Delaware Business Litigation Report

Delaware Superior Court Holds That Attorney-Client Privilege Was Retained By Seller Post-Merger

Biomerieux, Inc. v. Rhodes, C.A. No. N23C-10-067 (Del. Super. May 9, 2024).
The default rule in Delaware is that the attorney-client privilege transfers from the target corporation to the surviving corporation in a merger. This rule was established by the Court of Chancery’s leading decision in Great Hill Equity Partners IV, LP v. SIG Growth Fund I, LLLP, where the Court found that, under Section 259 of the Delaware General Corporation Law, the attorney client privilege was a “privilege” whose ownership transferred to the surviving corporation, by Section 259’s express terms. This decision from the Delaware Superior Court’s Complex Commercial Litigation Division demonstrates that parties can contract around the default rule by agreement. Here, the parties’ merger agreement provided that the attorney-client privilege “regarding” the merger agreement would remain with the sellers. Accordingly, the Court granted the seller-defendants’ motion to strike the buyer-plaintiffs’ use of an email containing the seller-defendants’ counsel’s legal advice “regarding” the merger agreement. The Court reasoned that, under the terms of the parties’ agreement, the attorney-client privilege remained with the seller-defendants and, thus, the buyer-plaintiffs were not entitled to use the privileged email.

Share