In DLO Enterprises, a seller brought claims against a buyer for breach of an asset purchase agreement (the Agreement), by which the buyer purchased substantially all of the seller’s assets. The seller’s allegations included that the buyer failed to follow contractual indemnification procedures and took other improper actions. The buyer filed counterclaims, including for breach of contract and fraudulent inducement.
Section 1.1 of the Agreement stated the seller would transfer, and the buyer would acquire, all of the seller’s “right, title and interest” in all of the seller’s assets, including “all files” and “all inventory.” Section 1.1 further provided the seller’s transfer excluded the “Excluded Assets,” defined to include the seller’s “rights under or pursuant to this Agreement and agreements entered into pursuant to this Agreement.” Section 8.9 of the Agreement stated “[t]he parties intend that, at all times after the Closing, [the buyer] will have the right in its discretion to assert or waive any attorney work-product protections, attorney-client privileges and similar protections and privileges relating to the Assets and Assumed Liabilities.”
The seller’s owners prior to the asset sale (the Seller Owners) worked for the buyer following the closing of the transaction. During discovery proceedings, a dispute arose between the parties regarding the privilege associated with various documents responsive to discovery requests, as well as emails between the sellers, the Seller Owners, and counsel on email accounts that the buyers acquired through the asset purchase. Specifically, the parties disputed whether the seller and the Seller Owners could claim attorney-client privilege over three categories of documents.
The buyer argued, under Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP, 80 A.3d 155 (Del. Ch. Nov. 15, 2013), any privilege over the seller’s pre-transaction communications passed to the buyer in the sale, and Section 8.9 of the Agreement waived privilege. The seller argued Great Hill was inapplicable and that its privilege fell within the Agreement’s Excluded Assets definition and, therefore, did not transfer. The buyer filed a “Motion for Disposition of Privilege Dispute,” seeking an order compelling production of the disputed materials.