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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.
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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.
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