In Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, the executor of the estate of the founder of a closely held corporation brought an action against the corporation's other shareholders and later moved for leave to amend the complaint to allege a shareholder derivative action against the law firm representing the corporation. (Favila, supra, 188 Cal.App.4th at pp. 201-202.) The executor alleged she "did not know any attorneys had assisted in the purportedly illegal transactions and did not learn of the law firm's involvement, and thus its malpractice" until depositions taken during the individual action. (Id. at pp. 224-225.) The attorneys disputed the veracity of these allegations. Given this dispute of material facts at the demurrer stage of the proceedings, the court determined the issue must be resolved on summary judgment or at trial. (Id. at p. 225.) The Court reversed a judgment of dismissal entered after the sustaining of corporate outside counsels' demurrer to a shareholder derivative action. The court remanded the matter to the trial court for its further consideration of whether under McDermott the attorneys' inability to disclose privileged information barred the action. The court concluded the propriety of the trial court's ruling "depends on the resolution of several difficult questions involving the lawyer-client privilege in the context of an asset sale followed immediately by a corporate dissolution." (Favila, supra, 188 Cal.App.4th at p. 218.) Favila explains: "A dissolved corporation continues to exist for various purposes. Because it continues in existence ... it would appear the persons authorized to act on the dissolved corporation's behalf during the windup process--its ongoing management personnel--should be able to assert the privilege, at least until all matters involving the company have been fully resolved and no further proceedings are contemplated. Indeed, if the lawyer-client privilege is simply extinguished upon dissolution, then the corporation's ability to effectively prosecute or defend actions is eviscerated; and the shareholders who may be responsible for their pro rata portions of any claims are unfairly disadvantaged." (Id. at pp. 219-220.) The court also explained "a demurrer based on McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th 378... is unlike most pleading motions; for it asks the trial court to speculate about matters in the future (can the lawyer-defendant adequately defend the case if privileged information cannot be disclosed), rather than to evaluate the legal sufficiency of the complaint actually before it. Accordingly, if a demurrer to a derivative complaint against outside counsel would otherwise be overruled but for the McDermott ... issue and there appears to be a realistic possibility that litigation of the remainder of the action against corporate insiders will result in a waiver of the corporation's privilege or produce additional evidence supporting an exception to that privilege, the trial court should not sustain the demurrer and dismiss the action. Rather, under these circumstances, the appropriate action is for the court to conditionally stay further proceedings against outside counsel, including discovery as to the causes of action against them, and defer consideration of any demurrer or judgment on the pleadings based on counsel's inability to defend because of the lawyer-client privilege." (Favila, supra, 188 Cal.App.4th at p. 221.)