In the context of mergers and acquisitions, safeguarding attorney-client privileged communications is a paramount concern for sellers. An often overlooked element of this process is the inclusion of a clause within the purchase agreement that effectively stipulates control of such privileged communications. This can prevent post-closing complications related to the attorney-client privilege, as illustrated by recent legal developments.
The issue of attorney-client privilege control was prominently discussed in the case of bioMérieux, Inc. v. Rhodes. In this scenario, a dispute arose when the buyer, bioMérieux, Inc., post-acquisition, attempted to use the target company’s pre-merger privileged communications in a lawsuit targeting the sellers. The discord focused on whether the privilege over certain emails had transferred to the buyer or remained with the sellers.
The court in bioMérieux v. Rhodes delivered a crucial finding: that the control of attorney-client privileges typically follows the target company to the new entity, unless otherwise specified in the merger agreement. This outcome emphasizes the importance of precise contractual language, whereby sellers proactively retain control over such communications.
Sellers should address several key drafting considerations in their transaction agreements. First, they need to ensure the agreement explicitly states the retention of attorney-client privilege relative to all communications pertinent to the merger and its execution. Such clarity can prevent buyers from accessing sensitive communications after the transaction closes. Additionally, the provision should not be confined to communications with designated mergers and acquisitions counsel but encompass all privileged interactions that pertain to the merger process, as highlighted in the Rhodes case.
The Rhodes court’s decision delineated the distinction between the transfer of privilege and the access to those communications. Despite arguments to constrict the scope of the privilege based on the specific counsel involved, the court sided with a broader interpretation aligning with the sellers’ claim that privileged communications related to the merger agreement should remain under their control.
Ultimately, this case underscores the significance of foresight and diligence in drafting merger agreements to manage potential ambiguities and safeguard privileged information. Businesses should consider consultation with legal experts well-versed in these matters to ensure a robust protective framework is in place for post-closing legal challenges. For further insights and a detailed discussion on the subject, refer to the original article by Sara Duran and Grace Dau on Bloomberg Law.