April 30, 2012 Articles

Reviewing Privilege Issues During Transaction Negotiations

You never know when a deal is going to lead to litigation, so parties should be as protective during negotiations as they might be during litigation

by Scott B. Murray

Almost every litigator has been asked at some point to handle a business litigation case involving operative documents that neither the litigator nor his or her firm was involved in drafting. In such situations, the litigator often finds that the client's case could have been stronger if certain contract provisions or transactional documents had been drafted with a keener eye toward future litigation that might develop. Because of this common experience, many litigators work with their firms' transactional teams during the negotiation of transactions to assist with drafting contract and other transactional language that might benefit their clients in future litigation.

However, how often are litigators or attorneys well-versed in privilege issues asked to assist transaction teams for the express purpose of limiting the disclosure or exchange of privileged information during due diligence and the extensive negotiations that often occur between the parties, especially in complex transactions? Given that the parties to a proposed transaction are often more concerned with obtaining and reviewing the information necessary to analyze and structure the deal than they are with thinking about how the disclosure of privileged information might be used against them in a future lawsuit, it is often difficult to convince the businesspeople that such privilege issues are a significant concern. This is especially true when counsel is preventing the exchange or disclosure of information that the parties believe is needed to overcome a negotiating hurdle. Even if your answer to the question of involving a litigator or other attorney to manage and supervise privilege issues is "Often" or "Always," a recent Illinois Appellate Court decision highlights why parties to a transaction should rigorously analyze the need to disclose or exchange privileged information during due diligence and negotiations to avoid or limit the unintentional waiver of privilege protections. Although the case has been appealed to the Illinois Supreme Court, which may have already issued a decision by the date this article is published, the Illinois Appellate Court's ruling nonetheless highlights the need for transacting parties to consider carefully the disclosure and exchange of privileged information.

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