Wang v. Zymergen Inc.

Background

The plaintiffs brought claims under Sections 11 and 15 of the Securities Act against Zymergen, the Individual Defendants, and others. Zymergen later entered Chapter 11 bankruptcy, and its attorney-client privileges were transferred to the Trustee under the Liquidating Trust Agreement. The plaintiffs had repeatedly challenged Zymergen’s assertions of attorney-client privilege. They asked the court to reconsider its February 21, 2025 order upholding the privilege.

The plaintiffs relied on several developments: WilmerHale’s statement that it had raised concerns in September 2024 about continuing to represent both the Trust and the Individual Defendants; the Trust’s June 2025 state-court lawsuit against the Individual Defendants; expert reports that allegedly reflected privileged communications; and the exhaustion of Zymergen’s insurance coverage and resulting immunity from further litigation under the bankruptcy plan.

Common-Interest Privilege

The court explained that the common-interest, or joint-defense, privilege extends attorney-client privilege to communications shared by parties pursuing a common litigation strategy. The court rejected the plaintiffs’ argument that the privilege ended in February or July 2024. The possibility that the Trustee might later bring claims against the Individual Defendants did not necessarily eliminate their shared interest in defending the plaintiffs’ claims, and an adverse interest on one issue does not automatically end a common-interest privilege on every issue.

The court also found that WilmerHale’s September 2024 concern about possible conflicts did not itself terminate the privilege. After examining the factual basis for that statement during an in-camera proceeding, meaning a private court review or hearing, the court concluded that the common interest remained intact. The court determined that the privilege ended when the Trust filed its state-court action in June 2025, because that lawsuit alleged that the Individual Defendants breached fiduciary duties based on the same core facts involved in this case.

Crime-Fraud Exception

The plaintiffs sought review of documents withheld or redacted as privileged under the crime-fraud exception. That exception can overcome attorney-client privilege when a client sought legal advice to further a criminal or fraudulent scheme and the communications were sufficiently related to that scheme. For in-camera review, the plaintiffs first had to provide a factual basis supporting a reasonable, good-faith belief that the review might reveal evidence establishing the exception.

The court found that the plaintiffs did not meet that threshold. Although they cited evidence supporting allegations of fraud, including the Trust’s state-court allegations and an Securities and Exchange Commission finding concerning misrepresentations and omissions, they did not provide evidence that Zymergen or the Individual Defendants sought legal advice to further the alleged scheme. The court therefore denied the request for in-camera review of the privileged documents.

Implied Waiver

The court rejected the plaintiffs’ argument that the Trust’s state-court lawsuit broadly waived attorney-client privilege. It held that any waiver resulting from the lawsuit applied only between the Trust and the defendants in that lawsuit, not to third parties such as the plaintiffs in this case.

The court also rejected arguments based on the Individual Defendants’ expert reports. The plaintiffs did not identify documents relied on by the experts that had not already been produced, and they did not address the significance of the attorneys’ potentially different roles in providing legal advice and participating in due diligence. The court further declined to reconsider arguments about access to documents because those arguments relied on facts and issues raised in earlier challenges. The court also rejected the argument that the Trust waived privilege by failing to immediately retrieve documents shared while the Trust and Individual Defendants still had a common litigation interest.

Bankruptcy and Privilege

The court rejected the plaintiffs’ argument that Zymergen’s immunity from further litigation extinguished the attorney-client privilege. The court emphasized that the privilege had expressly transferred to the Trust under the Liquidating Trust Agreement. It found that the Trust’s work under the bankruptcy plan remained ongoing and that the state-court lawsuit showed the Trust continued to pursue its rights and obligations.

Disposition

The court denied the plaintiffs’ motion for reconsideration of the February 21, 2025 order.