1041-00001 · Thorngate Capital Partners · Privilege

response-first-privilege-challenge.docx DOCUMENT Antitrust

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CALDERWOOD & HARKNESS LLP Attorneys at Law

1900 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7800 Facsimile: (202) 555-7801 www.calderwoodharkness.com

November 15, 2023

VIA ELECTRONIC MAIL AND HAND DELIVERY

Lead Staff Attorney Bureau of Competition Mergers IV Division Federal Trade Commission 600 Pennsylvania Avenue NW Washington, DC 20580

Re: FTC File No. 231-0487 — Second Request Issued May 29, 2023, to Solara Digital Infrastructure LP in Connection with the Proposed Acquisition of Pinnacle Cloud Systems, Inc.

Subject: Response to Privilege Challenge Dated November 8, 2023

Dear Sir or Madam:

I. Introduction and Purpose

This letter is submitted on behalf of Solara Digital Infrastructure LP ("Solara" or "SDILP"), a Delaware limited partnership, by Calderwood & Harkness LLP, outside antitrust counsel to Solara, in response to the letter from the Staff of the Federal Trade Commission's Bureau of Competition, Mergers IV Division ("Staff" or "FTC Staff"), dated November 8, 2023 (the "Challenge Letter"), challenging 214 entries on Solara's privilege log submitted in connection with the Second Request issued May 29, 2023 (FTC File No. 231-0487) (the "Second Request").

The 214 entries challenged by Staff constitute a subset of the 4,872 total entries on Solara's privilege log (the "Privilege Log"), which accompanied the production of approximately 196,300 documents (Bates-numbered SDILP-2R-000001 through SDILP-2R-196300) and the Substantial Compliance Certification filed by Solara on September 22, 2023 (the "Compliance Certification"). The Privilege Log was prepared in full compliance with the requirements of the Second Request and in accordance with the governing procedural framework agreed upon by the parties.

Solara respectfully submits that all 214 challenged entries are properly withheld under applicable privileges and protections and that none of the corresponding documents should be produced to Staff. Solara has undertaken a thorough review of each challenged entry and, through this letter and the accompanying Appendix A, provides enhanced descriptions for each of the 214 challenged entries, organized by privilege category, to demonstrate that each withholding is well-founded under the attorney-client privilege, the work product doctrine, or the joint defense / common interest privilege, as applicable.

This letter and the enhanced descriptions provided herein are submitted pursuant to, and without prejudice to the rights preserved under, the Clawback / Non-Waiver Agreement executed on June 9, 2023 (the "Clawback Agreement"), by and between Calderwood & Harkness LLP (on behalf of Solara) and FTC Bureau of Competition, Mergers IV Division staff, which was entered into pursuant to principles embodied in Federal Rule of Evidence 502(d) and is consistent with the FTC Model Stipulated Protective Order governing confidential treatment of materials produced in connection with this investigation. Nothing in this letter or in the enhanced descriptions set forth herein is intended to, nor shall it be construed to, waive any applicable privilege, protection, or right of Solara with respect to any document, communication, or material, whether or not identified on the Privilege Log.

II. Background

A. The Transaction

Solara Digital Infrastructure Fund IV LP ("Fund IV"), a Delaware limited partnership managed by Solara Digital Infrastructure GP LLC ("Solara GP"), proposes, through its wholly owned indirect subsidiary PCS Acquisition Corp. ("PCS AcqCo"), a newly formed Delaware corporation, to acquire 100% of the outstanding capital stock of Pinnacle Cloud Systems, Inc. ("Pinnacle"), a Delaware corporation headquartered at 8700 Research Boulevard, Suite 500, Austin, TX 78758 (the "Transaction"). The Transaction is governed by the Stock Purchase Agreement, dated April 14, 2023 (the "SPA"), by and among Solara Digital Infrastructure Fund IV LP, PCS Acquisition Corp., Pinnacle Cloud Systems, Inc., Thorngate Capital Partners LP ("Thorngate"), as Sellers' Representative, and the Sellers named therein.

The Transaction has an aggregate enterprise value of approximately $1.63 billion, comprised of approximately $1.19 billion in cash consideration and approximately $440 million in rollover equity, with the rollover equity representing approximately 27% of the post-closing enterprise value. The Transaction is structured as a stock purchase in which Fund IV, through PCS AcqCo, will acquire all issued and outstanding shares of Pinnacle common stock from the Sellers, subject to the terms and conditions of the SPA and applicable regulatory approvals.

Solara is a leading technology-focused private equity firm that manages a family of investment funds, including Fund IV, which is the primary investment vehicle for the Transaction. Solara GP serves as the general partner to each of the Solara funds. Solara's portfolio includes, among other companies, Meridian Workflow Solutions, Inc. ("Meridian"), a cloud-based order management system ("OMS") and execution management system ("EMS") platform provider serving institutional asset managers, which was acquired by Solara Digital Infrastructure Fund III LP ("Fund III") in 2019 and is currently a portfolio company controlled by Solara through Fund III.

Pinnacle is a cloud-based portfolio analytics and performance attribution software company that provides analytics solutions to institutional asset managers, hedge funds, endowments, and pension funds. The proposed combination of Pinnacle's portfolio analytics platform with Meridian's trade execution and order management platform is the subject of the FTC's investigation and the Second Request.

The parties filed a premerger notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the "HSR Act"), on April 28, 2023. The initial 30-day waiting period under the HSR Act expired on May 28, 2023, and the FTC issued the Second Request to Solara on May 29, 2023. A corresponding Second Request was issued to Pinnacle on the same date.

B. The Second Request Compliance Process

The Second Request contains 47 specifications covering a broad range of documents and data relating to, among other things, relevant product and geographic markets, competition and competitive dynamics in cloud-based portfolio analytics and OMS/EMS software, pricing and pricing trends, customer switching patterns and switching costs, barriers to entry and expansion, integration planning, financial projections, and strategic assessments of the Transaction.

Solara undertook a comprehensive compliance process in response to the Second Request. This process involved the following principal elements:

Custodian Identification. Solara identified 18 custodians on the Solara side of the Transaction, consisting of 12 individuals from Solara GP and Fund IV's management and investment team and 6 individuals from Meridian management. The Solara-side custodians were identified through a systematic process led by Calderwood & Harkness LLP, in consultation with Solara's business team, and were selected based on their likely possession of responsive documents and their functional responsibilities relating to the Transaction, competition in the relevant markets, and the operation of Meridian's business. Pinnacle separately identified 14 custodians, managed by Pinnacle's counsel, Hargrove, Pelletier & Stein LLP ("HPS").

Document Collection and Review. Approximately 1.24 million documents were collected from Solara-side custodians. After de-duplication and application of agreed-upon search term filters, approximately 487,000 documents were identified for review for responsiveness and privilege. The document review was conducted by a 22-person team of contract review attorneys managed by Keymark Document Solutions LLC ("Keymark") (Daniel S. Fong, Project Manager) in a hosted Relativity environment, under the supervision of Monica Reyes (Senior Associate, Year 7) and Elliot Nguyen (Associate, Year 4) of Calderwood & Harkness LLP, with e-discovery oversight provided by Tamara J. Westbrook (Of Counsel, Litigation Technology & E-discovery).

Document Production. Approximately 196,300 documents were produced to Staff, Bates-numbered SDILP-2R-000001 through SDILP-2R-196300, in load-file format in accordance with the FTC's production specifications.

Structured Data Submissions. Seven structured data submissions were provided to Staff, covering sales data, pricing data, customer lists, win/loss data, market share estimates, financial data, and product feature matrices, in response to the data specifications contained in the Second Request and as supplemented by Staff's subsequent requests for additional data.

Substantial Compliance Certification. Solara filed its Substantial Compliance Certification on September 22, 2023, 116 days from the date of issuance of the Second Request. Pinnacle's Substantial Compliance Certification was filed on October 6, 2023, through Hargrove, Pelletier & Stein LLP (Catherine A. Pelletier, Lead Partner).

C. The Privilege Log

Solara's Privilege Log contains 4,872 entries, each reflecting a document or communication withheld from production on the basis of one or more applicable privileges or protections. The Privilege Log entries are distributed across three privilege categories as follows:

The privilege review was conducted by the same 22-person contract review attorney team managed by Keymark Document Solutions LLC (Daniel S. Fong, Project Manager) in the hosted Relativity environment, under the supervision of Monica Reyes and Elliot Nguyen of Calderwood & Harkness LLP, with e-discovery oversight by Tamara J. Westbrook. Each privilege designation was subject to a quality-control review process that included sampling, second-level review by Calderwood & Harkness associates, and escalation protocols for documents presenting close or complex privilege questions.

All Privilege Log entries were prepared in compliance with FTC Second Request requirements and provide, for each withheld document: (i) the date of the document or communication; (ii) the author(s) or sender(s); (iii) the recipient(s), including any persons copied; (iv) the document type (e.g., email, memorandum, presentation, handwritten notes); (v) a subject matter description; and (vi) the privilege basis for the withholding. The log entries were designed to provide Staff with sufficient information to assess the privilege assertion without revealing the substance of the privileged communication or the attorney's mental impressions.

D. The FTC Staff Challenge

On November 8, 2023, FTC Staff issued the Challenge Letter, challenging 214 of the 4,872 entries on Solara's Privilege Log. The 214 challenged entries represent approximately 4.4% of the total Privilege Log entries.

Staff's Challenge Letter identified three principal categories of concern:

(i) Insufficient Descriptions for Certain Attorney-Client Privilege Entries. Staff asserted that certain log descriptions for attorney-client privilege entries do not sufficiently identify the legal advice sought or provided, and questioned whether certain communications involving business personnel alongside counsel reflect business rather than legal purposes.

(ii) Applicability of Work Product Doctrine to Certain Business-Oriented Documents. Staff questioned whether certain documents designated as work product — including documents that may reflect market analyses, financial projections, or competitive assessments — were genuinely prepared in anticipation of litigation, as opposed to having been created in the ordinary course of business for investment or commercial purposes.

(iii) Scope of Joint Defense / Common Interest Arrangement. Staff questioned whether the common interest arrangement extends to certain communications between counsel for the acquirer (Calderwood & Harkness LLP) and counsel for the sellers (Hargrove, Pelletier & Stein LLP; Ashford Crane LLP), and whether specific challenged communications were made in furtherance of the parties' common legal interest in obtaining regulatory clearance.

This response addresses each category in turn, providing enhanced descriptions and supporting legal authority to demonstrate that all 214 challenged entries are properly withheld under the applicable privilege or protection.

III. Legal Standards Governing Privilege Assertions

A. Attorney-Client Privilege

The attorney-client privilege is the oldest recognized privilege for confidential communications, and its purpose is to encourage full and frank communication between attorneys and their clients in order to promote the broader public interest of the observance of law and the administration of justice. See Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). The privilege applies to communications between a client and counsel that are made for the purpose of seeking or providing legal advice and that are intended to be, and are maintained as, confidential. Id. at 394-95.

In the corporate context, the attorney-client privilege extends to communications between counsel and corporate employees who possess information needed by counsel in order to render legal advice to the corporate client. See Upjohn, 449 U.S. at 394-95. Here, the client is Solara, including the officers and employees of Solara GP, Fund IV, and portfolio company Meridian who were acting within the scope of their responsibilities and communicating with counsel at the direction of, or for the benefit of, the corporate client. Communications between these individuals and counsel at Calderwood & Harkness LLP — including Howard Bellamy (Partner), Monica Reyes (Senior Associate), Elliot Nguyen (Associate), and Tamara J. Westbrook (Of Counsel) — for the purpose of seeking or providing legal advice regarding the Second Request, HSR compliance, and the proposed acquisition are squarely within the scope of the privilege.

