Business successors and the transpositional attorney client relationship

business successors and the transpositional attorney client relationship

whose law is extraordinarily influential in corporate transactional Successors and the Transpositional Attorney-Client Relationship, 64 BUS. Advising such a client often requires specialized legal knowledge and skill. Business Successors and the Transpositional Attorney-Client Relationship, 64 Bus. An attorney-client relationship that the courts permit to be asserted by a business successor is referred to in the Article as a "transpositional" relationship.

Chancellor Strine's narrow and tightly woven legalism expands the corporate law's more open textured structures, within which private governance regimes may be constructed in the shadow of and beyond law, to statutory behavior and expectation management rules. Though the language of the opinion is couched in the technical language of statutory interpretation, the underlying conceptual issues and choices among structuring premises make the case far more interesting, and important.

For in choosing the approach to interpretation, the Chancellor is also choosing among normative approaches to the issues of enterprise personality and its consequences for its legal relationships, especially among its stakeholders.

If the entity continues unchanged but its former owners and managers are replaced, to whom does the attorney-client privilege run? An enterprise as person centered perspective might suggest that it is retained by the entity, irrespective of changes in ownership or management.

business successors and the transpositional attorney client relationship

This is essentially a formalist analytical approach. Those changes are irrelevant as long as the institution remains unchanged. This is a perspective that also conflates public and private law views of entities, be they states or corporations.

It's value perhaps substantial is its simplicity. With a focus on the enterprise itself as autonomous, the relationships among other critical stakeholders through which the enterprise actually functions, is diminished and recharacterized as proceeding from out of, rather than as essential to, the autonomy of the enterprise itself. The approach deepens a commitment to a view of corporate personality away from the notion that the corporation is property in the hands of shareholders, to the institutional notion that the enterprise exists beyond its stakeholders--especially shareholder5s, managers and board members.

But there are inefficiencies as well. Such a view suggests that every interaction between enterprise and those individuals who are charged with its directions are always potentially adverse. And the changing character of those interactions will only be definitively resolved after the fact in litigation. That is the great tragedy, for example, in the current litigation among the former university President, the former university general counsel and the university over the role of the general counsel and the character of advice she provided.

Where there is a substantial change in any of them for example, through public offering of a previously private enterprise, where directors are replaced through sale to tender offer, etc.

Where that change is substantial enough, then the emerging enterprise is not the same as its predecessor and the attorney-client privilege might not legitimately pass to it. This perspective focuses on the actual realities of corporate operation, one in which the abstraction of the enterprise is itself only incarnated through the actions of its key stakeholders.

conflict of interest, Freivogel on Conflicts Client Mergers/Asset Sales

It suggests the complexities of agency in that relationship but also that agency here is multi-factorial, that is that it tends to run not to a single "person" but to clusters of persons acting together to form an enterprise.

But this functional approach, perhaps closer to the sociological realities of enterprises than the formal approach, is substantially more difficult to manage in the courts. It is for that reason, if for no other, that it is likely that courts, when faced with this issue, will tend to gravitate toward the more straightforward formalist approach.

Yet, as Chancellor Strine suggests slip op. Page references are to the slip opinion. October 15, Date Decided: November 15, Gregory V. Uebler, Esquire, Robert L. Poss, Esquire, Kathryn L.

Plimus was the surviving corporation in the merger. During that year, the Seller had done nothing to get these computer records back, and there is no evidence that the Seller took any steps to segregate these communications before the merger or excise them from the Plimus computer systems, the control over which was passing to the Buyer in the merger.

Before the court is a motion by the Buyer seeking to resolve this privilege dispute and determine, among other things, that the surviving corporation owns and controls any pre-merger privilege of Plimus or, alternatively, that the Seller has waived any privilege otherwise attaching to those pre-merger communications.

business successors and the transpositional attorney client relationship

AG Paintball Holdings, Inc. There, the court was applying New York law to an asset purchase agreement that excluded certain assets,16 rather than a merger that included all assets, and the parties had agreed that under the specific contractual terms of their transaction, the seller retained the attorney-client privilege over communications relating to the negotiation of the transaction. If the General Assembly had intended to exclude the attorney-client privilege, it could easily have said so.

Tellingly, the Seller admits that the attorney-client privilege has transferred to the surviving corporation for at least some purposes, and the Seller conceded at oral argument that the surviving corporation would, in fact, be able to access and use these same documents if it was necessary to defend itself against a third party.

That sort of micro-surgery on a clear statute is not an appropriate act for a court to take. After the amalgamation the new company caused an investigation to be done concerning the employee at the center of the misrepresentation claim. The court ruled that Law Firm could represent the sellers in this action.

One family group purchased the stock in a closely held corporation "Corp. The purchasing group and Corp. The plaintiffs moved to disqualify the law firm for the defendants "Law Firm" because Law Firm had represented Corp. The trial court denied the motion, and, in this opinion, the New Hampshire Supreme Court reversed. It held that Law Firm could not be adverse to Corp. The court remanded to the trial court so it could decide other Rule 1. The court relied heavily upon Tekni-Plex, Inc.

Meyner and Landis, N. Lawyer resisted, claiming attorney-client privilege. The trial court ruled for No. The court held that No. Meyer and Landis, N. Company B purchased and merged with Company A. Law Firm formerly represented Company A.

