For Common Interest Privilege to Apply, Communications Must Relate to Litigation

On June 9, 2016, the Court of Appeals issued a decision in Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 NY Slip Op. 04439, holding that for the common interest privilege to apply, the communications must relate to litigation, explaining:

This case concerns a related, but distinct, exception to the general rule that the presence of a third party destroys any claim of privilege: where two or more clients separately retain counsel to advise them on matters of common legal interest, the common interest exception allows them to shield from disclosure certain attorney-client communications that are revealed to one another for the purpose of furthering a common legal interest. The doctrine has its roots in criminal law and, as originally conceived, allowed the attorneys of criminal co-defendants to share confidential information about defense strategies without waiving the privilege as against third parties. . . .

As an exception to the general rule that communications made in the presence of or to a third party are not protected by the attorney-client privilege, our current formulation of the common interest doctrine is limited to situations where the benefit and the necessity of shared communications are at their highest, and the potential for misuse is minimal. 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 is 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. . . . 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. Defendants have not presented any evidence to suggest that a corporate crisis existed in New York over the last twenty years when our courts restricted the common interest doctrine to pending or anticipated litigation, and we doubt that one will occur as a result of our decision today.

(Internal quotations and citations omitted).