With respect to communications involving in-house counsel, the privilege applies to communications that are predominantly legal in nature, as distinguished from communications that serve a purely or predominantly business purpose. See In re Vioxx Prods. Liab. Litig., 501 F. Supp. 2d 789, 797 (E.D. La. 2007); In re Kellogg Brown & Root, Inc., 756 F.3d 754, 758-60 (D.C. Cir. 2014). Where a communication serves both a legal and a business purpose — that is, where it is "dual-purpose" — the communication is privileged if the predominant purpose of the communication was to seek or provide legal advice. See In re Kellogg Brown & Root, 756 F.3d at 760 (rejecting the "but-for" test and applying a "primary purpose" test). Communications with Marcus E. Culberson, General Counsel of Pinnacle, that are identified on the Privilege Log fall within this standard because they are predominantly legal in nature, concerning Pinnacle's assessment of regulatory risks, legal structuring issues, and compliance with the Second Request.

B. Work Product Doctrine

The work product doctrine, first recognized in Hickman v. Taylor, 329 U.S. 495 (1947), and codified in Federal Rule of Civil Procedure 26(b)(3), protects from disclosure documents and tangible things prepared in anticipation of litigation or for trial by or for a party or its representative. Materials qualifying as work product are subject to a qualified immunity from discovery, and the protection is at its strongest when the materials contain the mental impressions, conclusions, opinions, or legal theories of an attorney — commonly referred to as "opinion work product" — which is entitled to near-absolute protection. See Upjohn, 449 U.S. at 401; In re Cendant Corp. Sec. Litig., 343 F.3d 658, 663 (3d Cir. 2003).

In the Second Request context, documents prepared in anticipation of potential FTC enforcement action constitute work product. The prospect of FTC enforcement action — specifically, the prospect that the FTC might challenge the Transaction by filing a complaint in federal court seeking a preliminary injunction under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), or initiating an administrative proceeding under Part 3 of the FTC Rules — is a real and concrete litigation threat that satisfies the "anticipation of litigation" standard. See FTC v. Boehringer Ingelheim Pharms., Inc., 778 F.3d 142, 149-51 (D.C. Cir. 2015) (discussing the standard for work product in the context of FTC investigations); United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998) (applying the "because of" test for anticipation of litigation). Documents prepared by Calderwood & Harkness attorneys — including internal analyses of competitive issues, assessments of potential FTC theories of harm, and strategic memoranda regarding Second Request compliance — were prepared because of the prospect of such litigation and are properly classified as work product.

The distinction between fact work product and opinion work product is significant here. Many of the challenged work product entries contain opinion work product — reflecting the mental impressions, conclusions, and strategic assessments of Calderwood & Harkness attorneys regarding the strengths and weaknesses of FTC theories of harm, the competitive significance of market share data, and the legal sufficiency of efficiency arguments. Such opinion work product is entitled to heightened protection and is discoverable, if at all, only upon an extraordinary showing that is not present here. See Upjohn, 449 U.S. at 401-02.

C. Joint Defense / Common Interest Privilege

The joint defense privilege, also referred to as the common interest privilege, extends the protections of the attorney-client privilege and work product doctrine to communications between parties who share a common legal interest, made in furtherance of that common interest, through or in the presence of their respective counsel. See United States v. Schwimmer, 892 F.2d 237, 243-44 (2d Cir. 1989); In re Teleglobe Commc'ns Corp., 493 F.3d 345, 364 (3d Cir. 2007). The common interest need not be identical, but it must be a legal interest, as distinguished from a purely commercial or business interest. See In re Santa Fe Int'l Corp., 272 F.3d 705, 710-11 (5th Cir. 2001).

Here, Solara (through its counsel, Calderwood & Harkness LLP), Pinnacle and the Sellers (through their counsel, Hargrove, Pelletier & Stein LLP, led by Catherine A. Pelletier and David L. Morrissette), and Thorngate Capital Partners LP (through its counsel, Ashford Crane LLP, led by Robert T. Ishikawa) share a common legal interest in securing FTC clearance of the proposed Transaction. This common legal interest arises from the fact that all parties to the SPA have a shared stake in the successful consummation of the Transaction, which requires the termination or expiration of the waiting period under the HSR Act and, if necessary, the resolution of any FTC challenge to the Transaction. Communications exchanged among these parties' respective counsel under the common interest umbrella — to coordinate Second Request compliance, discuss competitive analyses, and align advocacy positions before the FTC — are protected by the common interest privilege.

The SPA itself, dated April 14, 2023, contains an antitrust cooperation covenant (Section 5.4 of the SPA) requiring the parties to cooperate fully in connection with any governmental investigation or proceeding relating to the Transaction, including the Second Request. This contractual framework reflects and reinforces the parties' shared legal interest in obtaining regulatory clearance. Communications made pursuant to this cooperation obligation, through the parties' respective counsel, in furtherance of the common legal interest, and intended to remain confidential, are properly protected by the common interest privilege.

D. FRE 502(d) / Clawback Agreement

On June 9, 2023, Calderwood & Harkness LLP (on behalf of Solara) and FTC Bureau of Competition, Mergers IV Division staff executed the Clawback / Non-Waiver Agreement (the "Clawback Agreement"), which governs the treatment of privileged and work product materials in connection with the Second Request compliance process. The Clawback Agreement provides that the inadvertent production of privileged or work product materials in the course of the Second Request compliance process shall not constitute a waiver of any applicable privilege or protection, consistent with the principles embodied in Federal Rule of Evidence 502(d) and the terms of the FTC Model Stipulated Protective Order.

While the Clawback Agreement is principally designed to address the risk of inadvertent production in the context of a large-scale document review — as is inherent in a review of over 487,000 documents by a 22-person team — it also underscores the parties' mutual understanding that privilege protections remain intact throughout the compliance process and that assertions of privilege are to be evaluated on the merits, without any implication of waiver arising from the volume or pace of the production. Solara's Privilege Log and the assertions set forth therein are submitted in reliance on, and without prejudice to the protections afforded by, the Clawback Agreement.

IV. Response to Challenged Attorney-Client Privilege Entries

A. Overview of Challenged Attorney-Client Entries

Of the 214 entries challenged by Staff in the Challenge Letter, 148 entries fall within the attorney-client privilege category, constituting the largest portion of the challenge. These 148 entries represent approximately 69.2% of all challenged entries and approximately 4.1% of the 3,641 total attorney-client privilege entries on the Privilege Log.

Staff's principal objections with respect to these entries are twofold. First, Staff asserts that certain log descriptions do not sufficiently identify the specific legal advice sought or provided, and that the descriptions are therefore too generic or conclusory to sustain the privilege assertion. Second, Staff questions whether certain communications involving business personnel alongside counsel — particularly communications that include both attorneys and non-attorney business personnel on the same email thread or in the same meeting — reflect business purposes rather than legal purposes, and thus fall outside the scope of the privilege.

Solara addresses each of these concerns below and provides enhanced descriptions organized by the principal sub-categories of challenged attorney-client entries. Appendix A, Table 1 sets forth the enhanced descriptions for each of the 148 challenged attorney-client privilege entries, with sufficient specificity to demonstrate the privileged nature of each communication without disclosing the substance of the legal advice or the attorney's mental impressions.

B. Enhanced Descriptions — Communications Between Solara Management and Calderwood & Harkness LLP

The largest sub-category of challenged attorney-client privilege entries consists of communications between Solara GP management — principally Graham A. Whitfield (Founding Partner & CEO, Solara GP) and Sandra K. Levinson (Co-Managing Partner & CIO, Solara GP) — and Calderwood & Harkness LLP attorneys, including Howard Bellamy (Partner), Monica Reyes (Senior Associate), Elliot Nguyen (Associate), and, in certain instances, Tamara J. Westbrook (Of Counsel). Approximately 87 of the 148 challenged attorney-client entries fall within this sub-category.

The nature of these communications is as follows: each communication involves Solara management seeking legal advice from, or receiving legal advice provided by, Calderwood & Harkness attorneys regarding one or more of the following topics:

(a) FTC Second Request Compliance Strategy. Communications in which Solara management seeks counsel's guidance on the scope of the Second Request specifications, the appropriate approach to custodian identification and document preservation, the timing of productions and data submissions, and the preparation of the Substantial Compliance Certification. These communications reflect counsel's legal advice regarding Solara's obligations under the Second Request and the most effective means of satisfying those obligations while preserving Solara's legal rights.

(b) Antitrust Risk Assessment. Communications in which Solara management seeks counsel's assessment of the antitrust risks associated with the proposed Transaction, including counsel's analysis of potential FTC theories of horizontal overlap in portfolio analytics and performance attribution software and potential theories of vertical foreclosure relating to data integration between Meridian's OMS/EMS platform and Pinnacle's analytics platform. These communications reflect counsel's legal analysis of substantive antitrust issues and counsel's assessment of the likelihood and potential basis for FTC enforcement action.

(c) Competitive Effects Analysis. Communications in which counsel provides legal advice regarding the competitive significance of the proposed combination of Pinnacle's portfolio analytics platform with Meridian's trade execution and order management platform, including counsel's assessment of relevant product and geographic market definitions, combined market share levels, the significance of competitor offerings, and the availability of procompetitive justifications and efficiencies. These communications are integral to counsel's rendering of legal advice regarding the Transaction's antitrust implications and the development of Solara's advocacy strategy.

(d) FTC Engagement Strategy. Communications in which counsel advises Solara management regarding strategy for engaging with FTC Staff, including the substance and timing of advocacy presentations, the preparation of economic analyses and submissions, and the handling of staff requests for additional information and pull-forward document requests. These communications reflect counsel's strategic legal judgment regarding the most effective approach to advocacy before the Commission.

In each instance, the communication was made for the predominant purpose of seeking or providing legal advice in connection with the Second Request, the proposed Transaction, and related antitrust matters. The inclusion of non-attorney business personnel — such as Derek H. Calloway (Senior Vice President, Technology & Data Analytics, Solara GP), Janet M. Strickland (Vice President, Portfolio Operations, Solara GP), or Tyler R. Pemberton (Associate, Investment Team, Solara GP) — on certain communications does not negate the privilege, as these individuals were included because they possessed information needed by counsel to render legal advice or because they were the individuals responsible for implementing counsel's legal advice within the organization. See Upjohn, 449 U.S. at 394-95. The communications were intended to be, and were maintained as, confidential, and were not shared with any third party outside the scope of the privilege.

The enhanced descriptions for each of the approximately 87 entries in this sub-category are set forth in Appendix A, Table 1, and specify, for each entry: the specific legal question or topic addressed; the participants and their roles; the document type; and the basis for the privilege assertion. Solara submits that these enhanced descriptions demonstrate that each communication was made for the predominant purpose of seeking or providing legal advice, and that each entry is properly withheld under the attorney-client privilege.

C. Enhanced Descriptions — Communications Involving Meridian Management

A second sub-category of challenged attorney-client privilege entries consists of communications involving Meridian management personnel, principally Priya N. Raghavan (CEO, Meridian Workflow Solutions, Inc.) and other Meridian personnel who were among the 6 Meridian custodians identified in the Second Request compliance process. Approximately 38 of the 148 challenged attorney-client entries fall within this sub-category.

Staff's challenge to these entries appears to be grounded in a concern that Meridian, as a portfolio company of Fund III (rather than Fund IV, the acquiring fund), may not fall within the scope of the attorney-client relationship between Solara and Calderwood & Harkness LLP, and that communications with Meridian personnel may reflect business rather than legal purposes. Solara respectfully submits that these concerns are unfounded for the following reasons.

First, Meridian is controlled by Solara through Fund III, and Solara GP exercises operational and strategic oversight over Meridian through Fund III's investment committee and the Solara GP management team. For purposes of the Second Request, Meridian is within Solara's corporate family, and Meridian management personnel are functional employees within the scope of the Upjohn analysis. Indeed, the Second Request itself treats Meridian as part of the acquiring person and requires production of Meridian's documents and data. The 6 Meridian custodians were identified precisely because they possess information regarding Meridian's competitive position, product offerings, pricing, customers, and market dynamics that is directly relevant to the FTC's investigation. Communications between these Meridian personnel and Calderwood & Harkness attorneys are privileged to the same extent as communications between Solara GP management and counsel.

