Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, C.A. No. 7906-CS (Del. Ch. Nov. 15, 2013).
Issue Addressed: In an issue of first impression, the Court of Chancery interpreted DGCL Section 259 to grant the ownership of pre-merger attorney-client communications to the buyer of the corporation. The issue arose because pre-merger communications between seller’s counsel and the acquired company were found on the computers of the acquired company after the merger. The court determined that because it was not expressly addressed otherwise in the applicable agreements, the attorney-client privilege passed to the surviving corporation in the merger as a matter of law under Section 259 of the DGCL.
Practice Pointer: One obvious result of this decision is that drafters of merger agreements will need to explicitly address the issue of who “owns” the attorney-client privilege to the extent that pre-merger or pre-acquisition attorney-client communications with the acquired entity become an issue in post-merger litigation.
As the court often does, regarding a matter of first impression, it reviewed the leading treatises on Delaware corporate law and corporation law in general to conclude that the issue had not previously been resolved. See footnote 6. Although DGCL Section 259 applies to mergers, the statute uses the broadest possible language to include all privileges of the constituent corporations passed to the surviving corporation in a merger.
Careful attorneys will scrutinize this opinion for its insights regarding other business combinations in addition to statutory mergers. See footnotes 29 through 31 regarding articles with practice commentary.