Thursday, June 9, 2016
An attorney-client privilege decision from the New York Court of Appeals limits the common interest doctrine.
This discovery dispute involves certain attorney-client communications that defendant Bank of America Corporation and defendant Countrywide Financial Corporation shared when the two entities were in the process of merging. Generally, communications between an attorney and a client that are made in the presence of or subsequently disclosed to third parties are not protected by the attorney-client privilege. Under the common interest doctrine, however, an attorney-client communication that is disclosed to a third party remains privileged if the third party shares a common legal interest with the client who made the communication and the communication is made in furtherance of that common legal interest. We hold today, as the courts in New York have held for over two decades, that any such communication must also relate to litigation, either pending or anticipated, in order for the exception to apply...
The question presently before us is whether to modify the existing requirement that shared communications be in furtherance of a common legal interest in pending or reasonably anticipated litigation in order to remain privileged from disclosure, by expanding the common interest doctrine to protect shared communications in furtherance of any common legal interest. We adhere to the litigation requirement that has historically existed in New York...
We conclude that the policy reasons for keeping a litigation limitation on the common interest doctrine outweigh any purported justification for doing away with it, and therefore maintain the narrow construction that New York courts have traditionally applied
The court reversed the order of the Appellate Division for the First Judicial Department.
Justice Rivera dissented
Whether this privilege should extend to confidential communications between separately represented parties, in which they have a common legal interest in a transaction, not involving pending or reasonably anticipated litigation, is the question posed in this appeal, and one which I would answer in the affirmative under the circumstances presented here. Given that the attorney-client privilege has no litigation requirement and the reality that clients often seek legal advice specifically to comply with legal and regulatory mandates and avoid litigation or liability, the privilege should apply to private client-attorney communications exchanged during the course of a transformative business enterprise, in which the parties commit to collaboration and exchange of client information to obtain legal advice aimed at compliance with transaction-related statutory and regulatory mandates.
The attorney-client privilege is a long-standing exception to the general rule promoting discovery as part of the truth-finding process, and one tolerated because it serves the individual and societal goals of furthering the proper administration of justice by encouraging the free flow of information essential to legal representation. It has never been limited to client communications involving pending or anticipated litigation. Even so, the privilege is deemed waived where a client shares information with a third party, under circumstances that reflect the client's disinterest in the continued protection of the confidences. However, where parties to a merger seek to comply with legal requirements and agree to treat as confidential any exchanges of information made for purposes of seeking legal and regulatory advice to complete the merger, the parties cannot be assumed to have vitiated the private nature of the information, or to harbor an unreasonable expectation of privacy in these exchanges. Therefore, extension of the attorney-client privilege to these communications is fully in line with the goals of our common law and the needs of our complex system of commercial regulation.
This decision will, as Justice Rivera's dissent suggests, likely have a significant impact on legal advice in commercial transactions. (Mike Frisch)