Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP
80 A.3d 155
Del. Ch.2013Background
- Buyer (Great Hill et al.) acquired Plimus, Inc. in a September 2011 statutory merger; Plimus survived.
- After suit a year later, Buyer found pre-merger communications between Seller and Plimus’s counsel on Plimus’s computer systems transferred in the merger.
- Merger agreement contained no carve‑out preserving pre‑merger attorney‑client communications to Seller; merger governed by Delaware law and § 259 of the DGCL.
- Seller asserted attorney‑client privilege over those communications, claiming former stockholders retained privilege for merger‑related communications.
- Buyer moved to resolve the privilege dispute, asking the court to hold that privileges (including attorney‑client) transferred to the surviving corporation or, alternatively, that Seller waived privilege.
- Chancellor Strine ruled for Buyer: under § 259 all privileges pass to the surviving corporation as a matter of law; no judicial exception for merger‑negotiation communications.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 259’s "all ... privileges" includes attorney‑client privilege | § 259 is plain: all privileges pass to the surviving corporation | "Privileges" meant only property‑type privileges or rights; evidentiary privileges excluded | Held: § 259 unambiguously transfers all privileges, including attorney‑client privilege, to the survivor |
| Whether courts may carve out a judicial exception for pre‑merger merger‑negotiation communications | Courts must apply the statute as written; no judicially created exception | Policy concerns justify a narrow reading to protect transactional confidentiality | Held: Court may not create judicial exceptions to clear statutory text; policy arguments are for legislature |
| Whether prior case law (e.g., Tekni‑Plex) controls under Delaware law | Statute controls; Tekni‑Plex is a New York decision and did not interpret § 259 | Tekni‑Plex and Postorivo support seller retention of privilege for negotiation communications | Held: Tekni‑Plex does not override Delaware statute; Postorivo involved asset sale and contract carve‑out, not § 259 merger rule |
| Whether waiver analysis is necessary given transfer under § 259 | Buyer argued transfer resolved ownership; alternatively sought waiver finding | Seller argued waiver should not be inferred despite inaction | Held: Court resolved ownership under § 259, so waiver analysis was unnecessary to decide transfer issue |
Key Cases Cited
- Tekni‑Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123 (N.Y. 1996) (New York Court of Appeals distinguished privileges and held merger‑negotiation communications did not pass to survivor under New York analysis)
- Upjohn Co. v. United States, 449 U.S. 383 (U.S. 1981) (classic statement on scope and importance of the attorney‑client privilege)
- Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343 (U.S. 1985) (when corporate control passes, authority to assert and waive corporate attorney‑client privilege passes to new management)
- Ross v. State, 990 A.2d 424 (Del. 2010) (Delaware courts apply unambiguous statutory language as written)