Delaware Court Enforces Contractual Provision Preserving Attorney-Client Privilege Over Seller’s Pre‑Disposition Communications

Corporate communications during the acquisition process – including those between the seller and the company’s counsel – transfer with all other assets of that company upon disposition. As a result, sellers involved in post-disposition disputes may be unable to assert attorney-client privilege over those communications once they become property of the buyer – which may be, in some situations, the counterparty of the dispute. In a recent case, the Delaware Court of Chancery affirmed that appropriate contractual language can effectively preserve a seller’s right to assert the attorney-client privilege over pre-acquisition communications with the company that remain on the company’s computer servers and are transferred to the buyer. The court also found that a “no-use” clause, which protected attorney-client privileged communications as of the closing date, was not affected by post-closing date conduct. This article outlines the background of the dispute and examines the court’s analysis in reaching its decision. For more on the attorney-client privilege, see “Federal Court Decision Narrows the Scope of Attorney-Client Privilege Available to Fund Managers in Internal Investigations” (Jan. 23, 2014); and “Six Recommendations for Private Fund Managers Seeking to Protect Themselves From Waiver of Attorney-Client Privilege When Faced With SEC Document Requests” (Jan. 17, 2013).

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