Legal Definitions - Garner doctrine

The Garner doctrine is a legal principle that creates a limited exception to the attorney-client privilege in specific circumstances. It allows shareholders, when they are suing a corporation's management on behalf of the corporation itself (a type of lawsuit known as a derivative action), to access confidential communications that occurred between the corporation's officers and its attorneys. This doctrine recognizes that in a derivative action, the shareholders are essentially stepping into the shoes of the corporation, and therefore, the privilege may not apply against them if management is accused of harming the company.

For the Garner doctrine to apply, the shareholders must demonstrate "good cause" to the court. This means they need to show a legitimate and compelling reason why the privileged information is necessary for their case, indicating that their claim is not frivolous and that the information is highly relevant to proving the alleged wrongdoing by the corporation's management. However, it's important to note that this doctrine does not extend to an attorney's "work product," which includes materials prepared by an attorney in anticipation of litigation.

• Example 1: Allegations of Executive Misconduct

  Imagine a scenario where a group of shareholders of "Apex Innovations Inc." files a derivative action against the company's CEO and several board members. They allege that the CEO misused corporate funds for personal gain and approved contracts with a vendor owned by his family, causing significant financial losses to Apex Innovations. The shareholders suspect that the company's general counsel provided legal advice to the board regarding these transactions, and that this advice might reveal whether the board was aware of the CEO's alleged misconduct or failed in its oversight duties. The shareholders could invoke the Garner doctrine, arguing they have "good cause" to access these confidential communications because they are suing on behalf of the corporation, and the information is crucial to proving the board's potential breach of fiduciary duty to the company.

• Example 2: Questionable Acquisition Deal

  Consider "Global Dynamics Corp." where shareholders initiate a derivative action against the board of directors after a major acquisition deal collapsed, resulting in a substantial financial loss for the company. The shareholders believe the board rushed into the deal without proper due diligence and ignored warnings about significant regulatory hurdles. They seek access to legal opinions and advice provided by Global Dynamics' external counsel to the board concerning the merger's viability, potential legal challenges, and regulatory compliance. By applying the Garner doctrine, the shareholders would argue that these communications are essential to determine if the board acted negligently or in bad faith in approving the merger, thereby harming the corporation. They would need to demonstrate "good cause" by showing a reasonable basis for their belief that the board's actions were detrimental and that the legal advice is relevant to assessing the board's decision-making process.

• Example 3: Concealed Product Liability Risks

  Suppose shareholders of "MediCare Solutions Ltd." bring a derivative action against the company's executives and board, alleging they deliberately concealed known design flaws in a new medical device, leading to patient injuries, product recalls, and massive legal settlements. The shareholders suspect that the company's in-house legal department advised the executives on the severity of the risks and the legal obligations for disclosure, but this advice was ignored or suppressed. Under the Garner doctrine, these shareholders could petition the court to compel the disclosure of those confidential legal communications. They would need to establish "good cause" by presenting evidence suggesting that the executives acted against the company's best interests by concealing the flaws, and that the legal advice is critical to understanding the extent of the board's knowledge and their subsequent actions or inactions regarding the product's safety.