Employee of Company A became an employee of Company B. Sometime after the merger Employee left Company B. Employee and Company B began a "food fight" over non-compete agreements and the like this case. Law Firm is representing Employee. One of the issues is whether Employee tortiously interfered with Company B's relationship with Law Firm. In this opinion the court granted Employee summary judgment on that claim, because, under the circumstances, Company B was not a former client of Law Firm.

For one thing, after the merger Company B had never approached Law Firm about representation. The court also noted that it had earlier denied a motion to disqualify Law Firm in this case, finding that Law Firm had never represented Company B. The court found largely the same reasoning applied to both motions.

A and thereby learned information about Corp. A and the relevant industry. A was purchased, and Lawyer's representation ended.

Later, Lawyer made a "significant" investment in Corp. B, a competitor of Corp. In this opinion the committee held that the investment violated Texas ethics rules. Thus, this opinion is largely based upon Texas' version of MR 1.

Under any formulation the opinion points to the correct result. Group One purchased Plimus, Inc. After the sale Group One found on Plimus servers communications between Group Two and their outside law firm regarding the sale. After being notified of this discovery, Group Two asserted attorney-client privilege. Group One moved for an order declaring that it owned the communications.

In this opinion the chancellor ruled that the communications and the privilege passed to Plimus. The court noted that there was nothing in the Delaware law or in the transaction documents that provided to the contrary. The court said that the parties could have contracted around this result, but did not. In the plaintiff in this case purchased Company A and merged it into the plaintiff. Because Lawyer now represents the defendant, the plaintiff moved to disqualify Lawyer.

In this opinion the court granted the motion. First, the court held that by virtue of the merger the plaintiff is deemed a former client of Lawyer. Second, the court held the representations were substantially related.

In re ATopTech, Inc. Law Firm represented Co. A in in a patent suit against Co. A in the merger. The surviving company was called Co. In this case Co. C is infringing Co. Law Firm appeared for Co. Because Law Firm earlier represented Co. B moved to disqualify Law Firm in this case.

The trial court granted the motion. C sought mandamus in the Federal Circuit. In this opinion the Federal Circuit denied mandamus. The court did not analyze the facts or the law of disqualification, but rather chose to discuss the heavy burden upon one seeking mandamus.

The technology involved was electronic design automation EDA. What About Pure Asset Sales? In the following cases the transaction was the sale of all, or substantially all, the client's assets. The issue was whether the law firm for the seller could be adverse to the purchaser. In each case the court held the law firm could be adverse to the purchaser. Telectronics and Yarn Processing involved the transfer of intellectual property. The court cited several cases involving the attorney-client privilege.

The court did not cite any cases involving disqualification, including any of those in the preceding paragraph. Cincinnati Bell sold a subsidiary to DynCorp. After the sale, a lawyer at Cincinnati Bell attempted to be adverse to the subsidiary in an arbitration.

DynCorp sued to enjoin the lawyer from handling the arbitration, because she had earlier represented the subsidiary. The Fourth Circuit affirmed an order dismissing the claim, citing Flanzer. The court said that the lawyer did not currently represent the subsidiary and relied in part on the fact that DynCorp had made no showing that the lawyer would use the subsidiary's confidences.

business successors and the transpositional attorney client relationship

San Diego Unified Port District v. Superior Court, Cal. PD moved to disqualify Law Firm. Thus, the substantial relationship rationale, as it relates to confidences, should not apply.

What constitutes attorney-client privilege?

The court disagreed and ruled the firm should be disqualified. However, the cases it cites on loyalty do not really establish that loyalty is an issue in former client situations. The only focus should be confidentiality. If a lawyer had a duty of loyalty to former clients, then a lawyer could never be adverse to a former client.

Plaintiff moved to disqualify Law Firm in this case. The court disagreed and denied the motion. The court distinguished cases such as Oswall v. Asset Sale; What Happens to Privilege? AG Paintball Holdings, Inc. Plaintiff sold many of its assets to Defendant, but retained some.

business successors and the transpositional attorney client relationship

This suit arises from that transaction. This opinion deals with a discovery dispute and the extent to which the attorney-client privilege of Plaintiff passes with the assets to Defendant.

business successors and the transpositional attorney client relationship

We will not discuss the case in any detail, in part because the asset purchase agreement dealt with some of the issues, and the parties agreed to much of what the court ruled. The only disputed issue was whether Plaintiff retained the privilege as to assets it retained, and the court ruled that it did. The court noted the relevance of Tekni-Plex, Inc. In this case Parus is suing Law Firm because Law Firm assisted another party in obtaining patents competitive to Parus' patents using information from Parus.

Law Firm had earlier represented Vail on patent matters. Vail sold a division to Parus, which included the patents at issue in this case, as well as employees and physical assets. The court applied the "practical consequences" test enunciated by courts from other jurisdictions.

Utah May 15, David Cole "Cole" was an officer and major shareholder of Salt Creek. Inve terminated Cole in Mansfield had been at the Van Cott firm and had represented Salt Creek from untilwhen he left Van Cott and joined the Snell firm. In when Cole sold his stock to Inve, Mansfield represented Cole in negotiating Cole's employment agreement. Mansfield billed that time to Salt Creek.