in the same sense as the attorney-client privilege. Rather, the doctrine is in the nature of a qualified immunity from discovery, more closely akin to the work product doctrine. Although many of the early decisions were silent on the source of the Court of Chancery's authority to promulgate an immunity for business-strategy information, it is now clear that the doctrine arises under the discretionary authority vested in the court by Chancery Court Rule 26(c), which authorizes the court to enter protective orders as "justice requires" to protect parties from undue prejudice.2 In this regard, the business-strategies doctrine envisions a balancing test under which the court is called upon to evaluate and weigh the competing legitimate interests of the parties as well as those of the target corporation's shareholders. [footnotes omitted]
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