• N.Y. Court of Appeals Judges Reject Bid to Broaden Attorney-Client Privilege Rule
  • July 22, 2016
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • On June 9, 2016, the New York Court of Appeals, in a 4-2 decision, declined to broaden the common interest exception to New York state attorney-client privilege. The First Department Appellate Division had previously found that the common interest exception could be extended to communications with third parties outside the context of pending litigation. The ruling in Ambac v. Countrywide concerned attorney-client communications that had been shared between two defendants, Bank of America and Countrywide Financial, while in the process of merging.[1]

    The ruling limits the common interest waiver exception solely to litigation, rather than extending it to the sharing of privileged communications for transactional purposes. This interpretation of the waiver exception is contrary to the Restatement of the Law Governing Lawyers and to previous federal court rulings by the Courts of Appeals for the Third, Seventh, Ninth and Federal Circuits.[2] Although the New York Court of Appeals decision is based on New York state law and cannot itself be reviewed or reversed, this split on such a key issue could lead the United States Supreme Court to weigh in sometime in the near future.

    The New York decision draws a distinction between the chilling effect of potential waiver when sharing information in anticipation of litigation as opposed to sharing information in a transactional context when no specific litigation is imminent. Judge Pigott’s majority opinion dismisses Bank of America’s argument that the very nature of operating a large-scale business in a highly regulated environment means the possibility of litigation is constant. To justify this dismissal, Judge Pigott asserts that “[t]here is no evidence ... complex commercial transactions have not occurred in New York because of [New York’s] litigation limitation on the common interest doctrine.”

    In dissent, Judge Jenny Rivera noted that extending the common interest waiver exception served the ultimate purpose of the attorney-client privilege to promote effective representation and that the privilege itself is not restricted to communications made during or in anticipation of litigation.[3]

    Parties who could now or in the future face litigation exposure to claims based in New York state law should be aware that any attorney-client communications shared outside the context of a current or pending litigation will be discoverable. Additionally, given the significant difference between the New York waiver exception and others, those who do business in New York should also be aware of the rules for conflicts of law surrounding application of privilege when selecting a forum for litigation or drafting a choice of law provision. All should stay tuned for possible developments further defining the common interest waiver exception across federal courts.


    [1] Ambac v. Countrywide, No. 80, NYLJ 1202759677360, at *1 (Ct. of App., Decided June 9, 2016).

    [2] Ambac at *27 fn 7; Restatement [Third] of the Law Governing Lawyers § 76 [2000].

    [3] Ambac at *24-*25.