One of the most contentious and complicated emerging issues of corporate law in the United States is the issue of attorney client privilege when it is asserted by an entity. The difficulty, of course, stems from the reality that though the entity (usually a corporation) is an autonomous legal person, it may act only through others, usually natural persons in positions of authority (board members or officers) with whom the attorney interacts. This affects not merely business enterprises, but is at the heart of civil and criminal cases involving other enterprises--for example state assisted universities. Mike Dawson, "Judge to consider whether Cynthia Baldwin represented Penn State or Graham Spanier in Sandusky case
," Centre Daily Times
, Dec. 18, 2013.
Read more here: http://www.centredaily.com/2013/12/18/3948448/judge-to-consider-whether-cynthia.html#storylink=cpy
(Pix (c) Larry Catá Backer 2013)
A particularly interesting issue arises when the underlying ownership of the autonomous enterprise passes from one group to another, resulting in changes in management. The issue was recently considered by the Delaware Chancery court in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLP
C.A. No. 7906 (Nov. 15, 2013) (Del. Ch.). The opinion in that case, written by, Chancellor Strine,
is bound to have a substantial influence on the ongoing judicial
discussion of attorney client privilege in the context of entity
representation in general, and more specifically, on the practices of
lawyers in managing control of that privilege in the context of
corporate transactions. It is also a great lesson in record keeping in
the current environment of digital records.
Though the extent and application of the normative choices made by Chancellor Strine may be questioned, and strongly (e.g., Tekni-Plex, Inc. v. Meyner & Landis
, 674 N.E.2d 663 (N.Y. 1996)), the influence of the opinion is less likely to be challenged. The opinion is also remarkable for its aggressive insistence ("The lady doth protest too much, methinks." Hamlet
act III, scene II) of the use of a plain meaning rule of statutory construction in an area where the meaning and application of the statutory framework is anything but clear. (On the distinctions between formalism and functionalism in statutory Interpretation see HERE
). But in the end, the most interesting aspect of the case is the way in which law is understood as open textured enough to permit private governance through contract. Chancellor Strine's narrow and tightly woven legalism expands the corporate law's more open textured structures, within which private governance regimes may be constructed in the shadow of and beyond law, to statutory behavior and expectation management rules.
This post includes a brief framework for consideration the case, the text of Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLP
C.A. No. 7906 (Nov. 15, 2013) (Del. Ch.) and some practical analysis of
the consequences of the case publicly circulated by leading U.S.
lawyers and law firms.