Buyers doing due diligence in connection with merger and acquisition transactions typically request information about the seller’s contract rights, patent rights, and/or pending/threatened litigations. Often times, the most relevant and useful information the seller may have in this regard are documents that are subject to the attorney-client privilege. Can the seller provide documents to the would-be buyer that are covered by the attorney client privilege without waiving the privilege? The answer turns on whether there is a “common interest” between the buyer and seller. That, in turn, could depend on what law is applied.
Ordinarily, providing a privileged document to a third party waives the attorney client privilege. The common interest doctrine is an exception.1 Under the common interest doctrine, “[a] third party may be privy to the communication between an attorney and a client, without destroying the privilege, if the communication is made for the purpose of furthering a nearly identical legal interest shared by the client and the third party.”2 Absent the existence of a valid common interest, exchanging privileged documents with the buyer during due diligence will waive the privilege. Exchanging privileged documents, even following the execution of a merger agreement, will often not suffice to protect the privilege if third parties later seek the privileged information. Unlike some states, New York takes a fairly narrow view of the common interest privilege.
