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Dlo Enters. v. Innovative Chem. Prods. Grp., LLC

Court of Chancery of Delaware

June 1, 2020, Decided

C.A. No. 2019-0276-MTZ


Dear Counsel:

I write regarding Counterclaim Plaintiffs' January 16, 2020, Motion for Disposition of Privilege Dispute (the "Motion").1 In the Motion, Counterclaim Plaintiffs Innovative Chemical Products Group, LLC and ICP Construction, Inc. (collectively, "Buyers") request an order compelling Counterclaim Defendants DLO Enterprises, Inc., 301 L&D, LLC, and Daniel and Leane Owen (collectively, the "Owen Sellers," and with the entities, "Sellers") to produce unredacted copies of certain documents and an order clarifying privilege was waived over other documents in Buyers' possession. For the following reasons, the Motion is denied in part and remains under advisement in part pending supplemental briefing.

I. Background

This action addresses Buyers' acquisition of substantially all of the assets of Arizona Polymer Flooring, Inc. ("Target") via an Asset Purchase and Contribution Agreement, dated January 17, 2018, by and among Buyers, Sellers, and Target (the "Purchase Agreement").2 Buyers' operating entity for the acquired assets is Arizona Polymer Flooring, LLC ("BuyerCo"). Following the execution of the Purchase Agreement, Target was renamed DLO [*2]  Enterprises, Inc. ("DLO").

The year before the Purchase Agreement, Target developed and sold a certain line of adhesive products that accounted for approximately $1.8 million in sales, but suffered from defects.3 The parties dispute who bears the financial responsibility for defective products that were sold pre-Purchase Agreement, but that were returned post-Purchase Agreement. Buyers assert Sellers knew of the products' problems and knowingly misrepresented that Target's financial statements contained no undisclosed liabilities and that the products met certain quality and workmanship standards.4

Sellers filed a Verified Complaint on April 10, 2019, and Buyers filed an Answer and Verified Counterclaims on May 6. Buyers issued their First Set of Requests for Production of Documents to Sellers on July 25 (the "Requests").5 A dispute arose regarding the privilege associated with various documents responsive to the Requests, as well as emails between the Owen Sellers and counsel on email accounts Buyers acquired through the asset purchase. The parties met and conferred multiple times regarding the privilege issues, but were unable to resolve them.6 The Motion followed. The parties fully [*3]  briefed the Motion by February 14. On February 27, I heard argument and took the matter under advisement.

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2020 Del. Ch. LEXIS 202 *

DLO Enterprises, Inc. v. Innovative Chemical Products Group, LLC



Buyers, Sellers, email, pre-closing, post-closing, attorney-client, monitoring, merger, confidentiality, waive, Target, negotiation, privacy, ban

Civil Procedure, Discovery, Privileged Communications, Attorney-Client Privilege, Evidence, Burdens of Proof, Allocation, Privileges, Attorney-Client Privilege, Elements, Scope, Waiver, Exceptions, Mergers & Acquisitions Law, General Business Considerations, Sales of Assets, Work Product Doctrine, Waiver of Protections, Business & Corporate Compliance, Computer & Internet Law, Privacy & Security, Company Communications