The 3rd Circuit’s recent decision in Teleglobe USA, Inc. v. BCE, Inc. (In re Teleglobe Communications, Inc.)[FOOTNOTE 1] is another pronouncement in litigation brought by a financially stressed and bankrupt subsidiary against a financially stable parent. The focus of the decision is whether the activities of in-house counsel were sufficient to waive the attorney-client privilege that the defendant parent corporation asserted to withhold allegedly privileged materials in discovery.
Teleglobe involved the decision of a parent corporation to cease supporting a failing subsidiary and has significant application to issues relating to spin-offs and split-offs. Interestingly, Teleglobe comes on the heels of the 3rd Circuit’s earlier decision in VFB LLC v. Campbell Soup Co.[FOOTNOTE 2] While in both cases the bankrupt plaintiff was not successful, counsel ought to take note of the potentially damaging consequences that may flow from the activities of counsel prior to a separation of the parent and subsidiary on subsequent litigation.
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