Document Type

Article

Publication Date

2018

Department

Law

Abstract

In recent years, parties to mergers and other transformational transactions have begun inserting into their deal documents provisions allocating post-transaction control of the attorney-client privilege for pretransaction communications. The controller of the privilege is the person or entity who decides whether to assert the privilege or, rather, to waive it. Commonly, representatives of the target entity in a merger or representatives of an asset seller in a transformational sale want post-transaction control of the privilege for pre-transaction communications relating to the transaction. They want control of the privilege so the surviving entity cannot access or use those communications against the pre-transaction representatives in post-transaction litigation. Though contractual privilege allocation provisions are now common in transformational transactions, the question of whether these provisions should be enforceable has garnered little attention. If the attorney-client privilege were an asset such as a piece of equipment, there would be no question that the asset could be allocated by contract. But the attorney-client privilege is not a typical asset; it represents a careful balance of public goals and policy and as such is not an asset of any one actor. The precise bounds of the privilege are set by courts and legislatures. They have determined the balance of the societal interest in a justice system that effectively and efficiently finds the truth and the secondary but important interest behind the privilege in assuring that clients fully disclose all matters to their attorneys so that they can have the best possible representation and abide within the law. When private parties contract to allocate control of the privilege, those parties contract to maximize their collective good, but in doing so they are resetting the bounds of the privilege in a way that overrules the balance set so carefully by courts and legislatures—a balance set with full consideration of societal interests. When dealing with claims of privilege based on common interest, courts have not allowed parties to dictate the existence of a common interest if, in fact, no common interest as determined by the court, exists. These courts have not allowed parties to reshape the privilege by contract. Similarly, control of the privilege for an entity should not be contractually alienable apart from control of an entity. As courts refuse to honor contractual extensions of statutes of limitations before a cause of action accrues because of the public interest at issue, so too should courts refuse to enforce contractual privilege allocation provisions. Control of the privilege for an entity should not be contractually alienable apart from control of the entity.

Original Publication Information

Giesel, Grace M., "Control of the Attorney-Client Privilege after Mergers and Other Transformational Transactions: Should Control of the Privilege Be Alienable by Contract?" 2018 Seton Hall Law Review, 48(2), 309.

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