Stay current on changes and developments in corporate law with a wide variety of resources and tools.
By Yin Wilczek
Jan. 16 — A Pennsylvania appellate court Jan. 13 ruled that the communications between a company and its attorney remains subject to the attorney-client privilege after the company is dissolved or ceases business “so long as the company retains some form of continued existence” shown by someone who is authorized to speak for it.
That authorized person can include a bankruptcy trustee, a statutory liquidator, a successor-in-interest or a person managing the company during its wind-up process, the Pennsylvania Superior Court wrote in a ruling of first impression in the state.
“However, if a business is dissolved and/or has ceased to operate, and has neither a legal successor nor some remaining management with authority to handle the company's post-dissolution windup, then there is no longer any ‘client' to raise or waive the privilege,” opined Judge Eugene B. Strassburger III.
The ruling involved an appeal filed by Thomas Lammert, the former in-house counsel of National Real Estate Information Services Inc. and other affiliated companies. After the companies were dissolved or became defunct, their former creditors filed a lawsuit alleging that they were owed more than $500,000 for services rendered.
Believing that NREIS was transferring assets to other entities to avoid paying them, the plaintiffs subpoenaed Lammert asking for him to testify and to produce certain documents.
Lammert filed a motion to quash the subpoena, arguing that the documents were protected by the attorney-client privilege. The trial court denied his motion and he appealed.
The superior court acknowledged that the federal and state courts have issued disparate conclusions about whether the attorney-client privilege survives the dissolution of a business entity. However, it found that the disparate results were due to differences in fact, not differences in the application of different legal requirements.
“The key fact is whether the corporation is ‘dead' as opposed to being in some other state, such as a windup phase, bankruptcy or liquidation, or having merged into or been acquired by a successor,” the court explained. “In the latter cases, there was a person or entity which succeeded to the defunct company's interests and authority to assert the privilege; in the former, no such person or entity existed.”
In affirming the dismissal of Lammert's appeal, the court noted that the former in-house counsel did not claim to have retained the power to act on behalf of the affiliated companies. Accordingly, he could not sustain his privilege claim because he could not show that a person with authority to speak for the company had claimed the privilege and did not waive it, the court held.
To contact the reporter on this story: Yin Wilczek in Washington at mailto:%email@example.com
To contact the editor responsible for this story: Ryan Tuck at firstname.lastname@example.org
The opinion is available at http://www.bloomberglaw.com/public/document/Red_Vision_Sys_Inc_v_Natl_Real_Estate_Info_Servs_LP_2015_PA_Super/1.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)