In an extremely detailed analysis, the Second Department illustrates the difference between NY and Delaware attorney-privilege law in Askari v McDermott, Will & Emery, LLP 2019 NY Slip Op 08547 Decided on November 27, 2019 Appellate Division, Second Department
Austin, J., J.
“The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law” (Upjohn Co. v United States, 449 US 383, 389; see Spectrum Sys. Intl. Corp. v Chemical Bank, 78 NY2d 371, 377). “Its purpose is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice” (Upjohn Co. v United States, 449 US at 389; see Spectrum Sys. Intl. Corp. v Chemical Bank, 78 NY2d at 377). “The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer’s being fully informed by the client” (Upjohn Co. v United States, 449 US at 389).
1. New York Law
Under New York law, the attorney-client privilege regarding pre-merger communications between an attorney and his or her client which are related to a business/corporate merger does not fully pass to the new or surviving company/buyer, but remains with the former shareholders of the prior company/seller (see Tekni-Plex, Inc. v Meyner & Landis, 89 NY2d at 130). In Tekni-Plex, the Court of Appeals determined that the buyer in a corporate acquisition controlled the attorney-client privilege as to some, but not all, of the pre-merger communications (see id. at 127). In that case, Tekni-Plex, Inc. (hereinafter the original Tekni-Plex) was a Delaware corporation which had 18 shareholders and a 5-member board of directors. Tom Y. C. Tang was a director as well as a shareholder (see id.). In 1986, Tang became the sole shareholder, president, chief executive officer, and sole director of the original Tekni-Plex (see id.).”
“With respect to disclosure of the law firm’s files to the new Tekni-Plex, the Court of Appeals determined that “[a]s for confidential communications between [the original] Tekni-Plex and [the law firm] generated during the law firm’s prior representation of the corporation on environmental compliance matters, authority to assert the attorney-client privilege passed to the corporation’s successor management” (id. at 130). However, the Court distinguished the communications made during the acquisition:
“New Tekni-Plex, however, does not control the attorney-client privilege with regard to discrete communications made by either [the original] Tekni-Plex or Tang individually to [the law firm] concerning the acquisition—a time when [the original] Tekni-Plex and Tang were joined in an adversarial relationship to Acquisition. Consequently, new Tekni-Plex cannot assert the privilege in order to prevent [the law firm] from disclosing the contents of such communications to Tang. Nor is new Tekni-Plex entitled to the law firm’s confidential communications concerning its representation of [the original] Tekni-Plex with regard to the acquisition” (id.).
Thus, the Court of Appeals made a clear distinction between confidential communications regarding a company’s ongoing operations and those related to its acquisition (see id. at 136). The Court noted that, during the acquisition negotiation process, the predecessor company and its shareholders were in an adversarial relationship with the successor company (see id. at 138-139). Therefore, the original Tekni-Plex continued to control the attorney-client privilege with respect to confidential communications concerning the acquisition, and was entitled to refuse to disclose such communications to the new Tekni-Plex (see id. at 138-139; Fochetta v Schlackman, 257 AD2d 546, 546 [“Given the extent of plaintiff’s ownership interest and managerial involvement in defendant corporations prior to the disputed stock surrender, the motion court properly determined that the attorney-client privilege was not properly invoked by defendants to deny plaintiff access to otherwise privileged pre-surrender materials essential to the proof of his claims”]; see also Orbit One Communications, Inc. v Numerex Corp., 255 FRD 98, 104, 106-107 [SD NY] [“Allowing Numerex to control Old Orbit One’s privilege would lead to a fundamentally unfair result. . . . Numerex cannot both pursue the rights of the buyer and simultaneously assume the attorney-client rights of the buyer’s adversary, Old Orbit One. Old Orbit One retained ownership of, and continues to control, the attorney-client privilege as to confidential communications with [the law firm which represented it throughout the acquisition negotiations] concerning the acquisition transaction” [citation omitted]).”