Episode summary. On February 17, 2026, federal Judge Jed Rakoff issued the first nationwide ruling holding that conversations with consumer AI chatbots are not protected by attorney-client privilege and are fully discoverable in litigation. Six weeks later, the Delaware Court of Chancery used a CEO's deleted AI chat logs as trial evidence in a $250 million earnout dispute. This episode walks CEOs, GCs, and CISOs through what the courts actually held, what it means for your company in practice, and the five specific moves to make this week.
Why this matters. Every prompt your employees type into ChatGPT, Claude, Gemini, or Copilot is now a timestamped, logged document living on a third party's servers under terms that explicitly permit disclosure to regulators and courts. The candor of AI conversations — precisely because employees feel they are thinking in private — makes them disproportionately damaging in discovery. This is the AI wake-up call, and it lands harder than email did in the 2000s or Slack did in the 2010s.
The Four Rulings You Need to Know
1. United States v. Heppner — No. 25 Cr. 503 (JSR), 2026 WL 436479 (S.D.N.Y. Feb. 17, 2026). Judge Jed S. Rakoff, Southern District of New York. The anchor case. Bradley Heppner, former Chair of GWG Holdings, was indicted for securities fraud allegedly costing investors more than $150 million. Facing a grand jury subpoena, he used the free version of Anthropic's Claude to generate 31 documents analyzing his defense strategy and shared them with Quinn Emanuel. FBI agents seized the documents during a Dallas search warrant. The government moved to compel. Rakoff — calling it "a question of first impression nationwide" — ruled the documents were not privileged on three independent grounds and found they may have even waived privilege over the original attorney-client communications Heppner had pasted into Claude.
2. Fortis Advisors LLC v. Krafton, Inc. — C.A. No. 2025-0805-LWW (Del. Ch. Mar. 16, 2026). Delaware Court of Chancery, Vice Chancellor Will. Krafton acquired Unknown Worlds Entertainment (maker of Subnautica) for $500M up front plus a $250M earnout. When the deal soured, Krafton's CEO used an AI chatbot to draft a "Response Strategy to a No-Deal Scenario" including a "pressure and leverage package" and a "two-handed strategy" combining legal pressure with softer retention offers. The court quoted the AI logs extensively to establish pretextual intent — and noted the CEO's admitted deletion of some logs may "factor prominently" in the damages phase. Civil discovery, not criminal. The reasoning travels.
