It is routinely the case that, following entry into an agreement of merger, two merging entities will share documents as part of their overall due-diligence process to effectuate the ultimate closing of the merger. Such shared materials can include sensitive documents relating to pending or anticipated litigation involving the company that is being acquired in the merger, which begs the question of whether, in subsequent litigation, a third party, such as the individual or entity with which the target company had anticipated litigation, may obtain discovery of the materials that were shared between the merging entities prior to the merger.
One way that merging entities have endeavored to shield such documents from production in subsequent litigation is under the common interest doctrine. But recent court decisions suggest that, under New York law, the common interest doctrine may be insufficient to protect such documents from disclosure in the merger context, a risk which corporate attorneys would do well to consider as they contemplate the documents they share with their counterparties in the merger context.
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