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New York Court Of Appeals Holds That The Common Interest Doctrine Protects Only Communications Relating To Pending Or Anticipated Litigation
06/20/2016On June 9, 2016, the New York Court of Appeals held that New York law does not exempt from discovery attorney-client privileged communications shared by parties that have a common legal interest, unless the communications relate to either pending or anticipated litigation. Ambac, et al. v. Countrywide Home Loans, Inc., et al., 2016 WL 3188989 (N.Y. Jan. 9, 2016).
The discovery dispute concerned attorney-client privileged documents exchanged between Countrywide and Bank of America during the period between the signing of their merger plan and the closing of their merger. Plaintiff sought to compel production of these documents on the basis that the privilege had been waived because the parties were not affiliated entities at the time of disclosure and did not share a common legal interest in litigation or anticipated litigation. Defendants opposed on the basis that they had a common legal interest in successfully completing the merger.
The Court noted that, unlike some other jurisdictions, New York courts had uniformly “rejected efforts to expand the common interest doctrine to communications that do not concern pending or reasonably anticipated litigation.” The Court first observed that because recognition of the privilege is antithetical to the “truth finding process,” it must be construed narrowly. The Court then reasoned that the “anticipation of litigation” requirement appropriately balanced the need for disclosure with the goals served by the privilege. Applying the doctrine where the communicants’ shared legal interest extends to pending or anticipated litigation is appropriate to encourage candor and coordination among parties who might otherwise be reluctant to share information for fear of waiving the privilege. By contrast, when parties have a common legal interest in a commercial transaction, but do not anticipate litigation, the parties would exchange the information anyway: “[t]here is no evidence, for example, that mergers, licensing agreements and other complex commercial transactions have not occurred in New York because of our State’s limitation on the common interest doctrine.” In addition, the Court found that because it is hard to define a “common legal interest,” the doctrine was prone to abuse without the “anticipation of litigation” requirement. Broad assertions of purportedly common legal interests “could result in the loss of evidence of a wide range of communications between parties who assert common legal interests but who really have only non-legal or exclusively business interests to protect.”
The Court also noted that the common interest doctrine need not be co-extensive with attorney-client privilege, which is not subject to an “anticipation of litigation” requirement. The common interest doctrine does not create privilege, but rather, limits the circumstances in which exchanged privileged information with third parties waives the privilege.
The dissent stressed that the attorney-client privilege has no “anticipation of litigation” requirement, that clients often seek legal advice aimed at compliance with complex transaction-related statutory and regulatory mandates, and that the ruling puts New York in conflict with the majority of federal courts that have considered the issue and several other states, such as Delaware, which protects communications on a matter of common legal interest even absent litigation. The majority was of the view that any expansion of New York’s common interest exception, for the reasons articulated by the dissent, is for the Legislature to consider.
