In re Cloudflare, Inc. Stockholder Litigation, C.A. No. 2026-0772-JTL (Del. Ch. Oct. 16, 2026), full opinion (PDF)
When directors negotiate a deal in auto-deleting chats, the messages that could test their later testimony may be gone. A court may then infer what those messages would have shown. In the Cloudflare stockholder litigation, a special committee and the company's founders had discussed a contested recapitalization on Signal. At the preliminary injunction stage, the Delaware Court of Chancery drew inferences from the missing messages, although the plaintiffs had filed no spoliation motion. The court also discounted defense testimony about the chats, because surviving messages showed substantive discussion of the deal.
The court granted a preliminary injunction that bars the recapitalization from closing pending the post-trial disposition of the case. It tied that injunction to the defendants' credibility problems, which included their Signal use.
What happened
During the committee's process, its members used Signal to discuss the recapitalization among themselves, with the founders, and with other directors. According to the court, the auto-delete settings on many of the chats resulted in "irretrievable deletion in days or weeks." The participants had been advised to expect stockholder litigation, the court noted. Even so, no one disabled the auto-delete settings until after a litigation hold was in place.
The court pointed to chat names such as "CF Special Committee" as indicating that some chats were created for the recapitalization. As the negotiations grew contentious, participants opened new chats and shortened deletion settings on existing ones. In the final days of negotiation, one founder created another chat and set it to delete messages after one day. The court observed that the defendants could provide no explanation for shortening the settings.
The court's analysis
In depositions, defense witnesses denied using the chats for substantive communications about the recapitalization. At this stage of the proceedings, the court discounted those denials, because surviving messages indicated otherwise. In the court's view, the defendants' extensive Signal use damaged their credibility further.
The defendants argued that any inference from the missing messages required a formal spoliation motion and ruling. The court reasoned that it could instead review the record to assess what inferences the Signal use, together with the gaps in the record, supports. In the court's words, that review "is not drawing an adverse inference based on spoliation; it draws an inference based on what the record contains and omits."
The court explained that a party's failure to produce strong evidence that should have been available can support an inference that the absent evidence would have been adverse. In this case, the court said, the strong evidence would have been the contemporaneous Signal messages.
The defendants prevailed on every question of statutory interpretation under Section 144 of the Delaware General Corporation Law. The safe harbor they invoked, however, requires a committee that acted in good faith. On the record as a whole, the court concluded that the plaintiffs had a reasonable probability of showing that the committee failed to act in good faith. The court explained that the defendants' credibility issues required it to hear their testimony at trial.
Why it matters
A board or committee advised to expect litigation over a transaction should turn off auto-delete as soon as the advice is given. That step reaches every channel the members use for the deal. Counsel who deliver the litigation-risk warning are well placed to raise message retention in the same conversation, before any hold notice issues.
A party that shortens a deletion setting during a contested negotiation should expect to explain the change under oath. A court may treat an unexplained change as one more reason to doubt that party's witnesses.
A witness may testify that an ephemeral channel carried no substantive discussion. Before the deposition, defense counsel should compare that account with every surviving message from the channel. A single contradicted denial can affect how a court weighs the rest of the witness's testimony.
A requesting party can ask the court to infer from the record that missing messages were adverse, without first moving for spoliation sanctions. Chat names, creation dates, deletion settings, surviving messages, and witnesses' own testimony about the chats can all support the inference. At the preliminary injunction stage, the Cloudflare court rejected the defendants' argument that a formal spoliation motion had to come first. A party that lost messages should prepare to meet the inference whether or not a sanctions motion is filed.
The full opinion is available as a PDF.