Second, the challenged communications in this sub-category reflect Meridian management providing factual information to Calderwood & Harkness attorneys at counsel's express direction for the purpose of counsel rendering legal advice regarding competitive effects analysis, market definition, and Second Request specification responses. These communications are not ordinary-course business communications between Meridian management and Solara GP; rather, they are communications specifically initiated by or at the request of counsel to obtain information necessary for counsel to render legal advice in connection with the Second Request and the antitrust review of the Transaction. As such, they fall squarely within the scope of the attorney-client privilege under Upjohn.

The enhanced descriptions for each of the approximately 38 entries in this sub-category are set forth in Appendix A, Table 1, and identify the specific factual information sought by counsel, the legal purpose for which the information was requested, and the participants in the communication.

D. Enhanced Descriptions — Communications Involving Pinnacle In-House Counsel

A third sub-category of challenged attorney-client privilege entries consists of communications involving Marcus E. Culberson, General Counsel of Pinnacle Cloud Systems, Inc. Approximately 23 of the 148 challenged attorney-client entries fall within this sub-category.

Staff's challenge to these entries appears to question whether communications with Mr. Culberson are predominantly legal in nature, as opposed to communications that serve a predominantly business purpose. Solara respectfully submits that each of the challenged communications involving Mr. Culberson satisfies the standard for attorney-client privilege.

Mr. Culberson, as General Counsel of Pinnacle, serves a dual function as both a legal advisor and a business executive. However, the challenged communications were initiated by or directed to Mr. Culberson in his capacity as a legal advisor, and the predominant purpose of each communication was the seeking or provision of legal advice. The communications address Pinnacle's assessment of regulatory risks associated with the Transaction, legal structuring issues relating to the SPA and the allocation of regulatory risk between the parties, and legal analysis of the competitive effects of the Transaction as they relate to Pinnacle's product offerings and market position. Where a communication served both a business and a legal purpose — that is, where it was "dual-purpose" — the predominant purpose of the communication was legal advice, and the communication is therefore privileged under the standard articulated in In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014).

The enhanced descriptions for each of the approximately 23 entries in this sub-category are set forth in Appendix A, Table 1.

E. Summary Assertion

For the foregoing reasons, Solara respectfully submits that all 148 challenged attorney-client privilege entries are properly withheld under the attorney-client privilege. The enhanced descriptions provided in Appendix A, Table 1, demonstrate that each communication was made for the predominant purpose of seeking or providing legal advice in connection with the Second Request, the proposed Transaction, and related antitrust matters. Each communication was between counsel and client (or functional employees acting within the scope of the corporate client's interests), was made in confidence, and has been maintained as confidential throughout the Second Request compliance process. No challenged attorney-client privilege entry should be produced to Staff.

V. Response to Challenged Work Product Entries

A. Overview of Challenged Work Product Entries

Of the 214 entries challenged by Staff, 44 entries fall within the work product doctrine category. These 44 entries represent approximately 20.6% of all challenged entries and approximately 4.9% of the 894 total work product entries on the Privilege Log.

Staff's principal objection with respect to these entries is that certain documents appear to be business analyses or financial projections that may not have been prepared in anticipation of litigation — that is, Staff questions whether these documents were prepared "because of" the prospect of FTC enforcement action, or whether they were created in the ordinary course of Solara's business for investment, portfolio management, or commercial purposes independent of the Second Request process. Solara addresses this concern below and demonstrates that each of the 44 challenged work product entries was prepared because of the prospect of litigation and reflects attorney mental impressions, conclusions, or legal theories.

B. Enhanced Descriptions — Internal Calderwood & Harkness Analytical Memoranda

The largest sub-category of challenged work product entries consists of internal memoranda prepared by Calderwood & Harkness attorneys and economists — principally Howard Bellamy (Partner), Monica Reyes (Senior Associate), Elliot Nguyen (Associate), and Dr. Arvind Chakrabarti (Senior Economist, Calderwood & Harkness Economic Consulting) — analyzing competitive dynamics, market shares, and potential FTC theories of harm in connection with the Transaction. Approximately 21 of the 44 challenged work product entries fall within this sub-category.

These documents were prepared specifically in anticipation of potential FTC enforcement action — that is, the prospect that the FTC might challenge the Transaction by filing a complaint in the United States District Court for the District of Columbia seeking a preliminary injunction under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), or by initiating an administrative proceeding before an Administrative Law Judge under Part 3 of the FTC Rules. The documents reflect attorneys' mental impressions, conclusions, and legal theories regarding, among other things:

(a) The definition and scope of relevant product markets, including cloud-based portfolio analytics and performance attribution software and cloud-based OMS/EMS software for institutional asset managers, and counsel's assessment of the strengths and weaknesses of alternative market definitions that the FTC might propose;

(b) The competitive significance of combined market share data, including analysis of the combined analytics market share of approximately 17.74% (based on approximately $326.4 million in combined analytics revenue in a $1.84 billion North American analytics segment total addressable market), Pinnacle's standalone analytics share of approximately 12.4%, and Meridian's standalone analytics share of approximately 5.2%;

(c) The competitive significance of rival offerings, including the market positions of Marlowe Asset Management Analytics Corp. (approximately 16% share), Arclight Data Systems (approximately 14% share), and other competitors, and counsel's assessment of the extent to which these competitors constrain the merging parties;

(d) Potential FTC theories of horizontal overlap in portfolio analytics and potential theories of vertical foreclosure relating to the integration of Meridian's OMS/EMS platform with Pinnacle's analytics platform, including counsel's assessment of the legal and factual basis for such theories and the most effective arguments and evidence to rebut them; and

(e) The availability of procompetitive justifications and merger-specific efficiencies, including counsel's assessment of the legal sufficiency of efficiency arguments under the FTC's Horizontal Merger Guidelines and the evidentiary support required to sustain such arguments.

These analyses were not prepared in the ordinary course of Solara's business. They were not created for investment committee presentations, portfolio monitoring, or commercial decision-making. Rather, they were created at the specific direction of counsel to assess litigation risk and develop advocacy strategy in the context of the FTC's investigation of the Transaction. The documents are replete with counsel's legal analysis, strategic assessments, and mental impressions regarding the potential for and likely outcome of FTC enforcement action. They constitute both fact work product and opinion work product, and the opinion work product contained therein is entitled to heightened protection under Upjohn, 449 U.S. at 401-02.

C. Enhanced Descriptions — Draft Economic Analyses and White Paper Preparation Materials

A second sub-category of challenged work product entries consists of draft versions and preparatory materials for the Economic Submission / White Paper filed with FTC Staff on November 3, 2023 (the "Economic Submission"). Approximately 14 of the 44 challenged work product entries fall within this sub-category.

The Economic Submission is a comprehensive analytical document prepared by Calderwood & Harkness LLP, in consultation with Dr. Arvind Chakrabarti and the firm's economic consulting team, presenting Solara's advocacy position on the competitive effects of the Transaction. The preparation of the Economic Submission involved multiple drafts, working papers, and internal memoranda in which counsel refined the analytical framework, selected and organized the supporting evidence, and made strategic judgments about which arguments and data to include in the final submission and how to present them most effectively.

The challenged entries in this sub-category consist of earlier draft versions and preparatory materials for the Economic Submission that contain counsel's mental impressions and strategic assessments that were refined, modified, or excluded before the final submission. These materials constitute opinion work product of the highest order, as they reveal the evolution of counsel's legal and strategic thinking, the analytical paths that were explored and abandoned, and the judgments that counsel made in shaping the final advocacy product. The heightened protection afforded to opinion work product applies with full force to these materials. See Upjohn, 449 U.S. at 401; In re Cendant Corp. Sec. Litig., 343 F.3d at 663.

The Economic Submission and its underlying preparatory materials address, among other things: total addressable market analyses (approximately $11.8 billion globally, approximately $6.2 billion in North America); vertical foreclosure analyses, including the significance of Meridian's open-architecture APIs and demonstrated interoperability with 9 or more competing analytics and data platforms; and detailed efficiency arguments. While certain elements of the final Economic Submission have been shared with Staff, the draft versions and preparatory materials contain counsel's unfiltered mental impressions and strategic assessments that were not included in the final product and that are entitled to the strongest protection under the work product doctrine.

D. Enhanced Descriptions — Compliance Strategy Documents

A third sub-category of challenged work product entries consists of internal planning documents related to Second Request compliance strategy. Approximately 9 of the 44 challenged work product entries fall within this sub-category.

These documents include memoranda and planning materials prepared by Calderwood & Harkness attorneys addressing custodian selection rationale, the development of search term protocols, document review guidelines and quality-control procedures, and strategic assessments of the order and timing of document productions and data submissions. These materials were prepared by counsel in anticipation of potential FTC enforcement action and reflect counsel's litigation strategy — specifically, counsel's judgments about how to structure and manage the Second Request compliance process in a manner that would most effectively serve Solara's legal interests in the event that the FTC elected to challenge the Transaction.

These documents were not created in the ordinary course of business; they have no business purpose independent of the Second Request process and the prospect of FTC enforcement action. They reflect counsel's strategic thinking about how to organize and present Solara's document production and advocacy in a way that would best position Solara for a favorable outcome, whether through negotiation of a consent decree, abandonment of the investigation by Staff, or, if necessary, litigation. As such, they are properly classified as work product.

E. Summary Assertion

For the foregoing reasons, Solara respectfully submits that all 44 challenged work product entries are properly withheld under the work product doctrine. Each document was prepared because of the prospect of litigation — specifically, the prospect of FTC enforcement action challenging the Transaction — and reflects attorney mental impressions, conclusions, opinions, or legal theories. No document in this category was created in the ordinary course of Solara's business independent of the Second Request process and the attendant prospect of litigation. The enhanced descriptions for each of the 44 challenged entries are set forth in Appendix A, Table 2. No challenged work product entry should be produced to Staff.

VI. Response to Challenged Joint Defense / Common Interest Entries

A. Overview of Challenged Joint Defense / Common Interest Entries

Of the 214 entries challenged by Staff, 22 entries fall within the joint defense / common interest privilege category. These 22 entries represent approximately 10.3% of all challenged entries and approximately 6.5% of the 337 total joint defense / common interest entries on the Privilege Log.

Staff's principal objection with respect to these entries is twofold. First, Staff questions whether the common interest arrangement extends to communications between counsel for the acquirer (Calderwood & Harkness LLP) and counsel for the sellers (Hargrove, Pelletier & Stein LLP and Ashford Crane LLP), given that the acquirer and sellers may have divergent commercial interests in certain respects. Second, Staff questions whether the specific challenged communications were made in furtherance of the parties' common legal interest, as opposed to having been made for commercial or transactional purposes unrelated to the regulatory clearance process.

B. The Common Interest Arrangement

Solara (through its counsel, Calderwood & Harkness LLP), Pinnacle and the Sellers (through their counsel, Hargrove, Pelletier & Stein LLP, led by Catherine A. Pelletier and David L. Morrissette), and Thorngate Capital Partners LP (through its counsel, Ashford Crane LLP, led by Robert T. Ishikawa) share a common legal interest in obtaining FTC clearance of the proposed Transaction. This common legal interest is well-established and is recognized in the case law as a sufficient basis for the common interest privilege. See, e.g., United States v. Vane Kaplan CPAs LLP Seidman, LLP, 492 F.3d 806, 815-16 (7th Cir. 2007) (recognizing common interest privilege where parties share a legal interest in the same transaction or proceeding).

The common legal interest shared by the parties is not merely a commercial or financial interest in completing the Transaction; it is a legal interest in securing the termination or expiration of the waiting period under the HSR Act and in successfully defending against any potential FTC enforcement action challenging the Transaction. All parties to the SPA face a common legal consequence if the FTC challenges the Transaction: the Transaction will not close, and all parties will suffer the attendant legal and economic consequences. This shared legal interest is precisely the type of interest that the common interest privilege is designed to protect.

The Stock Purchase Agreement dated April 14, 2023, reinforces this common legal interest through its antitrust cooperation covenant (Section 5.4 of the SPA), which requires the parties to "use their respective reasonable best efforts to cooperate in all respects with each other in connection with any investigation or proceeding by any Governmental Authority with respect to the transactions contemplated by this Agreement," including, without limitation, the Second Request. This contractual obligation reflects the parties' mutual recognition that the regulatory clearance process requires coordinated effort and that privileged communications between counsel are essential to that effort.

