Third-Party's Presence Did Not Waive Attorney-Client Privilege

On March 3, 2020, the First Department issued a decision in Spicer v. GardaWorld Consulting (UK) Ltd., 2020 NY Slip Op. 01448, holding that the presence of a third-party did not (necessarily) waive attorney-client privilege, explaining:

Plaintiffs were the sole shareholders of Hestia B.V. (the Company) prior to selling all of their shares to defendant. Nonparty KippsDeSanto & Company (KDC) was plaintiffs' financial adviser in connection with the sale transaction.

The motion court should not have accepted defendant's blanket challenge to pre-closing communications between plaintiffs' counsel and KDC that were withheld as attorney-client privileged. Although, generally, communications made in the presence of third parties are not privileged from disclosure because they are not deemed confidential, statements made to the agents of the attorney or client retain their confidential (and therefore, privileged) character, where the presence of such third parties is deemed necessary to enable the attorney-client communication and the client has a reasonable expectation of confidentiality. It is not dispositive for purposes of the agency exception that KDC did not have a fiduciary or formal agency relationship with plaintiffs.

It is true that KDC was not retained to assist plaintiffs' counsel in providing legal advice. However, the unrebutted evidence reflects that KDC spent some portion of its time helping counsel to understand various aspects of the transaction for that purpose. As such, KDC's presence was necessary to enable attorney-client communication.

Plaintiffs also had a reasonable expectation that the confidentiality of communications between their counsel and KDC would be maintained. Plaintiffs' counsel attested that KDC promised to keep all such communications confidential. The governing Purchase and Sale Agreement also specified that all privileged documents related to the transaction would remain protected from disclosure to defendant even after closing.

Contrary to defendant's contention, the Cooperation Clause in KDC's engagement letter did not undermine the reasonableness of this expectation of confidentiality, as it only required reasonable assistance to the Company (now owned by defendant), and should thus not be read to require KDC to turn over privileged documents.

Thus, plaintiffs demonstrated that KDC's presence was deemed necessary to enable the attorney-client communication and that they had a reasonable expectation that the confidentiality of communications between their counsel and KDC would be maintained - at least as a general matter. Defendant is free to challenge specific documents on plaintiffs' privilege log.

Insofar as defendant's challenge to the withholding of post-closing communications between plaintiffs' counsel and KDC on attorney work product grounds is limited to challenging the reasonableness of the same expectation of confidentiality as discussed above, it is equally unavailing.

An issue that arises in almost all complex commercial litigation is identifying evidence that should be withheld from production in evidence because it is subject to the attorney-client or other privilege. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the attorney-client, common interest, work product or other privileges or exemptions from production of evidence.