A corporate governance and trade secret case in Delaware involved a complex dispute between the co-founders of an artificial intelligence startup. The plaintiff alleged that the defendant co-founder breached his fiduciary duties by secretly developing valuable generative AI text-to-image software using company resources while simultaneously maneuvering to repurchase the plaintiff’s equity shares for a nominal sum. Shortly after the defendant personally purchased the plaintiff’s one million shares for a total of one hundred dollars, the company achieved a massive valuation increase, raising $101 million at a $1 billion valuation.
During the discovery phase of the litigation, the plaintiff sought the production of text message strings between the defendant and his wife. The defendant invoked the spousal communications privilege to withhold the text strings. The plaintiff moved to compel production, arguing that the wife was heavily involved in the corporate operations, serving as the enterprise’s chief operating officer and head of public relations. The core legal issue centered on whether internal corporate communications discussing business operations and the buyout strategy could be shielded from discovery merely because the two corporate officers were married.
The Court of Chancery granted the motion to compel in part by overriding the blanket assertion of spousal privilege for communications that were fundamentally corporate in nature. The court reminded everyone that the privilege does not attach to business communications simply because the officers share a marital relationship, particularly when the messages concern the strategic operations of the enterprise. The court explicitly emphasized the discovery threshold under the rules, noting that “[p]arties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case”. Because the withheld text messages were central to the allegations of secret corporate development and the allegedly fraudulent buyout scheme, the court ordered the production of the relevant communications to allow the plaintiff to prosecute his fiduciary duty claims.
The case is Hodes v. Mohammad Emad Mostaque, et al., C.A. No. 2024-0015-JTL (Del. Ch. June 15, 2026)
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, real estate, and other issues. He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
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