Preserving Privilege Post-Merger

The Delaware Court of Chancery recently upheld a provision in a merger agreement that prevented the buyer from using privileged emails between the seller and its attorneys in post-closing litigation. The decision, in Shareholder Representative Services LLC v. RSI Holdco, LLC, C.A. (Del. Ch. May 29, 2019), clarified that sellers who apply strong contractual protections to premerger privileged communications need not segregate such communications from other documents to preclude the buyer from relying on them in future litigation.

Background

RSI arose out of RSI Holdco, LLC’s (Buyer) acquisition of Radixx Solutions International, Inc. (Seller). As part of the merger, the Buyer took possession of the target’s computer systems and email servers, which contained approximately 1,200 premerger emails between the Seller’s owners, representatives and counsel. The Buyer subsequently sought to use these emails, including those concerning merger negotiations, in post-closing