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APPELLATE DIVISION WRONGLY EXTENDED COMMON INTEREST ATTORNEY CLIENT PRIVILEGE TO MERGER NEGOTIATIONS WHEN THERE WAS NO PENDING LITIGATION.

The Court of Appeals, in a full-fledged opinion by Judge Pigott, over an extensive two-judge dissenting opinion, reversing the Appellate Division, determined the common interest attorney-client privilege should only apply when there is litigation or pending litigation involving the parties with a common interest. The 1st Department had extended to privilege to merger negotiations between Countrywide and Bank of America at a time when the failure of mortgage-backed securities was in the air but there was no litigation or pending litigation:

Disclosure is privileged between codefendants, coplaintiffs or persons who reasonably anticipate that they will become colitigants, because such disclosures are deemed necessary to mount a common claim or defense, at a time when parties are most likely to expect discovery requests and their legal interests are sufficiently aligned that “the counsel of each [i]s in effect the counsel of all” … . When two or more parties are engaged in or reasonably anticipate litigation in which they share a common legal interest, the threat of mandatory disclosure may chill the parties’ exchange of privileged information and therefore thwart any desire to coordinate legal strategy. In that situation, the common interest doctrine promotes candor that may otherwise have been inhibited.

The same cannot be said of clients who share a common legal interest in a commercial transaction or other common problem but do not reasonably anticipate litigation. Ambac Assur. Corp. v Countrywide Home Loans, Inc., 2016 NY Slip Op 04439, CtApp 6-9-16

CIVIL PROCEDURE (ATTORNEY CLIENT PRIVILEGE, APPELLATE DIVISION WRONGLY EXTENDED COMMON INTEREST ATTORNEY CLIENT PRIVILEGE TO MERGER NEGOTIATIONS WHEN THERE WAS NO PENDING LITIGATION)/ATTORNEYS (ATTORNEY CLIENT PRIVILEGE, APPELLATE DIVISION WRONGLY EXTENDED COMMON INTEREST ATTORNEY CLIENT PRIVILEGE TO MERGER NEGOTIATIONS WHEN THERE WAS NO PENDING LITIGATION)/PRIVILEGE (ATTORNEY CLIENT PRIVILEGE, APPELLATE DIVISION WRONGLY EXTENDED COMMON INTEREST ATTORNEY CLIENT PRIVILEGE TO MERGER NEGOTIATIONS WHEN THERE WAS NO PENDING LITIGATION)/COMMON INTEREST PRIVILEGE (ATTORNEY CLIENT PRIVILEGE, APPELLATE DIVISION WRONGLY EXTENDED COMMON INTEREST ATTORNEY CLIENT PRIVILEGE TO MERGER NEGOTIATIONS WHEN THERE WAS NO PENDING LITIGATION)

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