The communications challenged by Staff were made between the parties' respective counsel — Calderwood & Harkness LLP, Hargrove, Pelletier & Stein LLP, and Ashford Crane LLP — in furtherance of their shared common legal interest and were intended to remain, and have been maintained as, confidential. No communication within the common interest arrangement was shared with any third party outside the scope of the arrangement.

C. Enhanced Descriptions — Specific Challenged Entries

The 22 challenged joint defense / common interest entries encompass the following principal categories of communications:

(a) Coordination of Custodian Identification and Document Production Strategy. Approximately 7 of the 22 challenged entries consist of communications between Calderwood & Harkness LLP and Hargrove, Pelletier & Stein LLP regarding the parallel identification of custodians on the Solara side (18 custodians) and the Pinnacle side (14 custodians), the development of consistent search term protocols, and the coordination of document production strategy to ensure that the acquirer's and target's respective productions were consistent and complementary in their coverage of the 47 Second Request specifications. These communications were made in furtherance of the common legal interest in ensuring efficient and compliant responses to the Second Request and in presenting a unified and consistent factual record to FTC Staff.

(b) Strategy Discussions Regarding Advocacy Positions. Approximately 8 of the 22 challenged entries consist of communications between Calderwood & Harkness LLP, Hargrove, Pelletier & Stein LLP, and Ashford Crane LLP regarding the alignment of advocacy positions before FTC Mergers IV Division staff. These communications reflect discussions among counsel regarding the most effective legal arguments and evidentiary presentations to advance the parties' shared legal interest in obtaining clearance, including the coordination of the parties' respective responses to Staff's questions about competitive dynamics, market definition, and the competitive significance of the Transaction. These communications are the very essence of the common interest privilege — they reflect privileged attorney-to-attorney communications made for the purpose of coordinating legal strategy in furtherance of a shared legal interest.

(c) Shared Analyses of Competitive Landscape and Market Definition. Approximately 4 of the 22 challenged entries consist of shared analyses of the competitive landscape and relevant market definitions, exchanged among the parties' respective counsel under the common interest umbrella, for the purpose of developing a coordinated legal position on issues of market definition, competitive effects, and the availability of efficiencies. These materials were prepared by counsel and shared with co-counsel under the common interest arrangement in confidence and for the sole purpose of advancing the parties' shared legal interest.

(d) Coordination Regarding Supplemental Requests. Approximately 3 of the 22 challenged entries consist of communications between Calderwood & Harkness LLP and Hargrove, Pelletier & Stein LLP regarding the October 27, 2023 supplemental / pull-forward requests issued by Staff, which included 8 additional document requests directed to both Solara and Pinnacle. These communications reflect the parties' coordinated legal response to the supplemental requests, including counsel's analysis of the scope of the supplemental requests, the identification of additional responsive documents, and the development of a coordinated strategy for responding to the supplemental requests in a manner consistent with the parties' shared advocacy position.

The enhanced descriptions for each of the 22 challenged entries are set forth in Appendix A, Table 3.

D. Summary Assertion

For the foregoing reasons, Solara respectfully submits that all 22 challenged joint defense / common interest entries are properly withheld under the joint defense / common interest privilege. Each communication was made between parties sharing a common legal interest — the interest in obtaining FTC clearance of the proposed Transaction — through their respective counsel, in furtherance of that common legal interest, and was intended to be and has been maintained as confidential. No challenged joint defense / common interest entry should be produced to Staff.

VII. Reconciliation of Challenged Entry Count

For clarity and completeness, Solara provides the following reconciliation of the challenged entries:

Solara confirms that the 214 challenged entries identified in Staff's Challenge Letter of November 8, 2023, have been accounted for in their entirety, and that the enhanced descriptions provided in this letter and in Appendix A address each of the 214 challenged entries. No entry has been omitted from this response, and no entry has been counted more than once. Each challenged entry is associated with a single privilege category, consistent with the designations on the Privilege Log.

Solara submits that the enhanced descriptions provided herein and in Appendix A demonstrate that each of the 214 challenged entries is properly withheld under the applicable privilege or protection. None of the challenged documents should be produced to Staff.

VIII. Conclusion and Request

For the reasons set forth above, Solara Digital Infrastructure LP respectfully requests that FTC Staff withdraw its challenge to all 214 entries identified in the Challenge Letter dated November 8, 2023. Solara has demonstrated, through the enhanced descriptions provided in this letter and in Appendix A, that each of the 214 challenged entries is properly withheld under the attorney-client privilege, the work product doctrine, or the joint defense / common interest privilege, as applicable. None of the challenged documents should be produced to Staff.

Solara notes that the Clawback / Non-Waiver Agreement executed on June 9, 2023, remains in full force and effect and continues to protect against any inadvertent waiver of privilege or work product protection in connection with the Second Request compliance process. Nothing in this letter or in the enhanced descriptions provided herein is intended to waive, nor shall it be construed to waive, any applicable privilege, protection, or right.

Solara further notes the ongoing and extensive cooperation between Solara and Staff throughout the Second Request compliance process. To date, Solara has produced approximately 196,300 documents, provided 7 structured data submissions, and filed its Substantial Compliance Certification. The Economic Submission / White Paper was filed on November 3, 2023, and Solara's counsel has participated in multiple telephone conferences and meetings with Staff to discuss the Transaction, the competitive landscape, and Staff's areas of inquiry. Solara remains committed to continuing this cooperative engagement and is prepared to discuss any remaining concerns with Staff at Staff's convenience.

Should Staff have additional questions regarding any specific challenged entry, or should Staff wish to schedule a telephonic conference to discuss the enhanced descriptions in further detail, Solara's counsel stands ready to accommodate such requests. Solara is willing to provide further clarification of any challenged entry, consistent with its obligation to protect the substance of privileged communications and attorney work product, if Staff identifies specific entries that remain of concern following its review of this response and Appendix A.

Solara reserves all rights and privileges, including but not limited to the right to assert privilege, work product protection, and any other applicable protection with respect to any document, communication, or material, whether or not identified on the Privilege Log, and whether or not challenged by Staff.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Monica Reyes Senior Associate, Antitrust & Competition Group Calderwood & Harkness LLP 1900 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7814

Email: mreyes@calderwoodharkness.com

On behalf of Solara Digital Infrastructure LP

cc (via electronic mail):

Howard Bellamy, Partner, Calderwood & Harkness LLP

Elliot Nguyen, Associate, Calderwood & Harkness LLP

Graham A. Whitfield, Founding Partner & CEO, Solara Digital Infrastructure GP LLC

Sandra K. Levinson, Co-Managing Partner & CIO, Solara Digital Infrastructure GP LLC

Catherine A. Pelletier, Lead Partner, Hargrove, Pelletier & Stein LLP (counsel to Pinnacle Cloud Systems, Inc. and the Sellers)

David L. Morrissette, Associate, Hargrove, Pelletier & Stein LLP

APPENDIX A

INDEX OF ENHANCED DESCRIPTIONS FOR 214 CHALLENGED PRIVILEGE LOG ENTRIES

Note: The enhanced descriptions set forth in this Appendix are provided to supplement the descriptions contained in Solara's Privilege Log submitted in connection with the Substantial Compliance Certification filed September 22, 2023. Each enhanced description is intended to provide FTC Staff with sufficient information to assess the privilege assertion without disclosing the substance of the legal advice, attorney mental impressions, or confidential communications protected by the applicable privilege or protection. Bates reference ranges are cross-referenced where applicable to corresponding privilege log entry numbers. Where a withheld document was not assigned a Bates number (i.e., it was logged and withheld prior to Bates-stamping), the privilege log entry number serves as the sole identifier.

Table 1: Attorney-Client Privilege — Enhanced Descriptions (148 Entries)

[Table 1 continues for the remaining 138 entries. Entries PRIV-0023 through PRIV-4681, encompassing all 148 challenged attorney-client privilege entries, are listed with enhanced descriptions of comparable specificity. Representative entries shown above illustrate the level of detail provided for each challenged entry. The complete table is provided in the electronic version of this Appendix delivered to Staff concurrently with this letter.]

Table 2: Work Product Doctrine — Enhanced Descriptions (44 Entries)

[Table 2 continues for the remaining 38 entries. Entries WP-0014 through WP-0189, encompassing all 44 challenged work product entries, are listed with enhanced descriptions of comparable specificity. Representative entries shown above illustrate the level of detail provided for each challenged entry. The complete table is provided in the electronic version of this Appendix delivered to Staff concurrently with this letter.]

Table 3: Joint Defense / Common Interest Privilege — Enhanced Descriptions (22 Entries)

[Table 3 continues for the remaining 18 entries. Entries JD-0003 through JD-0047, encompassing all 22 challenged joint defense / common interest entries, are listed with enhanced descriptions of comparable specificity. Representative entries shown above illustrate the level of detail provided for each challenged entry. The complete table is provided in the electronic version of this Appendix delivered to Staff concurrently with this letter.]

End of Appendix A. The electronic version of this Appendix, containing the complete enhanced descriptions for all 214 challenged privilege log entries, has been delivered to FTC Staff concurrently with this letter via the secure file transfer protocol designated by Staff.

Privilege Category	Number of Entries	Percentage of Total Log
Attorney-Client Privilege	3,641	74.8%
Work Product Doctrine	894	18.4%
Joint Defense / Common Interest Privilege	337	6.8%
Total	4,872	100.0%
Privilege Category	Number of Challenged Entries	Percentage of Challenge
Attorney-Client Privilege	148	69.2%
Work Product Doctrine	44	20.6%
Joint Defense / Common Interest	22	10.3%
Total	214	100.0%
Log Entry No.	Date	Author(s)/Sender(s)	Recipient(s)	Document Type	Enhanced Description	Privilege Basis
PRIV-0023	05/30/2023	Howard Bellamy (Calderwood & Harkness LLP)	Graham A. Whitfield (CEO, Solara GP); Sandra K. Levinson (CIO, Solara GP)	Email	Communication from outside antitrust counsel to Solara senior management conveying counsel's legal advice regarding the scope and requirements of the Second Request issued May 29, 2023, including counsel's preliminary legal assessment of the specifications and recommended compliance approach.	Attorney-Client Privilege
PRIV-0024	05/30/2023	Graham A. Whitfield (CEO, Solara GP)	Howard Bellamy (Calderwood & Harkness LLP); Monica Reyes (Calderwood & Harkness LLP)	Email	Communication from Solara CEO to outside antitrust counsel seeking legal advice regarding the implications of the Second Request for the Transaction timeline and counsel's assessment of the antitrust risk profile of the Transaction.	Attorney-Client Privilege
PRIV-0041	06/01/2023	Monica Reyes (Calderwood & Harkness LLP)	Graham A. Whitfield (CEO, Solara GP); Derek H. Calloway (SVP, Solara GP); Janet M. Strickland (VP, Solara GP)	Email	Communication from outside antitrust counsel to Solara management providing legal advice regarding custodian identification and document preservation obligations under the Second Request, including counsel's legal assessment of the scope of custodial responsibility.	Attorney-Client Privilege
PRIV-0067	06/05/2023	Sandra K. Levinson (CIO, Solara GP)	Howard Bellamy (Calderwood & Harkness LLP); Monica Reyes (Calderwood & Harkness LLP)	Email with attachment	Communication from Solara CIO to outside antitrust counsel providing factual information regarding Solara's investment thesis for the Transaction at counsel's request, for the purpose of counsel rendering legal advice regarding potential FTC theories of harm and competitive effects analysis.	Attorney-Client Privilege
PRIV-0089	06/08/2023	Elliot Nguyen (Calderwood & Harkness LLP)	Priya N. Raghavan (CEO, Meridian); Monica Reyes (Calderwood & Harkness LLP)	Email	Communication from outside antitrust counsel to Meridian CEO requesting factual information regarding Meridian's product architecture and competitive positioning, at counsel's direction, for the purpose of counsel re

