In Great Hill Equity Partners IV v. SIG Growth Equity Fund I, C.A. No. 7906-CS (Del. Ch. Nov. 15, 2013), the Delaware Court of Chancery held—in a matter of first impression—that pursuant to Section 259 of the Delaware General Corporation Law, the surviving corporation in a merger controls the seller entity’s pre-closing privileged communications. The opinion has already sparked a fair amount of commentary, as practitioners consider the practical implications of the opinion’s attention to a previously undiscussed aspect of Section 259: that the “privileges” a buyer acquires from a target company in a merger include attorney-client privilege over communications associated with the target.
Great Hill does not contain an extensive description of the background leading to the litigation, but what the court does provide is instructive. The underlying claim in the case involves a consortium of buyer entities led by Great Hill Equity Partners IV LP, a Delaware entity, that claims to have been fraudulently induced to acquire Plimus Inc., a California company. As a result of the merger, which closed approximately one year before the buyers filed suit, Plimus became a subsidiary of the buyers. The court indicated that the lawsuit was brought in the Chancery Court and Delaware law applied based on choice-of-law provisions set forth in the merger agreement.
