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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.

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Showing 2 posts in Attorney Client Privilege.

Chancery Denies Director Access to Privileged Materials Involving Counsel to Preferred-Appointed Directors

Posted In Attorney Client Privilege, Chancery, Directors

Gilmore v. Turvo, Inc., C.A. No. 2019-0472-JRS (Del. Ch. Aug. 19, 2019).

As several Delaware decisions teach, each director, as a member of the larger deliberative body that is the board, has a fundamental right to access corporate information to carry out his or her fiduciary duties.  Thus, as a general rule, a Delaware corporation “cannot assert the privilege to deny a director access to legal advice furnished to the board during the director’s tenure.”  There are several exceptions to this rule.  More ›

Merger Agreement’s Preservation of Privilege for Pre-Merger Communications Found to be Adequate, Notwithstanding that the Surviving Company Took Possession of E-Mails

Posted In Attorney Client Privilege, Cases, M&A, Merger Agreements

Shareholder Representative Services LLC v. RSI Holdco, LLC, C.A. No. 2018-0517-KSJM (Del. Ch. May 29, 2019).

This decision confirms that, in a post-merger dispute between an acquirer and the selling stockholders, broad contractual language can prevent a waiver of the acquired company's privileged pre-merger communications, even if the surviving company takes physical possession of the communications. RSI Holdco, LLC acquired Radixx Systems International, Inc. in 2016, and the merger agreement designated Shareholder Representative Services LLC as representative of Radixx's selling shareholders. As part of the merger, RSI Holdco acquired Radixx’s computers and email servers, which contained 1200 pre-merger emails between Radixx and its counsel; Radixx had not excised or segregated the communications from other data. However, the merger agreement contained a detailed provision that (1) preserved Radixx’s privilege, (2) assigned it the representative of selling stockholders, (3) required the parties to take steps to ensure that the privilege remained in effect, and (4) prevented RSI Holdco from relying on the privileged communications in post-merger litigation. In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. 2013), the Court had found that privilege transferred to the surviving company in a merger as a matter of law pursuant to section 259 of the DGCL because (i) the parties did not address privilege in the merger agreement, and (ii) because the at-issue communications were turned over. Great Hill cautioned future parties to "use their contractual freedom" to exclude privileged communications from the transferred assets. Here, the Court rejected RSI Holdco's argument that the failure to excise the communications waived privilege in this circumstance, and the Court noted that even if the privilege had been waived, the merger agreement still prevented RSI Holdco from relying on the communications in the litigation. Thus, the Court concluded that the sellers "heeded the Great Hill court's advice" and found the detailed provision in the merger agreement preserved the privilege attached to the pre-merger communications.