Answer: A
The diazonium group is a superb leaving group but the neighbouring carboxyl oxygen displaces NX2 from the back, giving an alpha-lactone (first inversion). Water opens it at the same carbon from the back (second inversion), so the net result is retention. Priorities are N/O>COOH>CHX3>H for the amine, diazonium and alcohol, so the product is (S)-lactic acid.