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Joseph M. McLaughlin and Shannon K. McGovern. Courtesy photos Joseph M. McLaughlin and Shannon K. McGovern. Courtesy photos

When a company is acquired, who “owns” the company’s pre-acquisition, attorney-client privileged communications—the buyer or the seller? Where a merger or other combination is effectuated under Delaware law, Delaware courts follow a bright-line rule that any attorney-client privilege attached to pre-merger communications—whether they relate to business operations or the negotiation of the merger itself—pass to the acquirer in the merger, unless the parties agree otherwise in the merger agreement. Under New York law, in contrast, courts apply a rule, informed by public policy, that the seller transfers to the buyer its privilege on most subjects but retains control of pre-merger privileged communications that relate to the merger and its negotiation. The Second Department recently addressed a variation on these divergent approaches—a New York court deciding who controls privilege when the core transaction documents contain a Delaware choice of law provision but the litigation is not brought under the transaction documents. Reversing a trial court decision, the Second Department held in Askari v. McDermott, Will & Emery, 2019 WL 6334192 (N.Y. App. Div. Nov. 27, 2019), that a dissolved seller and its controlling shareholder retained control over privileged pre-merger communications with their counsel because the plaintiffs’ claim of replevin against their former counsel did not involve the enforcement or interpretation of any Delaware-law transaction document.

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