New York's Court of Appeals has reinstated the New York rule that the common-interest doctrine only applies in the context of actual or threatened litigation.
The common-interest doctrine is a legal concept in New York's Mergers & Acquisitions law that provides an exception to the general rule that attorney-client privilege is waived when protected information is shared with a third party provided that the communication furthers a near-identical legal interest shared by a client and a third party. This doctrine protects M&A transactions in New York in this limited regard when companies seek to execute the transaction because both companies share a common legal interest at that time, but only when the information concerns legal advice in pending or reasonably anticipated litigation. However, the doctrine does not extend to other communications between the buyer and seller.
Recently, the lower Appellate Division in New York attempted to expand the protection provided by the common-interest doctrine to parties whose common interest was so compatible and non-adverse, that they could be regarded more like joint venturers than separate companies with separate interests, and where the communication was mere advice on common legal interests.
However, the highest court in New York disagreed in the matter of Ambac Assurance Corp., et. al. v. Countrywide Home Loans, Inc., et. al., rejecting this expansion of the common-interest doctrine because it would make it more difficult to distinguish between common legal interests and business interests. By maintaining the definition as limited to actual or threatened litigation, New York would maintain a bright-line rule determining what common legal interests actually are.
Why is this important to New York businesses? Because this decision is a clear warning that shared legal advice in the context of anything other than actual or anticipated litigation in court is not privileged. If you choose to have legal advice shared with a third party business - even if that business is one you may choose to merger with or acquire - that information is not shielded by attorney-client privilege. This ruling should make you think twice about who to have in the room with you when contemplating a significant change in your New York business.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.