Tekni-Plex, Inc. v. Meyner & Landis - 89 N.Y.2d 123, 651 N.Y.S.2d 954, 674 N.E.2d 663 (1996)

Rule:

When control of a corporation passes to new management, the authority to assert and waive the corporation's attorney-client privilege passes as well. New managers installed as a result of a takeover, merger, loss of confidence by shareholders, or simply normal succession, may waive the attorney-client privilege with respect to communications made by former officers and directors.

Facts:

Appellant Meyner and Landis (M&L), a New Jersey law firm, represented Tekni-Plex, Inc. on environmental and other matters. Tom Y. C. Tang, Tekni-Plex, Inc.’s sole shareholder, sold the corporation’s assets to TP Acquisition Company (Acquisition) for $43 million. M&L represented both Tekni-Plex and Tang personally. The Merger Agreement contained representations and warranties by Tang concerning environmental matters, including that Tekni-Plex was in full compliance with all applicable environmental laws and possessed all requisite environmental permits. Following the transaction Acquisition changed its name to "Tekni-Plex, Inc." (new Tekni-Plex). Subsequently, new Tekni-Plex commenced an arbitration against Tang, alleging breach of representations and warranties contained in the Merger Agreement regarding the former Tekni-Plex's (old Tekni-Plex) compliance with environmental laws. Tang retained M&L to represent him in the arbitration. New Tekni-Plex moved to disqualify the law firm from representing Tang. The state supreme court held that M&L should be disqualified from representing Tang in the arbitration. The Appellate Division affirmed. M&L and Tang appealed.

Issue:

Under the circumstances, should the law firm be disqualified from representing the shareholder in an arbitration commenced by the new corporation?

Answer:

Yes.

Conclusion:

The Court held that, applying a three-part test, law firm should be disqualified from representing shareholder. The court held that the authority to assert the attorney-client privilege passed to new corporation regarding communications between former corporation and law firm on environmental compliance matters. The Court held that law firm should be enjoined from disclosing the environmental-related communications to shareholder, and directed the law firm to give related files to new corporation. However, the Court held that the new corporation did not control the attorney-client privilege with regard to communications concerning the acquisition. Nor was new corporation entitled to the law firm's confidential communications concerning its representation of old corporation with regard to the acquisition.