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In Pennsylvania Case, ACC Argues that Attorney-Client Privilege Remains When a Corporation Dissolves

Posted: Apr 29, 2014

WASHINGTON (April 29, 2014) –– The Association of Corporate Counsel (ACC), a global bar association representing more than 33,000 in-house counsel at more than 10,000 organizations, filed an amicus curiae brief in the Superior Court of Pennsylvania recommending that the state reverse the trial court's decision that attorney-client privilege is negated immediately after a corporation is dissolved.

In its brief, ACC establishes the necessity of a robust privilege between corporations and their in-house counsel, noting that candid communications are essential for ensuring corporate accountability, transparency and compliance. ACC further argues that abolishing privilege after a corporation's dissolution would affect prior communications "by interfering with [the corporation's] ability to obtain sound legal advice and effective representation." Since the privileged communications are with individuals who are still living after the corporation's death, their willingness to be candid would diminish if the communications lose privilege after corporate dissolution.

"Given the increasingly complex regulatory world they face, businesses need and deserve the protection of the attorney-client privilege in order to encourage their officers, directors and employees to be as candid as possible," said Amar Sarwal, vice president and chief legal strategist at ACC. "Contrary to the trial court's holding, that undeniable need does not diminish when a business faces dissolution."

According to ACC, the Court of Common Pleas incorrectly ruled in Red Vision Systems, Inc. and Titlevision Texas LLC vs. National Real Estate Information Services that after a corporation ceased to exist, "corporate interests no longer need to be protected."

ACC asks the Superior Court to apply reasoning from Swidler & Berlin v. U.S., a 1998 Supreme Court case, to the appeal in Red Vision Systems. In Swidler, the Supreme Court ruled that attorney-client privilege survives the death of an individual client, as this "encourages the client to communicate fully and frankly with counsel." In its brief, ACC states that the same rationale applies to corporations, as they act through individuals.

The ruling will affect corporations that file for bankruptcy or otherwise close operations, an increasing reality in today's economy. The ACC brief notes that there were more than 40,000 corporate bankruptcies in 2012 – the majority of which were filed by smaller organizations, such as nonprofit associations, sole proprietorships and other small businesses.

"Like the United States Supreme Court, the Pennsylvania Supreme Court has a long history of safeguarding the corporate attorney client privilege from unnecessary erosion," Sarwal said. "In that light, the Pennsylvania Superior Court should make clear that dissolution of a company does not deprive otherwise-privileged communications of their valuable protection."

To read the amicus curiae brief, visit www.acc.com/advocacy/Red-Vision-Systems-v-NREIS.

About ACC: The Association of Corporate Counsel (ACC) is a global bar association that promotes the common professional and business interests of in-house counsel who work for corporations, associations and other private-sector organizations through information, education, networking opportunities and advocacy initiatives. With more than 33,000 members employed by over 10,000 organizations, ACC connects its members to the people and resources necessary for both personal and professional growth. By in-house counsel, for in-house counsel.® For more information, visit www.acc.com and follow ACC on Twitter http://twitter.com/ACCinhouse.

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