Shareholder Disputes in Closely-Held Entities: Implications for Attorney-Client Privilege

Closely-held dealerships face a range of thorny corporate governance and legal issues. The issues these multi-faceted enterprises encounter often cross over multiple affiliated entities, frequently with diverse and inconsistent ownership interests between the affiliates. Adding to this complexity can be sporadic—and sometimes unanticipated— ownership changes resulting from multi-generation succession interspersed with non-family employee owners and even former relations and employees. Corporate structures that were initially simple, elegant, and rational, often become a complex bramble with latent legal hazards waiting for a triggering event, such as an ownership or management dispute.

One often overlooked pitfall in such settings is protecting and anticipating possible waiver of attorney-client privilege in the event of litigation among directors who are often the only owners or who represent a significant interest. With shifting and inconsistent appellate decisions in this area, dealership counsel should be constantly mindful of the potential dichotomy between corporate and individual constituent interests.

Read the full article at National Association of Dealer Counsel Defender November/December 2018