CALDERWOOD & HARKNESS LLP Attorneys at Law
1900 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7800 Facsimile: (202) 555-7801 www.calderwoodharkness.com
November 15, 2023
VIA ELECTRONIC MAIL AND HAND DELIVERY
Lead Staff Attorney Bureau of Competition Mergers IV Division Federal Trade Commission 600 Pennsylvania Avenue NW Washington, DC 20580
Re: FTC File No. 231-0487 — Second Request Issued May 29, 2023, to Solara Digital Infrastructure LP in Connection with the Proposed Acquisition of Pinnacle Cloud Systems, Inc.
Subject: Response to Privilege Challenge Dated November 8, 2023
Dear Sir or Madam:
I. Introduction and Purpose
This letter is submitted on behalf of Solara Digital Infrastructure LP ("Solara" or "SDILP"), a Delaware limited partnership, by Calderwood & Harkness LLP, outside antitrust counsel to Solara, in response to the letter from the Staff of the Federal Trade Commission's Bureau of Competition, Mergers IV Division ("Staff" or "FTC Staff"), dated November 8, 2023 (the "Challenge Letter"), challenging 214 entries on Solara's privilege log submitted in connection with the Second Request issued May 29, 2023 (FTC File No. 231-0487) (the "Second Request").
The 214 entries challenged by Staff constitute a subset of the 4,872 total entries on Solara's privilege log (the "Privilege Log"), which accompanied the production of approximately 196,300 documents (Bates-numbered SDILP-2R-000001 through SDILP-2R-196300) and the Substantial Compliance Certification filed by Solara on September 22, 2023 (the "Compliance Certification"). The Privilege Log was prepared in full compliance with the requirements of the Second Request and in accordance with the governing procedural framework agreed upon by the parties.
Solara respectfully submits that all 214 challenged entries are properly withheld under applicable privileges and protections and that none of the corresponding documents should be produced to Staff. Solara has undertaken a thorough review of each challenged entry and, through this letter and the accompanying Appendix A, provides enhanced descriptions for each of the 214 challenged entries, organized by privilege category, to demonstrate that each withholding is well-founded under the attorney-client privilege, the work product doctrine, or the joint defense / common interest privilege, as applicable.
This letter and the enhanced descriptions provided herein are submitted pursuant to, and without prejudice to the rights preserved under, the Clawback / Non-Waiver Agreement executed on June 9, 2023 (the "Clawback Agreement"), by and between Calderwood & Harkness LLP (on behalf of Solara) and FTC Bureau of Competition, Mergers IV Division staff, which was entered into pursuant to principles embodied in Federal Rule of Evidence 502(d) and is consistent with the FTC Model Stipulated Protective Order governing confidential treatment of materials produced in connection with this investigation. Nothing in this letter or in the enhanced descriptions set forth herein is intended to, nor shall it be construed to, waive any applicable privilege, protection, or right of Solara with respect to any document, communication, or material, whether or not identified on the Privilege Log.
II. Background
A. The Transaction
Solara Digital Infrastructure Fund IV LP ("Fund IV"), a Delaware limited partnership managed by Solara Digital Infrastructure GP LLC ("Solara GP"), proposes, through its wholly owned indirect subsidiary PCS Acquisition Corp. ("PCS AcqCo"), a newly formed Delaware corporation, to acquire 100% of the outstanding capital stock of Pinnacle Cloud Systems, Inc. ("Pinnacle"), a Delaware corporation headquartered at 8700 Research Boulevard, Suite 500, Austin, TX 78758 (the "Transaction"). The Transaction is governed by the Stock Purchase Agreement, dated April 14, 2023 (the "SPA"), by and among Solara Digital Infrastructure Fund IV LP, PCS Acquisition Corp., Pinnacle Cloud Systems, Inc., Thorngate Capital Partners LP ("Thorngate"), as Sellers' Representative, and the Sellers named therein.
The Transaction has an aggregate enterprise value of approximately $1.63 billion, comprised of approximately $1.19 billion in cash consideration and approximately $440 million in rollover equity, with the rollover equity representing approximately 27% of the post-closing enterprise value. The Transaction is structured as a stock purchase in which Fund IV, through PCS AcqCo, will acquire all issued and outstanding shares of Pinnacle common stock from the Sellers, subject to the terms and conditions of the SPA and applicable regulatory approvals.
Solara is a leading technology-focused private equity firm that manages a family of investment funds, including Fund IV, which is the primary investment vehicle for the Transaction. Solara GP serves as the general partner to each of the Solara funds. Solara's portfolio includes, among other companies, Meridian Workflow Solutions, Inc. ("Meridian"), a cloud-based order management system ("OMS") and execution management system ("EMS") platform provider serving institutional asset managers, which was acquired by Solara Digital Infrastructure Fund III LP ("Fund III") in 2019 and is currently a portfolio company controlled by Solara through Fund III.
Pinnacle is a cloud-based portfolio analytics and performance attribution software company that provides analytics solutions to institutional asset managers, hedge funds, endowments, and pension funds. The proposed combination of Pinnacle's portfolio analytics platform with Meridian's trade execution and order management platform is the subject of the FTC's investigation and the Second Request.
The parties filed a premerger notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the "HSR Act"), on April 28, 2023. The initial 30-day waiting period under the HSR Act expired on May 28, 2023, and the FTC issued the Second Request to Solara on May 29, 2023. A corresponding Second Request was issued to Pinnacle on the same date.
B. The Second Request Compliance Process
The Second Request contains 47 specifications covering a broad range of documents and data relating to, among other things, relevant product and geographic markets, competition and competitive dynamics in cloud-based portfolio analytics and OMS/EMS software, pricing and pricing trends, customer switching patterns and switching costs, barriers to entry and expansion, integration planning, financial projections, and strategic assessments of the Transaction.
Solara undertook a comprehensive compliance process in response to the Second Request. This process involved the following principal elements:
Custodian Identification. Solara identified 18 custodians on the Solara side of the Transaction, consisting of 12 individuals from Solara GP and Fund IV's management and investment team and 6 individuals from Meridian management. The Solara-side custodians were identified through a systematic process led by Calderwood & Harkness LLP, in consultation with Solara's business team, and were selected based on their likely possession of responsive documents and their functional responsibilities relating to the Transaction, competition in the relevant markets, and the operation of Meridian's business. Pinnacle separately identified 14 custodians, managed by Pinnacle's counsel, Hargrove, Pelletier & Stein LLP ("HPS").
Document Collection and Review. Approximately 1.24 million documents were collected from Solara-side custodians. After de-duplication and application of agreed-upon search term filters, approximately 487,000 documents were identified for review for responsiveness and privilege. The document review was conducted by a 22-person team of contract review attorneys managed by Keymark Document Solutions LLC ("Keymark") (Daniel S. Fong, Project Manager) in a hosted Relativity environment, under the supervision of Monica Reyes (Senior Associate, Year 7) and Elliot Nguyen (Associate, Year 4) of Calderwood & Harkness LLP, with e-discovery oversight provided by Tamara J. Westbrook (Of Counsel, Litigation Technology & E-discovery).
Document Production. Approximately 196,300 documents were produced to Staff, Bates-numbered SDILP-2R-000001 through SDILP-2R-196300, in load-file format in accordance with the FTC's production specifications.
Structured Data Submissions. Seven structured data submissions were provided to Staff, covering sales data, pricing data, customer lists, win/loss data, market share estimates, financial data, and product feature matrices, in response to the data specifications contained in the Second Request and as supplemented by Staff's subsequent requests for additional data.
Substantial Compliance Certification. Solara filed its Substantial Compliance Certification on September 22, 2023, 116 days from the date of issuance of the Second Request. Pinnacle's Substantial Compliance Certification was filed on October 6, 2023, through Hargrove, Pelletier & Stein LLP (Catherine A. Pelletier, Lead Partner).
C. The Privilege Log
Solara's Privilege Log contains 4,872 entries, each reflecting a document or communication withheld from production on the basis of one or more applicable privileges or protections. The Privilege Log entries are distributed across three privilege categories as follows:
The privilege review was conducted by the same 22-person contract review attorney team managed by Keymark Document Solutions LLC (Daniel S. Fong, Project Manager) in the hosted Relativity environment, under the supervision of Monica Reyes and Elliot Nguyen of Calderwood & Harkness LLP, with e-discovery oversight by Tamara J. Westbrook. Each privilege designation was subject to a quality-control review process that included sampling, second-level review by Calderwood & Harkness associates, and escalation protocols for documents presenting close or complex privilege questions.
All Privilege Log entries were prepared in compliance with FTC Second Request requirements and provide, for each withheld document: (i) the date of the document or communication; (ii) the author(s) or sender(s); (iii) the recipient(s), including any persons copied; (iv) the document type (e.g., email, memorandum, presentation, handwritten notes); (v) a subject matter description; and (vi) the privilege basis for the withholding. The log entries were designed to provide Staff with sufficient information to assess the privilege assertion without revealing the substance of the privileged communication or the attorney's mental impressions.
D. The FTC Staff Challenge
On November 8, 2023, FTC Staff issued the Challenge Letter, challenging 214 of the 4,872 entries on Solara's Privilege Log. The 214 challenged entries represent approximately 4.4% of the total Privilege Log entries.
Staff's Challenge Letter identified three principal categories of concern:
(i) Insufficient Descriptions for Certain Attorney-Client Privilege Entries. Staff asserted that certain log descriptions for attorney-client privilege entries do not sufficiently identify the legal advice sought or provided, and questioned whether certain communications involving business personnel alongside counsel reflect business rather than legal purposes.
(ii) Applicability of Work Product Doctrine to Certain Business-Oriented Documents. Staff questioned whether certain documents designated as work product — including documents that may reflect market analyses, financial projections, or competitive assessments — were genuinely prepared in anticipation of litigation, as opposed to having been created in the ordinary course of business for investment or commercial purposes.
(iii) Scope of Joint Defense / Common Interest Arrangement. Staff questioned whether the common interest arrangement extends to certain communications between counsel for the acquirer (Calderwood & Harkness LLP) and counsel for the sellers (Hargrove, Pelletier & Stein LLP; Ashford Crane LLP), and whether specific challenged communications were made in furtherance of the parties' common legal interest in obtaining regulatory clearance.
This response addresses each category in turn, providing enhanced descriptions and supporting legal authority to demonstrate that all 214 challenged entries are properly withheld under the applicable privilege or protection.
III. Legal Standards Governing Privilege Assertions
A. Attorney-Client Privilege
The attorney-client privilege is the oldest recognized privilege for confidential communications, and its purpose is to encourage full and frank communication between attorneys and their clients in order to promote the broader public interest of the observance of law and the administration of justice. See Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). The privilege applies to communications between a client and counsel that are made for the purpose of seeking or providing legal advice and that are intended to be, and are maintained as, confidential. Id. at 394-95.
In the corporate context, the attorney-client privilege extends to communications between counsel and corporate employees who possess information needed by counsel in order to render legal advice to the corporate client. See Upjohn, 449 U.S. at 394-95. Here, the client is Solara, including the officers and employees of Solara GP, Fund IV, and portfolio company Meridian who were acting within the scope of their responsibilities and communicating with counsel at the direction of, or for the benefit of, the corporate client. Communications between these individuals and counsel at Calderwood & Harkness LLP — including Howard Bellamy (Partner), Monica Reyes (Senior Associate), Elliot Nguyen (Associate), and Tamara J. Westbrook (Of Counsel) — for the purpose of seeking or providing legal advice regarding the Second Request, HSR compliance, and the proposed acquisition are squarely within the scope of the privilege.
With respect to communications involving in-house counsel, the privilege applies to communications that are predominantly legal in nature, as distinguished from communications that serve a purely or predominantly business purpose. See In re Vioxx Prods. Liab. Litig., 501 F. Supp. 2d 789, 797 (E.D. La. 2007); In re Kellogg Brown & Root, Inc., 756 F.3d 754, 758-60 (D.C. Cir. 2014). Where a communication serves both a legal and a business purpose — that is, where it is "dual-purpose" — the communication is privileged if the predominant purpose of the communication was to seek or provide legal advice. See In re Kellogg Brown & Root, 756 F.3d at 760 (rejecting the "but-for" test and applying a "primary purpose" test). Communications with Marcus E. Culberson, General Counsel of Pinnacle, that are identified on the Privilege Log fall within this standard because they are predominantly legal in nature, concerning Pinnacle's assessment of regulatory risks, legal structuring issues, and compliance with the Second Request.
B. Work Product Doctrine
