Who controls the privilege for a seller's pre-sale attorney-client communications in the case of an asset purchase transaction? In DLO Enterprises v. Innovative Chemical Products Group, C.A. No. 2019-0276-MTZ, 2020 Del. Ch. Lexis 202 (Del. Ch. June 1, 2020), Vice Chancellor Morgan T. Zurn held that the rule in such cases, unlike the rule in merger cases, is that the privilege for communications regarding an asset purchase agreement and associated negotiations does not pass to the purchaser by default operation of law, but remains with the seller unless the buyer contracts for something different. The vice chancellor also considered how to resolve the issue of the seller's pre- and post-sale privileged communications that come into the buyer's possession because they are on email accounts transferred to the buyer in the transaction.

Innovative Chemical Products and ICP Construction (buyers) acquired substantially all of the assets of Arizona Polymer Flooring (target) from DLO Enterprises, 301 L&D, and the Owens (sellers) pursuant to an asset purchase and contribution agreement. Subsequent to the sale, a dispute developed between the parties regarding responsibility for defective products that were sold prior to the closing, but were returned after the closing. In the ensuing litigation, the buyers alleged that the sellers knew of the problems and knowingly misrepresented that the target's financial statements contained no undisclosed liabilities and that the products met certain quality and workmanship standards.