In doing corporate transactions, it’s fairly typical for a seller’s lawyer to represent the company being sold and not the individual shareholders.  In fact, this is one of the main ethical points driven into business lawyers during law school and in post-law school CLE course.  Your client is the company, not its directors, officers or shareholders.  Another thing business lawyers quickly learn when they start practicing is that once your client is sold, they usually cease to be your client (going forward, buyers typically have their own lawyer take over all legal matters for the newly acquired company).  But this raises the question… who is the beneficiary of all of that legal work the lawyer provided to the selling company pre-closing (that is, who owns the attorney-client privilege for that work)?  I had always assumed that the buyer takes over the privilege (as the new owners of the company), but in practice folks typically didn’t exert that right.  It would be bad form for the day after closing to have the buying company call up the seller’s lawyer and say, “Okay counselor, please provide us your entire client file on the Target, which we now own.”

Well, it’s definitely the case that things do get ugly when a buyer exerts its right to a selling company’s attorney’s work product.  See here for a recent Delaware opinion addressing the issue.  In short (and not purely legalistically), the Delaware Chancery Court held that unless a specific carve-0ut is made for the attorney-client privilege, any transaction that includes the acquisition by a buyer of all rights and privileges of a selling company (either directly through an asset sale or as a matter of law through a stock sale or merger), the attorney-client privilege transfers to the buyer as well.

And thanks to the excellent folks at Richards, Layton & Finger for their distribution of the opinion.