In Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, the Delaware Court of Chancery held that in a merger under Delaware law, privilege over the absorbed corporation’s communications with its counsel, including those relating to acquisition by the surviving corporation, pass to the surviving corporation.
The case arose from a suit filed by Great Hill Equity Partners IV, LP, et al. (the “Buyer”), alleging that former shareholders and representatives of Plimus, Inc. (the “Seller”) fraudulently induced the Buyer to acquire Plimus, Inc. (“Plimus”). Plimus was the surviving corporation in the merger.
After the Buyer brought the suit, a full year after the merger, it notified the Seller that, among the files on the Plimus computer systems that the Buyer acquired in the merger, it had discovered certain communications between the Seller and Plimus’s then-legal counsel regarding the transaction. During that year, the Seller had done nothing to get these computer records back, and there was no evidence that the Seller took any steps to segregate these communications before the merger or excise them from the Plimus computer systems. Additionally, the merger agreement lacked any provision excluding pre-merger attorney-client communications from the assets of Plimus that were transferred to the Buyer. Nonetheless, the Seller asserted the attorney-client privilege over those communications on the ground that it, and not the surviving corporation, retained control of the attorney-client privilege that belonged to Plimus for communications regarding the negotiation of the merger agreement.