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In re Lululemon Athletica Inc. 220 Litig.

Court of Chancery of Delaware, Wilmington

December 1, 2014, Submitted; April 30, 2015, Decided

CONSOLIDATED C.A. No. 9039-VCP

Opinion

MEMORANDUM OPINION

PARSONS, Vice Chancellor.

In this books and records action under 8 Del C. § 220, I previously ordered the defendant corporation to produce books and records relating to the plaintiffs' investigation of potential insider trading or Brophy claims against the company's founder and then-chairman of the board of directors, as well as potential claims for mismanagement against the other directors. The company produced documents pursuant to [*2]  that order, but the plaintiffs found the production inadequate and moved to enforce the Court's order. Their motion presents several questions for resolution: (1) whether the company must search its non-employee directors' personal email accounts for documents responsive to my previous order; (2) whether certain documents properly were designated as privileged; and (3) even if those documents are privileged, whether the plaintiffs have shown "good cause" under the circumstances to obtain them anyway.

For the reasons stated in this Memorandum Opinion, I deny in part and grant in part the plaintiffs' motion to enforce. Specifically, I conclude that ordering the company to search its non-employee directors' personal email accounts is not warranted, but I find that the plaintiffs have demonstrated "good cause" to access certain documents withheld as privileged.

I. BACKGROUND

A. Parties

Defendant, lululemon athletica, inc. (the "Company" or "lululemon"), is a Delaware corporation with its principal place of business in Vancouver, British Columbia, Canada. Lululemon is a designer and retailer of athletic apparel and operates throughout North American and Australia. Its stock is traded on the [*3]  NASDAQ.

Plaintiffs, Hallandale Beach Police Officers and Firefighters' Personnel Retirement Fund ("Hallandale") and Laborers' District Council Construction Industry Pension Fund ("LDC"), are both lululemon stockholders.

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2015 Del. Ch. LEXIS 127 *; 2015 WL 1957196

IN RE LULULEMON ATHLETICA INC. 220 LITIGATION

Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

Subsequent History: Related proceeding at Laborers' Dist. Council Constr. Indus. Pension Fund v. Bensoussan, 2016 Del. Ch. LEXIS 87 (Del. Ch., June 14, 2016)

CORE TERMS

Email, lululemon, Chain, advice, Non-Employee, fiduciary, waive, attorney-client, stock, colorable, insider, shareholders, non-Company, mismanagement, inspection, broker, wrongdoing, withheld, log, coordinated, unavailable, credible, resign, weighs, crux

Securities Law, Securities Exchange Act of 1934 Actions, Insider Trading, Classical Theory, Elements of Proof, Scienter, Insider Trading, Business & Corporate Law, Corporate Governance, Record Inspection & Maintenance, General Overview, Civil Procedure, Discovery, Methods of Discovery, Inspection & Production Requests, Inspection Rights, Shareholders, Evidence, Privileges, Attorney-Client Privilege, Scope, Privileged Communications, Attorney-Client Privilege, Waiver, Appeals, Appellate Briefs, Reviewability of Lower Court Decisions, Preservation for Review