## Facts

- Tekni-Plex, Inc. operated a manufacturing and packaging business and, over many years, used Meyner & Landis (M&L) as outside counsel, including on environmental compliance matters.
- Tom Y. C. Tang became the corporation’s sole shareholder and sole director and later agreed to sell the company through a merger for $43 million.
- In negotiating and documenting the merger, M&L represented both the corporation and Tang.
- The merger agreement contained extensive representations and warranties, including environmental compliance, and an indemnification obligation by Tang for breaches.
- After closing, the surviving corporation (new Tekni-Plex) claimed environmental misrepresentations and commenced arbitration against Tang under the merger agreement.
- Tang retained M&L to represent him in the arbitration.
- New Tekni-Plex moved in court to disqualify M&L and to compel turnover of M&L’s files from its pre-merger representation of old Tekni-Plex.
- The trial court disqualified M&L and ordered broad file turnover; the intermediate appellate court largely affirmed.
- The New York Court of Appeals reviewed whether disqualification was required and how attorney–client privilege and file control should be allocated post-merger.

## Issues

1. Whether longtime counsel to a closely held corporation may represent the former sole shareholder in a post-merger dispute with the buyer/surviving corporation concerning alleged misrepresentations on matters within counsel’s prior corporate work.
2. Who controls the attorney–client privilege for pre-merger communications between corporate counsel and the target company after a merger: the surviving corporation, the former shareholder, or both depending on subject matter.

## Decision

- The court held M&L was disqualified from representing Tang in the arbitration because the arbitration was substantially related to M&L’s prior corporate work and adverse to the corporation’s successor.
- The court held control of the attorney–client privilege generally passed to new Tekni-Plex for communications concerning the company’s pre-merger operations that continued after the merger.
- The court held privilege did not pass for certain merger-negotiation communications that were clearly for Tang’s personal benefit in negotiating and structuring the sale.
- The court modified the turnover order to require production of operational files to new Tekni-Plex while excluding the protected, Tang-controlled merger-negotiation communications; as modified, the order was affirmed.

## Legal Principles

- A law firm that represented a corporation may be disqualified from representing a new client against the corporation (or its successor) in a substantially related matter where confidences from the former representation could be used.
- In a closely held corporation context, corporate counsel’s duties generally run to the corporate entity, not to the shareholder personally, for purposes of former-client conflict analysis.
- Following a merger in which the buyer continues the enterprise, control of the corporation’s attorney–client privilege transfers to the surviving corporation’s management for communications about the company’s operations.
- Privilege may remain with the former shareholder for discrete pre-merger communications that were primarily for the shareholder’s personal interests in negotiating the transaction, rather than for the ongoing operations of the business.
- Courts may order turnover of counsel’s files consistent with the post-transaction allocation of privilege, requiring production of operational materials while protecting seller-side negotiation communications.

## Conclusion

The court barred the target’s longtime counsel from defending the former sole shareholder against post-merger claims tied to counsel’s prior corporate work and held that, after a merger continuing the business, the surviving corporation controls privilege for operational communications while the former shareholder retains privilege over certain merger-negotiation communications made for his personal benefit.


Tekni-Plex, Inc. v. Meyner & Landis, 89 N.Y.2d 123 (1996)