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Alere presses court for access to Abbott attorney documents

April 7, 2017

Alere Inc. has urged a Delaware court to accept a special master’s recommendation to compel Abbott Laboratories Inc.’s disclosure of attorney notes and due diligence analyses involving troubles at Alere before the two companies signed a now-disputed $5.8 billion merger agreement.
The Alere arguments, made public late Tuesday, clash with a recent Abbott warning that court adoption of former Chancellor William B. Chandler III’s special master recommendation on case discovery “would eviscerate” attorney-client privilege in some types of merger cases.

Abbott had sued in December 2016 to terminate the merger, arguing that “Alere is no longer the company Abbott once agreed to buy.” Troubles cited by Abbott included reports of government investigations and losses of contracts and other “systemic” problems justifying a merger termination. Feuding over document releases and the progress of antitrust assessments began almost immediately.

Although former Chancellor Chandler’s report on Alere’s demands for Abbott’s premerger attorney documents has not been made public, both sides cited and quoted the special master’s discovery recommendations in briefs to Vice Chancellor Sam Glasscock III.

Redacted versions of both briefs said that Chandler concluded that Abbott put its presigning knowledge and associated legal advice “at issue” when it filed a suit alleging that material adverse events reduced Alere’s value after the merger agreement signing on Jan. 30, 2016.

“Having asserted MAE claims premised on litigations and investigations that were subject to due diligence by Abbott’s lawyers,” Alere said in its brief, “the special master held that Abbott cannot shield the due diligence materials (and the knowledge they reflect) as privileged, and then assert at trial that the related MAEs were unknown to it.”

The former chancellor recommended an order for Abbott’s production of all handwritten notes and summaries from due diligence meetings and conference calls, Abbott said, as well as subsequent analysis of meetings and calls relating to events in the complaint.

Abbott said in its brief that Chandler went too far in recommending a handover of attorney notes and analyses on Alere’s diligence materials, and that adoption by the court would frustrate buyer efforts to secure frank legal advice in the future.

“In any case where a party’s knowledge is at issue, not only the facts known to that party but also the privileged legal advice it received on those facts would be discoverable. That is not the law,” Abbott said in its brief.

Abbott had cooled to the merger after Alere’s value — $52 per share at contract signing — fell sharply in the wake of what Abbott described as an “endless sequence” of post-agreement revelations. Upsets included reports of Alere’s inability to meet deadlines for required financial reports, the withdrawal of an important product from global markets, and the expulsion of Alere’s diabetes supply business from the Medicare program.

Alere said that Abbott has to show that the adverse matters were unknown to it when it entered into the agreement and that they had a material effect on the merger agreement.

“Abbott cannot be heard to claim now that it was unaware of the existence or scope of the legal and regulatory issues it alleges in its complaint if Abbott’s counsel advised it of such issues before the merger agreement was signed,” Alere said in its brief.

Abbott said that it already had provided notes from attorneys involved in teleconferences during due diligence discussions, with only a small number of redactions. Alere, however, sought more and said that Abbott’s assertion that it would not have agreed to the merger if it saw the post-merger troubles coming.

“Abbott’s board will not testify that its decision to enter the merger agreement was ‘based on the advice of counsel,’” Abbott said in its response to the special master’s recommendation. “Nor will Abbott contend Alere’s post-signing problems were surprising because they contradicted its lawyers’ analysis.”

Instead, Abbott said that it would rely only on nonprivileged diligence materials and that Alere had not proven a requirement for access to privileged materials.

Still pending in the case is a separate Alere motion for dismissal of, or summary judgment against, Abbott’s motions for the handover of what Alere called extensive, “forensic”-level records on Alere’s business operations.

Abbott is represented by William M. Lafferty, Kevin M. Coen, D. McKinley Measley, Zi-Xiang Shen and Jason Z. Miller of Morris Nichols Arsht & Tunnell LLP, James F. Hurst, Andrew A. Kassof Elizabeth S. Hess and Brenton A. Rogers of Kirkland & Ellis LLP, and William Savitt, Jeffrey M. Wintner, Marshall L. Miller, Cynthia Fernandez Lumermann and Jordan L. Pietzsch Carrie M. Reilly of Wachtell Lipton Rosen & Katz.

Alere is represented by Michael A. Pittenger, T. Brad Davey, Matthew F. Davis and Jacob R. Kirkham of Potter Anderson & Corroon LLP and Bruce Birenboim, Andrew G. Gordon, Audra J. Soloway, Jaren Janghorbani, Stephen P. Lamb and Daniel A. Mason of Paul Weiss Rifkind Wharton & Garrison LLP.

The consolidated case is In re Alere-Abbott Merger Litigation, case number 12963, all in the Court of Chancery of the State of Delaware.

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