Does the A-C Privilege Survive a Company’s Death?

When it comes to interesting ethical quandaries, the case of U.S. v. Martin Shkreli is the gift that keeps on giving. As we discussed in a previous post, Martin Shkreli has asserted the “advice-of-counsel” defense in the securities fraud case he is facing in the Eastern District of New York. Since our last post, Shkreli has served a document subpoena on one of the law firms that represented several of his companies, as well as him personally. What complicates this matter, however, is the fact that many of these companies are now defunct and therefore lack any active individuals who can waive the attorney-client privilege on their behalf.

Although often used interchangeably with confidentiality, the attorney-client privilege is a common law evidentiary creation that is distinct from its ethical cousin, Rule of Professional Conduct 1.6.  Nevertheless, similar concepts apply to both, including theoretical survival of the privilege beyond the “death” of the client.  While simple in its most basic form, the attorney-client privilege of a corporate entity is more complicated.  Once a company “dies”, is it capable of waiving the attorney-client privilege?  If so, who can properly authorize such waiver when, technically, there are no authorized representatives of a defunct company? And what exactly constitutes the “death” of a company anyway?

These are the questions the responding law firm has opted to present to the presiding judge rather than risk waiver. Defunct corporate entities typically leave a sour taste in the mouths of many other companies and individuals, with litigation as a common result. It will therefore be interesting to see if the court faces this issue head on and presents a rule or standard for determining how, if at all, such companies can waive the attorney-client privilege.  If waiver dies with the company, it could present a significant hurdle for parties who later file suit against company executives, or even in actions between third parties in which the company’s documents are vital.  If waiver can still be obtained, the court will then have to further explore which of the former officers or owners would be required to obtain waiver.  Regardless, a substantive decision of the court will provide much-needed guidance on an issue that is sure to pop up again in many different contexts.


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