Attorney-Client Privilege as Passing with Sale of Business, Even If Asset Sale - Joseph Hage Aaronson

Commercial Litigation and Arbitration

Commercial Litigation and Arbitration

Attorney-Client Privilege as Passing with Sale of Business, Even If Asset Sale

From Gilday v. Kenra, Ltd., 2010 U.S. Dist. LEXIS 106310 (S.D. Ind. Oct. 4, 2010):

Kenra, Ltd. *** purchased substantially all of Kenra, LLC's assets and continued Kenra, LLC's operations "at the exact same location using the same computer systems, file cabinets, documents and other assets . . . . Kenra hired all of the Kenra, LLC employees, and it acquired Kenra, LLC employee records, including records relating to Kenra, LLC employee benefits." ***

The power to assert or waive a corporation's attorney-client privilege is an incident of control of the corporation. See Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 349 (1985); Am. Int'l Specialty Lines Ins. Co. v. NWI-I, Inc., 240 F.R.D. 401, 406 (N.D. Ill. 2007). Whether control transfers from one entity to another depends on the practical consequences of the transaction at issue. Am Int'l, 240 F.R.D. at 406-07. Acquisition of substantially all of a corporation's assets and continuity of business operations support transfer of the privilege.

Gilday does not challenge Kenra's assertion (made under Rule 11) that it purchased substantially all of Kenra, LLC's assets and continued Kenra, LLC's operations using the same location, equipment, and people. The authority to assert or waive Kenra, LLC's attorney-client privilege therefore passed to Kenra, Ltd. as an incident of corporate control.

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