N.Y. Reinstates Narrow View of Common Interest Doctrine

By Joan C. Rogers

June 13 — The common interest doctrine won't preserve the attorney-client privilege in New York for confidential communications exchanged among attorneys for separately represented parties if there's no pending or anticipated litigation, the New York Court of Appeals held June 9 ( Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 BL 184648, N.Y., No. 80, 6/9/16 , rev'g 998 N.Y.S.2d 329, 30 Law. Man. Prof. Conduct 770).

Normally the attorney-client privilege is lost if protected communications are shared with a third party, but an exception prevents waiver when the senders and recipients share a common legal interest in the subject matter of the communications.

“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,” Judge Eugene F. Pigott Jr. wrote for the court.


Oral argument webcast and transcript

Amicus curiae brief submitted by Association of Corporate Counsel and U.S. Chamber of Commerce

The decision means the common interest doctrine doesn't apply under New York law when parties that have separate counsel in a commercial transaction exchange legal communications outside the context of expected litigation.

This narrow view is at odds with the position of some federal courts and the Restatement (Third) of the Law Governing Lawyers (2000), which allow the common interest doctrine to apply in both litigated and nonlitigated matters.

Some Courts and States Have Dropped Litigation Requirement for Common Interest Doctrine, but Others Haven't

In Ambac, Judge Pigott acknowledged that the Restatement (Third) of the Law Governing Lawyers §76(1) and some federal courts of appeals have extended the common interest doctrine to communications in furtherance of any common legal interest. He cited cases from the Third, Seventh and Federal circuits.

The Second and Ninth circuits have made clear that actual or ongoing litigation isn't required, but apparently haven't expressly decided whether there must be a threat of litigation to invoke the exception, Pigott said.

Pigott also noted that a Delaware rule extends the attorney-client privilege to confidential communications the client makes to a lawyer “representing another in a matter of public interest.”

However, at least 11 states have statutorily restricted the common interest doctrine to communications made in furtherance of ongoing litigation, Pigott said. He cited rules or laws from Arkansas, Hawaii, Kentucky, Maine, Mississippi, New Hampshire, North Dakota, Oklahoma, South Dakota, Texas and Vermont.

Other jurisdictions have embraced the same limitation through judicial decision, Pigott said. He cited decisions from the Fifth Circuit, Florida, Maryland, New Jersey, Tennessee and Virginia.

Bigger Exception Not Needed

The ruling grew out of a discovery dispute in an insurer's suit against Bank of America Corp. and Countrywide Home Loans Inc. to recover losses on mortgage securities.

The court overturned a lower court decision which held that attorney-client communications the two companies and their lawyers shared with each other when they were preparing to merge may be privileged even though no litigation was on the horizon at that time.

Pigott said the high court saw no need to expand the common interest doctrine, which lower New York courts have long restricted to the context of litigation.

There's no evidence that complex commercial transactions haven't occurred in New York as a result of the litigation restriction, the court said. Nor is there evidence that corporate clients will stop complying with the law unless the common interest doctrine applies in transactional matters, Pigott said.

The court cited the merger at the heart of this case as the perfect example. The companies obtained regulatory approval and filed required disclosures in anticipation of closing their merger even though New York law was clear at the time that their shared communications wouldn't remain privileged unless they anticipated litigation.

“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 said.

Detriments of Expansion

The court also said expanding the common interest doctrine outside the context of litigation would result in loss of relevant evidence and create the potential for abuse.

The difficulty of defining “common legal interests” outside the context of litigation could shield a wide range of communications between parties who say they have common legal interests but who really only have only nonlegal or purely business interests to protect, the court said.

In a footnote, Pigott said the court didn't need to decide here what it means to share a common legal interest in pending or anticipated litigation.

“We hold only that such litigation must be ongoing or reasonably anticipated, and the exchanged communication must relate to it, in order for the common interest exception to apply,” he wrote.

The court rejected several reasons Bank of America put forward for dropping the litigation requirement. Pigott said that:

  •  the common interest doctrine doesn't need to be as broad as the attorney-client privilege, which isn't tied to contemplation of litigation;
  •  it isn't anomalous that communications among clients are privileged outside the litigation context if they share the same counsel but not privileged outside that context if they hire separate counsel; and
  •  other states haven't uniformly embraced the federal courts' expansion of the common interest doctrine. ( See box.)


Dissent: Drop It

Judge Jenny Rivera dissented, joined by Judge Michael J. Garcia.

Rivera argued that the attorney-client privilege should apply to private attorney-client communications exchanged “during the course of a transformative business enterprise in which the parties agree to collaborate and exchange information to obtain legal advice aimed at compliance with transaction related statutory and regulatory mandates.”

Rivera pointed out that the attorney-client privilege itself has no litigation requirement. Clients often seek legal advice specifically to comply with legal and regulatory mandates and to avoid litigation or liability, she said.

Jonathan Rosenberg of O'Melveny & Myers LLP, New York, argued for Bank of America. Stephen P. Younger of Patterson Belknap Webb & Tyler LLP, New York, argued for Ambac Assurance Corp.

To contact the reporter on this story: Joan C. Rogers in Washington at jrogers@bna.com

To contact the editor responsible for this story: Kirk Swanson at kswanson@bna.com

For More Information

Full text at http://www.bloomberglaw.com/public/document/Ambac_Assurance_Corp_v_Countrywide_Home_Loans_Inc_No_80_2016_BL_1.

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA. 

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