The Pennsylvania Superior Court has held that a former in-house attorney for dissolved companies cannot assert the attorney-client privilege in response to a subpoena for documents pertaining to his former representation of the companies. In so doing, the Court held that the attorney-client privilege may only be asserted for a defunct company if a current representative of the company possesses the authority to raise the privilege.
Red Vision Systems, Inc. v. National Real Estate Information Services, LLC concerned a complaint against three affiliated title search companies alleging that the companies failed to pay for certain services. After the lawsuit was filed, the plaintiffs learned that these companies had been dissolved. The plaintiffs then served a subpoena upon former in-house counsel for these companies, with the intent of determining whether the companies had fraudulently transferred assets to other entities in order to avoid paying creditors such as the plaintiffs. In addition to requiring testimony, the subpoena also sought production of documents identifying the companies’ management personnel and insurance coverage, as well as any transfer of the companies’ assets.
The former in-house counsel filed a motion to quash the subpoenas, contending that the requested materials were protected by the attorney-client privilege, that their disclosure would violate confidentiality agreements with third parties, and that production of the materials would be unduly burdensome. The Court of Common Pleas for Allegheny County denied the motion.
The Superior Court began its analysis by holding that the trial court’s determination that compliance with the subpoena would not violate confidentiality agreements and would not be unduly burdensome could not be appealed as a collateral order. Turning to the appellant’s ability to assert the attorney-client privilege, the Court examined a number of decisions throughout the United States addressing the continued existence of the privilege after a business entity has dissolved.
As the Court noted, these cases recognized that a company’s attorney-client privilege survived its dissolution if anyone currently possessed the authority to raise the privilege on the company’s behalf. However, if no person possessed such authority, the privilege ceased to exist.
The Court found that such a rule was consistent with Pennsylvania courts’ recognition that the attorney-client privilege should be applied when enforcement of the privilege would support a “public good transcending the normally predominant principle of utilizing all rational means for ascertaining the truth.” The Court therefore held that the attorney-client privilege could only be enforced following a corporate entity’s dissolution if a party had the authority to raise the privilege, such as a bankruptcy trustee, a statutory liquidator, a successor-in-interest, a person managing the company during the wind-up process, or any person or group that succeeds to the company’s management.
Applying this rule to the facts of the case, the Court noted that the appellant did not allege that he was the current representative of the dissolved companies, nor did the appellant identify any representatives of these companies. The Court therefore held that the subpoenaed documents were not subject to the attorney-client privilege, and affirmed the trial court’s denial of the motion to quash.
In holding that the attorney-client privilege can only be asserted on behalf of dissolved companies if representatives currently possess the authority to raise the privilege, the Pennsylvania Superior Court’s decision may be utilized to authorize discovery of numerous legal files pertaining to former businesses. Furthermore, the Court’s analysis reflects the general reluctance of Pennsylvania courts to extend the attorney-client privilege to situations in which no party has a real interest in shielding the documents from disclosure.