The work product doctrine, first recognized in Hickman v. Taylor, 329 U.S. 495 (1947), and codified in Federal Rule of Civil Procedure 26(b)(3), protects from disclosure documents and tangible things prepared in anticipation of litigation or for trial by or for a party or its representative. Materials qualifying as work product are subject to a qualified immunity from discovery, and the protection is at its strongest when the materials contain the mental impressions, conclusions, opinions, or legal theories of an attorney — commonly referred to as "opinion work product" — which is entitled to near-absolute protection. See Upjohn, 449 U.S. at 401; In re Cendant Corp. Sec. Litig., 343 F.3d 658, 663 (3d Cir. 2003).
In the Second Request context, documents prepared in anticipation of potential FTC enforcement action constitute work product. The prospect of FTC enforcement action — specifically, the prospect that the FTC might challenge the Transaction by filing a complaint in federal court seeking a preliminary injunction under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), or initiating an administrative proceeding under Part 3 of the FTC Rules — is a real and concrete litigation threat that satisfies the "anticipation of litigation" standard. See FTC v. Boehringer Ingelheim Pharms., Inc., 778 F.3d 142, 149-51 (D.C. Cir. 2015) (discussing the standard for work product in the context of FTC investigations); United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998) (applying the "because of" test for anticipation of litigation). Documents prepared by Calderwood & Harkness attorneys — including internal analyses of competitive issues, assessments of potential FTC theories of harm, and strategic memoranda regarding Second Request compliance — were prepared because of the prospect of such litigation and are properly classified as work product.
The distinction between fact work product and opinion work product is significant here. Many of the challenged work product entries contain opinion work product — reflecting the mental impressions, conclusions, and strategic assessments of Calderwood & Harkness attorneys regarding the strengths and weaknesses of FTC theories of harm, the competitive significance of market share data, and the legal sufficiency of efficiency arguments. Such opinion work product is entitled to heightened protection and is discoverable, if at all, only upon an extraordinary showing that is not present here. See Upjohn, 449 U.S. at 401-02.
C. Joint Defense / Common Interest Privilege
The joint defense privilege, also referred to as the common interest privilege, extends the protections of the attorney-client privilege and work product doctrine to communications between parties who share a common legal interest, made in furtherance of that common interest, through or in the presence of their respective counsel. See United States v. Schwimmer, 892 F.2d 237, 243-44 (2d Cir. 1989); In re Teleglobe Commc'ns Corp., 493 F.3d 345, 364 (3d Cir. 2007). The common interest need not be identical, but it must be a legal interest, as distinguished from a purely commercial or business interest. See In re Santa Fe Int'l Corp., 272 F.3d 705, 710-11 (5th Cir. 2001).
Here, Solara (through its counsel, Calderwood & Harkness LLP), Pinnacle and the Sellers (through their counsel, Hargrove, Pelletier & Stein LLP, led by Catherine A. Pelletier and David L. Morrissette), and Thorngate Capital Partners LP (through its counsel, Ashford Crane LLP, led by Robert T. Ishikawa) share a common legal interest in securing FTC clearance of the proposed Transaction. This common legal interest arises from the fact that all parties to the SPA have a shared stake in the successful consummation of the Transaction, which requires the termination or expiration of the waiting period under the HSR Act and, if necessary, the resolution of any FTC challenge to the Transaction. Communications exchanged among these parties' respective counsel under the common interest umbrella — to coordinate Second Request compliance, discuss competitive analyses, and align advocacy positions before the FTC — are protected by the common interest privilege.
The SPA itself, dated April 14, 2023, contains an antitrust cooperation covenant (Section 5.4 of the SPA) requiring the parties to cooperate fully in connection with any governmental investigation or proceeding relating to the Transaction, including the Second Request. This contractual framework reflects and reinforces the parties' shared legal interest in obtaining regulatory clearance. Communications made pursuant to this cooperation obligation, through the parties' respective counsel, in furtherance of the common legal interest, and intended to remain confidential, are properly protected by the common interest privilege.
D. FRE 502(d) / Clawback Agreement
On June 9, 2023, Calderwood & Harkness LLP (on behalf of Solara) and FTC Bureau of Competition, Mergers IV Division staff executed the Clawback / Non-Waiver Agreement (the "Clawback Agreement"), which governs the treatment of privileged and work product materials in connection with the Second Request compliance process. The Clawback Agreement provides that the inadvertent production of privileged or work product materials in the course of the Second Request compliance process shall not constitute a waiver of any applicable privilege or protection, consistent with the principles embodied in Federal Rule of Evidence 502(d) and the terms of the FTC Model Stipulated Protective Order.
While the Clawback Agreement is principally designed to address the risk of inadvertent production in the context of a large-scale document review — as is inherent in a review of over 487,000 documents by a 22-person team — it also underscores the parties' mutual understanding that privilege protections remain intact throughout the compliance process and that assertions of privilege are to be evaluated on the merits, without any implication of waiver arising from the volume or pace of the production. Solara's Privilege Log and the assertions set forth therein are submitted in reliance on, and without prejudice to the protections afforded by, the Clawback Agreement.
IV. Response to Challenged Attorney-Client Privilege Entries
A. Overview of Challenged Attorney-Client Entries
Of the 214 entries challenged by Staff in the Challenge Letter, 148 entries fall within the attorney-client privilege category, constituting the largest portion of the challenge. These 148 entries represent approximately 69.2% of all challenged entries and approximately 4.1% of the 3,641 total attorney-client privilege entries on the Privilege Log.
Staff's principal objections with respect to these entries are twofold. First, Staff asserts that certain log descriptions do not sufficiently identify the specific legal advice sought or provided, and that the descriptions are therefore too generic or conclusory to sustain the privilege assertion. Second, Staff questions whether certain communications involving business personnel alongside counsel — particularly communications that include both attorneys and non-attorney business personnel on the same email thread or in the same meeting — reflect business purposes rather than legal purposes, and thus fall outside the scope of the privilege.
Solara addresses each of these concerns below and provides enhanced descriptions organized by the principal sub-categories of challenged attorney-client entries. Appendix A, Table 1 sets forth the enhanced descriptions for each of the 148 challenged attorney-client privilege entries, with sufficient specificity to demonstrate the privileged nature of each communication without disclosing the substance of the legal advice or the attorney's mental impressions.
B. Enhanced Descriptions — Communications Between Solara Management and Calderwood & Harkness LLP
The largest sub-category of challenged attorney-client privilege entries consists of communications between Solara GP management — principally Graham A. Whitfield (Founding Partner & CEO, Solara GP) and Sandra K. Levinson (Co-Managing Partner & CIO, Solara GP) — and Calderwood & Harkness LLP attorneys, including Howard Bellamy (Partner), Monica Reyes (Senior Associate), Elliot Nguyen (Associate), and, in certain instances, Tamara J. Westbrook (Of Counsel). Approximately 87 of the 148 challenged attorney-client entries fall within this sub-category.
The nature of these communications is as follows: each communication involves Solara management seeking legal advice from, or receiving legal advice provided by, Calderwood & Harkness attorneys regarding one or more of the following topics:
(a) FTC Second Request Compliance Strategy. Communications in which Solara management seeks counsel's guidance on the scope of the Second Request specifications, the appropriate approach to custodian identification and document preservation, the timing of productions and data submissions, and the preparation of the Substantial Compliance Certification. These communications reflect counsel's legal advice regarding Solara's obligations under the Second Request and the most effective means of satisfying those obligations while preserving Solara's legal rights.
(b) Antitrust Risk Assessment. Communications in which Solara management seeks counsel's assessment of the antitrust risks associated with the proposed Transaction, including counsel's analysis of potential FTC theories of horizontal overlap in portfolio analytics and performance attribution software and potential theories of vertical foreclosure relating to data integration between Meridian's OMS/EMS platform and Pinnacle's analytics platform. These communications reflect counsel's legal analysis of substantive antitrust issues and counsel's assessment of the likelihood and potential basis for FTC enforcement action.
(c) Competitive Effects Analysis. Communications in which counsel provides legal advice regarding the competitive significance of the proposed combination of Pinnacle's portfolio analytics platform with Meridian's trade execution and order management platform, including counsel's assessment of relevant product and geographic market definitions, combined market share levels, the significance of competitor offerings, and the availability of procompetitive justifications and efficiencies. These communications are integral to counsel's rendering of legal advice regarding the Transaction's antitrust implications and the development of Solara's advocacy strategy.
(d) FTC Engagement Strategy. Communications in which counsel advises Solara management regarding strategy for engaging with FTC Staff, including the substance and timing of advocacy presentations, the preparation of economic analyses and submissions, and the handling of staff requests for additional information and pull-forward document requests. These communications reflect counsel's strategic legal judgment regarding the most effective approach to advocacy before the Commission.
In each instance, the communication was made for the predominant purpose of seeking or providing legal advice in connection with the Second Request, the proposed Transaction, and related antitrust matters. The inclusion of non-attorney business personnel — such as Derek H. Calloway (Senior Vice President, Technology & Data Analytics, Solara GP), Janet M. Strickland (Vice President, Portfolio Operations, Solara GP), or Tyler R. Pemberton (Associate, Investment Team, Solara GP) — on certain communications does not negate the privilege, as these individuals were included because they possessed information needed by counsel to render legal advice or because they were the individuals responsible for implementing counsel's legal advice within the organization. See Upjohn, 449 U.S. at 394-95. The communications were intended to be, and were maintained as, confidential, and were not shared with any third party outside the scope of the privilege.
The enhanced descriptions for each of the approximately 87 entries in this sub-category are set forth in Appendix A, Table 1, and specify, for each entry: the specific legal question or topic addressed; the participants and their roles; the document type; and the basis for the privilege assertion. Solara submits that these enhanced descriptions demonstrate that each communication was made for the predominant purpose of seeking or providing legal advice, and that each entry is properly withheld under the attorney-client privilege.
C. Enhanced Descriptions — Communications Involving Meridian Management
A second sub-category of challenged attorney-client privilege entries consists of communications involving Meridian management personnel, principally Priya N. Raghavan (CEO, Meridian Workflow Solutions, Inc.) and other Meridian personnel who were among the 6 Meridian custodians identified in the Second Request compliance process. Approximately 38 of the 148 challenged attorney-client entries fall within this sub-category.
Staff's challenge to these entries appears to be grounded in a concern that Meridian, as a portfolio company of Fund III (rather than Fund IV, the acquiring fund), may not fall within the scope of the attorney-client relationship between Solara and Calderwood & Harkness LLP, and that communications with Meridian personnel may reflect business rather than legal purposes. Solara respectfully submits that these concerns are unfounded for the following reasons.
First, Meridian is controlled by Solara through Fund III, and Solara GP exercises operational and strategic oversight over Meridian through Fund III's investment committee and the Solara GP management team. For purposes of the Second Request, Meridian is within Solara's corporate family, and Meridian management personnel are functional employees within the scope of the Upjohn analysis. Indeed, the Second Request itself treats Meridian as part of the acquiring person and requires production of Meridian's documents and data. The 6 Meridian custodians were identified precisely because they possess information regarding Meridian's competitive position, product offerings, pricing, customers, and market dynamics that is directly relevant to the FTC's investigation. Communications between these Meridian personnel and Calderwood & Harkness attorneys are privileged to the same extent as communications between Solara GP management and counsel.
Second, the challenged communications in this sub-category reflect Meridian management providing factual information to Calderwood & Harkness attorneys at counsel's express direction for the purpose of counsel rendering legal advice regarding competitive effects analysis, market definition, and Second Request specification responses. These communications are not ordinary-course business communications between Meridian management and Solara GP; rather, they are communications specifically initiated by or at the request of counsel to obtain information necessary for counsel to render legal advice in connection with the Second Request and the antitrust review of the Transaction. As such, they fall squarely within the scope of the attorney-client privilege under Upjohn.
