April 28, 2017 Top Story

Reduction in Price for Company Facing Litigation Is Discoverable

Arms-length negotiations involving third parties can become subject to discovery

By Stephen Carr

Litigants can discover a change in a party's company price when the decreased price resulted from arms-length negotiations. In reaching this conclusion, a magistrate from the U.S. District Court Northern District of Illinois determined such negotiations were not "in anticipation of litigation"—a key standard for protection from discovery. The decision highlighted the contrast between the fact of a negotiated sale, a discoverable fact, and an attorney's opinion about trial strategy, and a privileged opinion.

Litigation Leads to a Purchase Price Discount

The dispute began when Lynk Labs claimed Juno Lighting misused several of its patents and broke an agreement between the two companies not to share their mutual patents. Schneider Electric, the parent company of Juno, agreed to sell Juno to a third company, Acuity Brands Lighting, soon after Lynk sued Juno. When Schneider sold Juno to Acuity, the two companies negotiated a price for the company, including an estimate of how much the Lynk lawsuit reduced the value of Juno.

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