Insights

Good Note Taking Practices for Corporate Directors

May 17, 2016

Management Liability/D&O

Corporate directors are routinely given the advice that they should avoid taking notes lest the notes be used against them in litigation. A good friend of mine—who also happens to be an experienced litigator—likes to tell directors that they can take all the notes that they like, just write at the top: “Ladies and gentlemen of the jury ….”

But what if you are the type of person who needs to take notes to do your job well? Indeed, if we were talking about any other intellectually challenging endeavor that involves synthesizing large amounts of information in order to make critical judgments, everyone would just assume that taking notes is part of the process.

notepad coffee

Let me clarify that when talking about notes in this article, I’m talking about any writing that you create to prepare for a board meeting or that you create during a board meeting.

Notes can include things like research, observations or even questions. Notes might be taken on anything from random scraps of paper to a notebook to electronic media like a laptop or tablet.

Why Notes Can Cause Concern

It’s worth being cautious about notes. These seemingly harmless scribblings have the potential to become a part of your corporate records the minute you create them.

We know that, in litigation, director notes found in notebooks, margin notes or in any type of electronic storage are routinely subpoenaed, as I alluded to in the introduction. In deposition, a director may be asked to explain his or her notes (and random doodles) in detail.

Notes also can be the subject of a Section 220 books and records request. (For more on how to prepare if you get one of these requests, see an earlier post I wrote here.)

One recent case involving Yahoo affirmatively held that a CEO’s notes and emails were a part of the corporate record and subject to being turned over to plaintiffs pursuant to a Section 220 books and records request.

To be sure, Yahoo went to great efforts to say that emails and notes were beyond the scope of a Section 220 books and records request as it tried to limit the scope of the request to “board-level documents.” Yahoo was not successful.

Amalgamated Bank vs. Yahoo! Inc.

In Amalgamated Bank vs. Yahoo! Inc., Yahoo was asked to hand over books and records as part of an investigation of the hiring and firing of Yahoo’s chief operating officer, Henrique de Castro.

These documents included Yahoo CEO Marissa Mayer’s emails and notes. From the Delaware Court of Chancery’s opinion (February 2016):

The evidence establishes that the Mayer Documents are necessary for a meaningful investigation of de Castro‘s hiring … Her documents, including notes and emails, will provide otherwise unavailable information about and insight into her discussions and negotiations. Those books and records will show what Mayer knew and when, and they will reveal any variations between what Mayer knew and what she told the Board.

In its defense, Yahoo argued that electronic documents are beyond the scope of Section 220 books and records requests, however, the Court disagreed:

Although it is true that Section 220 does not contain those words, Yahoo is wrong that inspection rights are limited to paper records. Stockholder inspection rights in Delaware date from the turn of the twentieth century, when the courts recognized them under the common law … In that era and for a long time afterwards, courts logically focused on paper documents, but times have changed … Today, over 90% of business documents are stored electronically … Limiting “books and records” to physical documents “could cause Section 220 to become obsolete or ineffective.”

The Court’s conclusion makes it clear that emails and notes can be part of a corporation’s books and records and thus subject to being delivered to plaintiffs in response to a properly made books and records request.

6 Best Practices for Note Taking

Given the likelihood that your notes may be used against you in a court of law if you find yourself in litigation, should you be taking them at all?

I believe the answer is yes, in a prudent manner. If you need to take notes to do your job well, then do so—and also be mindful that somebody may review those notes.

Consider some best practices as part of your personal note-taking protocol:

  1. If you’re taking notes, take relevant notes. Don’t also make shopping lists, doodle sketches, and write with a level of randomness that will be hard to explain in the future. The last thing you want is for scribbles in your notebook to be characterized as evidence that you were not paying attention. As you take notes, also be cautious about casually or cavalierly writing down things that you don’t really mean or that could be open to a negative interpretation (e.g., “double check,” “unlikely,” “BS,” etc.).
  1. If your notes contain questions or concerns, be sure to get those issues addressed. Then be sure to indicate in your notes that those issues were addressed. This might mean jotting down the results of your inquiry, checking a box, or just crossing something out from a list of things you’re pursuing. Whatever it is, show resolution. It will help you if your notes indicate that your questions were answered.
  1. Consider taking a disciplined approach to document retention for yourself. As I discussed in last week’s post, corporations benefit from having a systematic approach to discarding documents in the absence of litigation. Having, and following, a similar policy for yourself is a good idea.
  1. Always remember that once litigation becomes probable, it’s never appropriate to change or destroy notes. You want to avoid being accused of spoliation of evidence—a serious offense.
  1. As part of your document retention policy, think about the notes that simply aren’t necessary to keep. Discard all notes that you would describe as “obsolete,” “no longer useful” and “not worth storing”—like notes related to a board meeting that can be discarded after the official meeting minutes have been approved.
  1. Keep in mind that while electronic notes can sometimes feel more efficient, they can be a trap for the unwary. You’re less likely to have a disciplined approach to deleting e-files because storage is seemingly endless and notes are out of sight. Particularly when it comes to electronic notes, it’s amazing what can be reconstituted even after you think something was deleted. Because of this, board members who use electronic means to take notes need to be extra thoughtful about what they write down in the first place.

Whether or not you take notes is a personal decision. Those who take no notes may be taking the risk of coming across either as overly conservative or derelict in their duties.

In all cases, what you don’t want to do is to create an opportunity for your notes (or the lack thereof) to be used against you. If you can be thoughtful about what you write and disciplined about what you retain, you are likely to be just fine.

 

 

The views expressed in this blog are solely those of the author. This blog should not be taken as insurance or legal advice for your particular situation. Questions? Comments? Concerns? Email: phuskins@woodruffsawyer.com.

See all articles by Priya Cherian Huskins, Esq.

All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Priya Cherian Huskins, Esq.

Senior Vice President, D&O

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn

Priya Cherian Huskins, Esq.

Senior Vice President, D&O

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn