N.Y. Court Retains Limits on Privilege Shield in BofA Case

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By Michael Greene

June 13 — A divided New York Court of Appeals June 9 declined to broaden the attorney-client privilege shield in a decision finding that hundreds of documents related to Bank of America's 2008 acquisition of Countrywide Financial Corp. were discoverable ( Ambac Assurance Corp. v. Countrywide Home Loans Inc., 2016 BL 184648, N.Y., No. 80, 6/9/16 ).

The case involved communications between the bank and Countrywide before the merger was completed. The materials were sought by Ambac Assurance Corp., which alleged that Countrywide fraudulently induced it to insure mortgage-backed securities before Countrywide was acquired by Bank of America.

The state high court 4-2 reversed a lower court decision finding that the communications were protected by New York's “common interest” doctrine (12 CARE 1690, 12/12/14).

Writing for the majority, Judge Eugene Pigott Jr. said that policy reasons didn't support expanding the common interest doctrine to include protecting communications made in the absence of pending or anticipated litigation.

Under the doctrine, communications between counsel and a client that are made in the presence of or subsequently disclosed to a third party are protected under the attorney-client privilege when the third party shares a legal interest with the client.

The court's ruling means that certain communications made in the context of mergers and other types of complex transactions will still be discoverable in lawsuits.

“Put simply, when businesses share a common interest in closing a complex transaction, their shared interest in the transaction's completion is already an adequate incentive for exchanging information necessary to achieve that end,” Pigott wrote.

Dissenting Opinion

In her dissent, Judge Jenny Rivera said the doctrine should be extended. She observed that other state and federal courts that have addressed this issue have held the privilege applies even if litigation isn't pending or reasonably anticipated.

“[T]he 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,” she wrote.

Chief Judge Janet DiFiore didn't participate in the case.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

For More Information

The opinion is available at http://src.bna.com/fQM.