In Re Howard Midstream Energy Partners, LLC, C.A. 2021-0487-LWW

Background

Howard Midstream Energy Partners, LLC was governed by a six‑member board; co‑founders Howard and Bynum (and CFO Archer) were directors designated by a controlling affiliate group.
In April 2021 the Board created a Special Committee to evaluate executive/personnel matters after a dispute between Howard and Bynum; the Committee recommended that one co‑founder leave.
On April 25, 2021 the Special Committee and Howard requested resignations of Bynum, Archer, and General Counsel Braden; petitioners retained litigation counsel and entered separation negotiations and threatened litigation.
Between April 25 and the May 27, 2021 board meeting the Company’s outside and in‑house counsel prepared privileged communications and the Special Committee and Howard allegedly formed a secret alliance to effect removals at the May 27 Meeting.
Petitioners filed suit on June 3, 2021 and obtained a status‑quo order; they moved to compel production of privileged materials prepared April 25–May 27, arguing that any privilege was waived or that they retained a reasonable expectation of being clients of company counsel for concealed governance actions.
The Court concluded petitioners were openly adverse to the Company beyond mere negotiation, that the Special Committee and Company could properly withhold privileged communications (including those involving Howard), and denied the Motion to Compel.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether directors (Bynum/Archer) are entitled to company privileged communications created Apr 25–May 27 while they remained directors	Petitioners: adversity was limited to separation negotiations; concealed Committee plans were unknown so they reasonably expected to be clients of Company counsel and thus entitled to communications	Company/Respondents: open adversity existed after Apr 25; petitioners had retained litigation counsel and anticipated litigation, so no reasonable expectation of privilege	Court: Held for Company — adversity was sufficiently broad; petitioners had no reasonable expectation of being clients for matters related to their removal; Motion denied
Whether Special Committee communications with Company counsel remained privileged and could exclude petitioners	Petitioners: involving Howard and Company employees waived Committee privilege	Company/Respondents: Committee had common interest with Company; discussions with Company counsel fell within Committee mandate and privilege was not broadly waived	Court: Held for Company — Special Committee communications within its mandate could be privileged; inclusion of Howard did not effect a broad waiver
Whether petitioners’ early retention of litigation counsel and correspondence created a work‑product/anticipation‑of‑litigation inference of adversity	Petitioners: some withheld materials were work product but that doesn't entitle them to Company privileged materials	Company: petitioners’ engagement with litigation counsel showed they anticipated litigation and were adverse	Court: Held for Company — petitioners’ own work‑product withholding and counsel involvement supported finding of adversity
Whether Company in‑house counsel communications could be protected despite Committee involvement	Petitioners: in‑house involvement undermines claim of confidentiality	Company: Committee could direct employee cooperation without waiving privilege; confidential legal advice to Committee and Company may be withheld from adverse directors	Court: Held for Company — communications with in‑house counsel (other than petitioners’ counsel) remained protected

Key Cases Cited

Zirn v. VLI Corp., 621 A.2d 773 (Del. 1993) (discusses work‑product protection for materials prepared in anticipation of litigation)