The enhanced descriptions for each of the approximately 38 entries in this sub-category are set forth in Appendix A, Table 1, and identify the specific factual information sought by counsel, the legal purpose for which the information was requested, and the participants in the communication.
D. Enhanced Descriptions — Communications Involving Pinnacle In-House Counsel
A third sub-category of challenged attorney-client privilege entries consists of communications involving Marcus E. Culberson, General Counsel of Pinnacle Cloud Systems, Inc. Approximately 23 of the 148 challenged attorney-client entries fall within this sub-category.
Staff's challenge to these entries appears to question whether communications with Mr. Culberson are predominantly legal in nature, as opposed to communications that serve a predominantly business purpose. Solara respectfully submits that each of the challenged communications involving Mr. Culberson satisfies the standard for attorney-client privilege.
Mr. Culberson, as General Counsel of Pinnacle, serves a dual function as both a legal advisor and a business executive. However, the challenged communications were initiated by or directed to Mr. Culberson in his capacity as a legal advisor, and the predominant purpose of each communication was the seeking or provision of legal advice. The communications address Pinnacle's assessment of regulatory risks associated with the Transaction, legal structuring issues relating to the SPA and the allocation of regulatory risk between the parties, and legal analysis of the competitive effects of the Transaction as they relate to Pinnacle's product offerings and market position. Where a communication served both a business and a legal purpose — that is, where it was "dual-purpose" — the predominant purpose of the communication was legal advice, and the communication is therefore privileged under the standard articulated in In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014).
The enhanced descriptions for each of the approximately 23 entries in this sub-category are set forth in Appendix A, Table 1.
E. Summary Assertion
For the foregoing reasons, Solara respectfully submits that all 148 challenged attorney-client privilege entries are properly withheld under the attorney-client privilege. The enhanced descriptions provided in Appendix A, Table 1, demonstrate that each communication was made for the predominant purpose of seeking or providing legal advice in connection with the Second Request, the proposed Transaction, and related antitrust matters. Each communication was between counsel and client (or functional employees acting within the scope of the corporate client's interests), was made in confidence, and has been maintained as confidential throughout the Second Request compliance process. No challenged attorney-client privilege entry should be produced to Staff.
V. Response to Challenged Work Product Entries
A. Overview of Challenged Work Product Entries
Of the 214 entries challenged by Staff, 44 entries fall within the work product doctrine category. These 44 entries represent approximately 20.6% of all challenged entries and approximately 4.9% of the 894 total work product entries on the Privilege Log.
Staff's principal objection with respect to these entries is that certain documents appear to be business analyses or financial projections that may not have been prepared in anticipation of litigation — that is, Staff questions whether these documents were prepared "because of" the prospect of FTC enforcement action, or whether they were created in the ordinary course of Solara's business for investment, portfolio management, or commercial purposes independent of the Second Request process. Solara addresses this concern below and demonstrates that each of the 44 challenged work product entries was prepared because of the prospect of litigation and reflects attorney mental impressions, conclusions, or legal theories.
B. Enhanced Descriptions — Internal Calderwood & Harkness Analytical Memoranda
The largest sub-category of challenged work product entries consists of internal memoranda prepared by Calderwood & Harkness attorneys and economists — principally Howard Bellamy (Partner), Monica Reyes (Senior Associate), Elliot Nguyen (Associate), and Dr. Arvind Chakrabarti (Senior Economist, Calderwood & Harkness Economic Consulting) — analyzing competitive dynamics, market shares, and potential FTC theories of harm in connection with the Transaction. Approximately 21 of the 44 challenged work product entries fall within this sub-category.
These documents were prepared specifically in anticipation of potential FTC enforcement action — that is, the prospect that the FTC might challenge the Transaction by filing a complaint in the United States District Court for the District of Columbia seeking a preliminary injunction under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), or by initiating an administrative proceeding before an Administrative Law Judge under Part 3 of the FTC Rules. The documents reflect attorneys' mental impressions, conclusions, and legal theories regarding, among other things:
(a) The definition and scope of relevant product markets, including cloud-based portfolio analytics and performance attribution software and cloud-based OMS/EMS software for institutional asset managers, and counsel's assessment of the strengths and weaknesses of alternative market definitions that the FTC might propose;
(b) The competitive significance of combined market share data, including analysis of the combined analytics market share of approximately 17.74% (based on approximately $326.4 million in combined analytics revenue in a $1.84 billion North American analytics segment total addressable market), Pinnacle's standalone analytics share of approximately 12.4%, and Meridian's standalone analytics share of approximately 5.2%;
(c) The competitive significance of rival offerings, including the market positions of Marlowe Asset Management Analytics Corp. (approximately 16% share), Arclight Data Systems (approximately 14% share), and other competitors, and counsel's assessment of the extent to which these competitors constrain the merging parties;
(d) Potential FTC theories of horizontal overlap in portfolio analytics and potential theories of vertical foreclosure relating to the integration of Meridian's OMS/EMS platform with Pinnacle's analytics platform, including counsel's assessment of the legal and factual basis for such theories and the most effective arguments and evidence to rebut them; and
(e) The availability of procompetitive justifications and merger-specific efficiencies, including counsel's assessment of the legal sufficiency of efficiency arguments under the FTC's Horizontal Merger Guidelines and the evidentiary support required to sustain such arguments.
These analyses were not prepared in the ordinary course of Solara's business. They were not created for investment committee presentations, portfolio monitoring, or commercial decision-making. Rather, they were created at the specific direction of counsel to assess litigation risk and develop advocacy strategy in the context of the FTC's investigation of the Transaction. The documents are replete with counsel's legal analysis, strategic assessments, and mental impressions regarding the potential for and likely outcome of FTC enforcement action. They constitute both fact work product and opinion work product, and the opinion work product contained therein is entitled to heightened protection under Upjohn, 449 U.S. at 401-02.
C. Enhanced Descriptions — Draft Economic Analyses and White Paper Preparation Materials
A second sub-category of challenged work product entries consists of draft versions and preparatory materials for the Economic Submission / White Paper filed with FTC Staff on November 3, 2023 (the "Economic Submission"). Approximately 14 of the 44 challenged work product entries fall within this sub-category.
The Economic Submission is a comprehensive analytical document prepared by Calderwood & Harkness LLP, in consultation with Dr. Arvind Chakrabarti and the firm's economic consulting team, presenting Solara's advocacy position on the competitive effects of the Transaction. The preparation of the Economic Submission involved multiple drafts, working papers, and internal memoranda in which counsel refined the analytical framework, selected and organized the supporting evidence, and made strategic judgments about which arguments and data to include in the final submission and how to present them most effectively.
The challenged entries in this sub-category consist of earlier draft versions and preparatory materials for the Economic Submission that contain counsel's mental impressions and strategic assessments that were refined, modified, or excluded before the final submission. These materials constitute opinion work product of the highest order, as they reveal the evolution of counsel's legal and strategic thinking, the analytical paths that were explored and abandoned, and the judgments that counsel made in shaping the final advocacy product. The heightened protection afforded to opinion work product applies with full force to these materials. See Upjohn, 449 U.S. at 401; In re Cendant Corp. Sec. Litig., 343 F.3d at 663.
The Economic Submission and its underlying preparatory materials address, among other things: total addressable market analyses (approximately $11.8 billion globally, approximately $6.2 billion in North America); vertical foreclosure analyses, including the significance of Meridian's open-architecture APIs and demonstrated interoperability with 9 or more competing analytics and data platforms; and detailed efficiency arguments. While certain elements of the final Economic Submission have been shared with Staff, the draft versions and preparatory materials contain counsel's unfiltered mental impressions and strategic assessments that were not included in the final product and that are entitled to the strongest protection under the work product doctrine.
D. Enhanced Descriptions — Compliance Strategy Documents
A third sub-category of challenged work product entries consists of internal planning documents related to Second Request compliance strategy. Approximately 9 of the 44 challenged work product entries fall within this sub-category.
These documents include memoranda and planning materials prepared by Calderwood & Harkness attorneys addressing custodian selection rationale, the development of search term protocols, document review guidelines and quality-control procedures, and strategic assessments of the order and timing of document productions and data submissions. These materials were prepared by counsel in anticipation of potential FTC enforcement action and reflect counsel's litigation strategy — specifically, counsel's judgments about how to structure and manage the Second Request compliance process in a manner that would most effectively serve Solara's legal interests in the event that the FTC elected to challenge the Transaction.
These documents were not created in the ordinary course of business; they have no business purpose independent of the Second Request process and the prospect of FTC enforcement action. They reflect counsel's strategic thinking about how to organize and present Solara's document production and advocacy in a way that would best position Solara for a favorable outcome, whether through negotiation of a consent decree, abandonment of the investigation by Staff, or, if necessary, litigation. As such, they are properly classified as work product.
E. Summary Assertion
For the foregoing reasons, Solara respectfully submits that all 44 challenged work product entries are properly withheld under the work product doctrine. Each document was prepared because of the prospect of litigation — specifically, the prospect of FTC enforcement action challenging the Transaction — and reflects attorney mental impressions, conclusions, opinions, or legal theories. No document in this category was created in the ordinary course of Solara's business independent of the Second Request process and the attendant prospect of litigation. The enhanced descriptions for each of the 44 challenged entries are set forth in Appendix A, Table 2. No challenged work product entry should be produced to Staff.
VI. Response to Challenged Joint Defense / Common Interest Entries
A. Overview of Challenged Joint Defense / Common Interest Entries
Of the 214 entries challenged by Staff, 22 entries fall within the joint defense / common interest privilege category. These 22 entries represent approximately 10.3% of all challenged entries and approximately 6.5% of the 337 total joint defense / common interest entries on the Privilege Log.
Staff's principal objection with respect to these entries is twofold. First, Staff questions whether the common interest arrangement extends to communications between counsel for the acquirer (Calderwood & Harkness LLP) and counsel for the sellers (Hargrove, Pelletier & Stein LLP and Ashford Crane LLP), given that the acquirer and sellers may have divergent commercial interests in certain respects. Second, Staff questions whether the specific challenged communications were made in furtherance of the parties' common legal interest, as opposed to having been made for commercial or transactional purposes unrelated to the regulatory clearance process.
B. The Common Interest Arrangement
Solara (through its counsel, Calderwood & Harkness LLP), Pinnacle and the Sellers (through their counsel, Hargrove, Pelletier & Stein LLP, led by Catherine A. Pelletier and David L. Morrissette), and Thorngate Capital Partners LP (through its counsel, Ashford Crane LLP, led by Robert T. Ishikawa) share a common legal interest in obtaining FTC clearance of the proposed Transaction. This common legal interest is well-established and is recognized in the case law as a sufficient basis for the common interest privilege. See, e.g., United States v. Vane Kaplan CPAs LLP Seidman, LLP, 492 F.3d 806, 815-16 (7th Cir. 2007) (recognizing common interest privilege where parties share a legal interest in the same transaction or proceeding).
The common legal interest shared by the parties is not merely a commercial or financial interest in completing the Transaction; it is a legal interest in securing the termination or expiration of the waiting period under the HSR Act and in successfully defending against any potential FTC enforcement action challenging the Transaction. All parties to the SPA face a common legal consequence if the FTC challenges the Transaction: the Transaction will not close, and all parties will suffer the attendant legal and economic consequences. This shared legal interest is precisely the type of interest that the common interest privilege is designed to protect.
