Labor & Employment Law Daily Wrap Up, STATE-LAW CLAIMS—Del. Ch.: Spousal privilege didn’t shield all texts between AI startup executives, (Jun 17, 2026)

By Anne Sherry, J.D.

In one long text exchange, the spouses communicated primarily in a business capacity.

An AI-company founder was entitled to discovery of one text string between his cofounder and the cofounder’s spouse. Four text threads between the couple were protected by spousal privilege, but the fifth was not because the conversation was mostly businesslike. The fact that a message was sent after 10:30 p.m. did not change things because the modern workday no longer ends at 5:00 (Hodes v. Mostaque, No. 2024-0015-JTL (Del. Ch. June 15, 2026)).

Mohammad Emad Mostaque and Cyrus Hodes cofounded Stability AI, Inc., an artificial intelligence company. The agreement was that Hodes would use his connections in the AI industry to promote the company while Mostaque, a former hedge fund manager, ran the business as CEO. Mostaque’s wife was a director and an officer.

Frustrated with the way Mostaque was running the company, and believing it had no value, Hodes sought an exit. The cofounders agreed that Stability would buy Hodes’ shares, but Mostaque bought them instead for a total of $100. Three months after the repurchase, the company raised $101 million in venture capital on the strength of generative AI technology that Mostaque had been developing, allegedly in secret.

In the resulting litigation, Hodes secured discovery, but Mostaque sought to claw back texts between himself and his wife. The Chancery Court was tasked with deciding which, if any, of five text strings were discoverable.

The court noted that the spousal privilege does not protect every confidential communication between spouses, but only those that are in furtherance of and in reliance on the marital relationship. A party challenging the spousal communications privilege can defeat its application by showing that the communication was not made in a spousal role—such as a purely business communication.

After making “five difficult judgment calls,” the court determined that all but one of the text strings were protected by spousal privilege. The four protected texts concerned the spouses’ private relationship and included sensitive exchanges about their interpersonal dynamic. The references to business matters were ancillary to the emotionally charged content.

The fifth text string was longer and saw the spouses communicating mostly in a business capacity. The conversation about employees’ performance was of the kind that any two coworkers might have had. Although the chat reflected frustration between the spouses, business partners can get frustrated with one another. And particularly for executives in a startup, sending messages late at night is normal.

The court accordingly ordered that the text string, redacted as it had already been done, be re-produced. The court also commended the parties’ counsel for managing the difficult issues underlying the dispute.

The case is No. 2024-0015-JTL.

Judge: Laster, J.

Attorneys: Raymond J. DiCamillo (Layton & Finger) for Cyrus Hodes. E. Wade Houston (Abrams & Bayliss) for Mohammad Emad Mostaque and Stability AI, Inc.

Companies: Stability AI, Inc.

Cases: EvidenceDiscovery TortClaims StateLawClaims AINews DelawareNews