State Attorney-Client Privilege Incorporated Into Federal Law
Publication| Bankruptcy & Corporate Restructuring
Fraudulent transfer plaintiffsfrequently challenge transactionsthat they say contributed tothe company’s insolvency: leveragedbuyouts, cash-out mergers,share redemptions or othermajor transactions where thecompany parts with assets orincurs liabilities. State law (oftenDelaware law) typically governsthese types of transactions,and structuring them usually requiresthe involvement of attorneys,financial professionals andsometimes investment bankers.
Because state law applies atthe time the transaction is negotiated,the parties might assume— reasonably so — that stateprivilege law will govern communicationswith their attorneysand financial professionals. Butwhat happens if, years later, afraudulent transfer plaintiff filessuit in federal court and bringsclaims under federal law? Doesstate privilege law still apply?