Litigation: Attorney-client privilege needs special considerations when companies are bought and sold

Buyers should take care to structure their deals so as to maximize the possibility that they can maintain attorney-client privilege

In 1985 the U.S. Supreme Court confirmed that a corporation's officers and directors have the power to assert or waive the attorney-client privilege belonging to the corporation, and that when control of such corporation passes to new management, the authority to assert and waive the corporation's attorney-client privilege also passes. In Commodity Futures Trading Comm'n v. Weintraub. the court also found that former managers may not assert the privilege over the wishes of current managers, even as to statements that the former managers may have made to counsel concerning matters within the scope of their duties. Questions arise, however, when a business or only part of a business is sold or acquired over who then has the right to assert the attorney-client privilege.

Following Weintraub, several courts found that a transfer of assets, without more, was insufficient to affect a transfer of the attorney-client privilege; rather, the acquiring entity must also receive control of the entity possessing the privilege. See In re Grand Jury Subpoenas; Zenith Elecs. Corp. v. WH-TV Broad. Corp., (sale of certain assets did not transfer the right to invoke the attorney-client privilege, despite contract provision stating that the privilege transferred with the sale); Pilates, Inc. v. Georgetown Bodyworks Deep Muscle Massage Ctrs., Inc., (assignee of trademarks had no right to assert the attorney-client privilege where there was no transfer of control of the corporation).

Contributing Author

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Brigid Carpenter

Brigid M. Carpenter is a shareholder at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (Nashville). Her practice focuses on products liability and other tort/personal injury...

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