(Reuters) - The Delaware Supreme Court on Tuesday gave an investor probing possible fraud and mismanagement at Palantir Technologies Inc more power to litigate against and inspect emails of the data analytics company co-founded by Silicon Valley billionaire Peter Thiel.
In a 3-0 vote, the court said a lower court judge abused his discretion by preventing KT4 Partners LLC from using materials from Palantir in litigation outside Delaware, and from reviewing emails related to Palantir’s investors’ rights agreement.
The decision is a victory for KT4’s Marc Abramowitz, who said Palantir wrongly blocked him from selling his estimated $60 million stake after a 2015 falling out with Chief Executive Alexander Karp, who had accused him of stealing the Palo Alto, California-based company’s intellectual property.
Lawyers for Palantir and KT4 did not immediately respond to requests for comment.
Palantir handles work for U.S. defense and intelligence agencies, and its software has been credited with helping track down al Qaeda leader Osama bin Laden in 2011. The company was valued at $20 billion after a 2015 funding round.
Last February, Judge Joseph Slights of the Delaware Court of Chancery let KT4 inspect some Palantir financial records, saying it had shown “a proper purpose of investigating potential wrongdoing” and a credible basis to probe further.
But in Tuesday’s Supreme Court decision, Chief Justice Leo Strine said Slights did not justify restricting KT4’s use of Palantir books and records in litigation only in the Court of Chancery, and not in other Delaware courts or in states such as California, where Palantir had itself sued KT4.
Strine said the restriction could lead to wasteful, overlapping litigation in multiple jurisdictions, and deny KT4 a “safety valve” if the chancery court were unable to assert jurisdiction over Karp and Thiel.
The chief justice also found it unfair for Palantir to keep shareholders such as KT4 “in the dark” by withholding emails, given its lack of formal board resolutions or minutes that might have satisfied KT4’s needs.
“Emails and other electronic communications do much of the work of the paper correspondence of yore,” Strine wrote. “[A] corporation cannot insist on a production order that excludes emails even if they are in fact the only responsive corporate documents that exist and are therefore by definition necessary.”
Strine rejected other KT4 claims, and returned the case to the lower court.
The case is KT4 Partners LLC v Palantir Technologies Inc, Delaware Supreme Court, No. 281.
Reporting by Jonathan Stempel in New York; Editing by Richard Chang
Our Standards: The Thomson Reuters Trust Principles.