The Stock Purchase Agreement dated April 14, 2023, reinforces this common legal interest through its antitrust cooperation covenant (Section 5.4 of the SPA), which requires the parties to "use their respective reasonable best efforts to cooperate in all respects with each other in connection with any investigation or proceeding by any Governmental Authority with respect to the transactions contemplated by this Agreement," including, without limitation, the Second Request. This contractual obligation reflects the parties' mutual recognition that the regulatory clearance process requires coordinated effort and that privileged communications between counsel are essential to that effort.
The communications challenged by Staff were made between the parties' respective counsel — Calderwood & Harkness LLP, Hargrove, Pelletier & Stein LLP, and Ashford Crane LLP — in furtherance of their shared common legal interest and were intended to remain, and have been maintained as, confidential. No communication within the common interest arrangement was shared with any third party outside the scope of the arrangement.
C. Enhanced Descriptions — Specific Challenged Entries
The 22 challenged joint defense / common interest entries encompass the following principal categories of communications:
(a) Coordination of Custodian Identification and Document Production Strategy. Approximately 7 of the 22 challenged entries consist of communications between Calderwood & Harkness LLP and Hargrove, Pelletier & Stein LLP regarding the parallel identification of custodians on the Solara side (18 custodians) and the Pinnacle side (14 custodians), the development of consistent search term protocols, and the coordination of document production strategy to ensure that the acquirer's and target's respective productions were consistent and complementary in their coverage of the 47 Second Request specifications. These communications were made in furtherance of the common legal interest in ensuring efficient and compliant responses to the Second Request and in presenting a unified and consistent factual record to FTC Staff.
(b) Strategy Discussions Regarding Advocacy Positions. Approximately 8 of the 22 challenged entries consist of communications between Calderwood & Harkness LLP, Hargrove, Pelletier & Stein LLP, and Ashford Crane LLP regarding the alignment of advocacy positions before FTC Mergers IV Division staff. These communications reflect discussions among counsel regarding the most effective legal arguments and evidentiary presentations to advance the parties' shared legal interest in obtaining clearance, including the coordination of the parties' respective responses to Staff's questions about competitive dynamics, market definition, and the competitive significance of the Transaction. These communications are the very essence of the common interest privilege — they reflect privileged attorney-to-attorney communications made for the purpose of coordinating legal strategy in furtherance of a shared legal interest.
(c) Shared Analyses of Competitive Landscape and Market Definition. Approximately 4 of the 22 challenged entries consist of shared analyses of the competitive landscape and relevant market definitions, exchanged among the parties' respective counsel under the common interest umbrella, for the purpose of developing a coordinated legal position on issues of market definition, competitive effects, and the availability of efficiencies. These materials were prepared by counsel and shared with co-counsel under the common interest arrangement in confidence and for the sole purpose of advancing the parties' shared legal interest.
(d) Coordination Regarding Supplemental Requests. Approximately 3 of the 22 challenged entries consist of communications between Calderwood & Harkness LLP and Hargrove, Pelletier & Stein LLP regarding the October 27, 2023 supplemental / pull-forward requests issued by Staff, which included 8 additional document requests directed to both Solara and Pinnacle. These communications reflect the parties' coordinated legal response to the supplemental requests, including counsel's analysis of the scope of the supplemental requests, the identification of additional responsive documents, and the development of a coordinated strategy for responding to the supplemental requests in a manner consistent with the parties' shared advocacy position.
The enhanced descriptions for each of the 22 challenged entries are set forth in Appendix A, Table 3.
D. Summary Assertion
For the foregoing reasons, Solara respectfully submits that all 22 challenged joint defense / common interest entries are properly withheld under the joint defense / common interest privilege. Each communication was made between parties sharing a common legal interest — the interest in obtaining FTC clearance of the proposed Transaction — through their respective counsel, in furtherance of that common legal interest, and was intended to be and has been maintained as confidential. No challenged joint defense / common interest entry should be produced to Staff.
VII. Reconciliation of Challenged Entry Count
For clarity and completeness, Solara provides the following reconciliation of the challenged entries:
Solara confirms that the 214 challenged entries identified in Staff's Challenge Letter of November 8, 2023, have been accounted for in their entirety, and that the enhanced descriptions provided in this letter and in Appendix A address each of the 214 challenged entries. No entry has been omitted from this response, and no entry has been counted more than once. Each challenged entry is associated with a single privilege category, consistent with the designations on the Privilege Log.
Solara submits that the enhanced descriptions provided herein and in Appendix A demonstrate that each of the 214 challenged entries is properly withheld under the applicable privilege or protection. None of the challenged documents should be produced to Staff.
VIII. Conclusion and Request
For the reasons set forth above, Solara Digital Infrastructure LP respectfully requests that FTC Staff withdraw its challenge to all 214 entries identified in the Challenge Letter dated November 8, 2023. Solara has demonstrated, through the enhanced descriptions provided in this letter and in Appendix A, that each of the 214 challenged entries is properly withheld under the attorney-client privilege, the work product doctrine, or the joint defense / common interest privilege, as applicable. None of the challenged documents should be produced to Staff.
Solara notes that the Clawback / Non-Waiver Agreement executed on June 9, 2023, remains in full force and effect and continues to protect against any inadvertent waiver of privilege or work product protection in connection with the Second Request compliance process. Nothing in this letter or in the enhanced descriptions provided herein is intended to waive, nor shall it be construed to waive, any applicable privilege, protection, or right.
Solara further notes the ongoing and extensive cooperation between Solara and Staff throughout the Second Request compliance process. To date, Solara has produced approximately 196,300 documents, provided 7 structured data submissions, and filed its Substantial Compliance Certification. The Economic Submission / White Paper was filed on November 3, 2023, and Solara's counsel has participated in multiple telephone conferences and meetings with Staff to discuss the Transaction, the competitive landscape, and Staff's areas of inquiry. Solara remains committed to continuing this cooperative engagement and is prepared to discuss any remaining concerns with Staff at Staff's convenience.
Should Staff have additional questions regarding any specific challenged entry, or should Staff wish to schedule a telephonic conference to discuss the enhanced descriptions in further detail, Solara's counsel stands ready to accommodate such requests. Solara is willing to provide further clarification of any challenged entry, consistent with its obligation to protect the substance of privileged communications and attorney work product, if Staff identifies specific entries that remain of concern following its review of this response and Appendix A.
Solara reserves all rights and privileges, including but not limited to the right to assert privilege, work product protection, and any other applicable protection with respect to any document, communication, or material, whether or not identified on the Privilege Log, and whether or not challenged by Staff.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Monica Reyes Senior Associate, Antitrust & Competition Group Calderwood & Harkness LLP 1900 K Street NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7814
Email: mreyes@calderwoodharkness.com
On behalf of Solara Digital Infrastructure LP
cc (via electronic mail):
Howard Bellamy, Partner, Calderwood & Harkness LLP
Elliot Nguyen, Associate, Calderwood & Harkness LLP
Graham A. Whitfield, Founding Partner & CEO, Solara Digital Infrastructure GP LLC
Sandra K. Levinson, Co-Managing Partner & CIO, Solara Digital Infrastructure GP LLC
Catherine A. Pelletier, Lead Partner, Hargrove, Pelletier & Stein LLP (counsel to Pinnacle Cloud Systems, Inc. and the Sellers)
David L. Morrissette, Associate, Hargrove, Pelletier & Stein LLP
APPENDIX A
INDEX OF ENHANCED DESCRIPTIONS FOR 214 CHALLENGED PRIVILEGE LOG ENTRIES
Note: The enhanced descriptions set forth in this Appendix are provided to supplement the descriptions contained in Solara's Privilege Log submitted in connection with the Substantial Compliance Certification filed September 22, 2023. Each enhanced description is intended to provide FTC Staff with sufficient information to assess the privilege assertion without disclosing the substance of the legal advice, attorney mental impressions, or confidential communications protected by the applicable privilege or protection. Bates reference ranges are cross-referenced where applicable to corresponding privilege log entry numbers. Where a withheld document was not assigned a Bates number (i.e., it was logged and withheld prior to Bates-stamping), the privilege log entry number serves as the sole identifier.
Table 1: Attorney-Client Privilege — Enhanced Descriptions (148 Entries)
[Table 1 continues for the remaining 138 entries. Entries PRIV-0023 through PRIV-4681, encompassing all 148 challenged attorney-client privilege entries, are listed with enhanced descriptions of comparable specificity. Representative entries shown above illustrate the level of detail provided for each challenged entry. The complete table is provided in the electronic version of this Appendix delivered to Staff concurrently with this letter.]
Table 2: Work Product Doctrine — Enhanced Descriptions (44 Entries)
[Table 2 continues for the remaining 38 entries. Entries WP-0014 through WP-0189, encompassing all 44 challenged work product entries, are listed with enhanced descriptions of comparable specificity. Representative entries shown above illustrate the level of detail provided for each challenged entry. The complete table is provided in the electronic version of this Appendix delivered to Staff concurrently with this letter.]
Table 3: Joint Defense / Common Interest Privilege — Enhanced Descriptions (22 Entries)
[Table 3 continues for the remaining 18 entries. Entries JD-0003 through JD-0047, encompassing all 22 challenged joint defense / common interest entries, are listed with enhanced descriptions of comparable specificity. Representative entries shown above illustrate the level of detail provided for each challenged entry. The complete table is provided in the electronic version of this Appendix delivered to Staff concurrently with this letter.]
End of Appendix A. The electronic version of this Appendix, containing the complete enhanced descriptions for all 214 challenged privilege log entries, has been delivered to FTC Staff concurrently with this letter via the secure file transfer protocol designated by Staff.
Privilege Category | Number of Entries | Percentage of Total Log
Attorney-Client Privilege | 3,641 | 74.8%
Work Product Doctrine | 894 | 18.4%
Joint Defense / Common Interest Privilege | 337 | 6.8%
Total | 4,872 | 100.0%
Privilege Category | Number of Challenged Entries | Percentage of Challenge
Attorney-Client Privilege | 148 | 69.2%
Work Product Doctrine | 44 | 20.6%
Joint Defense / Common Interest | 22 | 10.3%
Total | 214 | 100.0%
Log Entry No. | Date | Author(s)/Sender(s) | Recipient(s) | Document Type | Enhanced Description | Privilege Basis
PRIV-0023 | 05/30/2023 | Howard Bellamy (Calderwood & Harkness LLP) | Graham A. Whitfield (CEO, Solara GP); Sandra K. Levinson (CIO, Solara GP) | Email | Communication from outside antitrust counsel to Solara senior management conveying counsel's legal advice regarding the scope and requirements of the Second Request issued May 29, 2023, including counsel's preliminary legal assessment of the specifications and recommended compliance approach. | Attorney-Client Privilege
PRIV-0024 | 05/30/2023 | Graham A. Whitfield (CEO, Solara GP) | Howard Bellamy (Calderwood & Harkness LLP); Monica Reyes (Calderwood & Harkness LLP) | Email | Communication from Solara CEO to outside antitrust counsel seeking legal advice regarding the implications of the Second Request for the Transaction timeline and counsel's assessment of the antitrust risk profile of the Transaction. | Attorney-Client Privilege
PRIV-0041 | 06/01/2023 | Monica Reyes (Calderwood & Harkness LLP) | Graham A. Whitfield (CEO, Solara GP); Derek H. Calloway (SVP, Solara GP); Janet M. Strickland (VP, Solara GP) | Email | Communication from outside antitrust counsel to Solara management providing legal advice regarding custodian identification and document preservation obligations under the Second Request, including counsel's legal assessment of the scope of custodial responsibility. | Attorney-Client Privilege
PRIV-0067 | 06/05/2023 | Sandra K. Levinson (CIO, Solara GP) | Howard Bellamy (Calderwood & Harkness LLP); Monica Reyes (Calderwood & Harkness LLP) | Email with attachment | Communication from Solara CIO to outside antitrust counsel providing factual information regarding Solara's investment thesis for the Transaction at counsel's request, for the purpose of counsel rendering legal advice regarding potential FTC theories of harm and competitive effects analysis. | Attorney-Client Privilege
PRIV-0089 | 06/08/2023 | Elliot Nguyen (Calderwood & Harkness LLP) | Priya N. Raghavan (CEO, Meridian); Monica Reyes (Calderwood & Harkness LLP) | Email | Communication from outside antitrust counsel to Meridian CEO requesting factual information regarding Meridian's product architecture and competitive positioning, at counsel's direction, for the purpose of counsel re

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APPENDIX A

INDEX OF ENHANCED DESCRIPTIONS FOR 214 CHALLENGED PRIVILEGE LOG ENTRIES

Record

Parties

Dates

Amounts