Ambac Assurance Corporation v. Countrywide Home Loans, Inc. ( 2016 )


Menu:
  • This opinion is uncorrected and subject to revision before
    publication in the New York Reports.
    -----------------------------------------------------------------
    No. 80
    Ambac Assurance Corporation,
    et al.,
    Appellants,
    v.
    Countrywide Home Loans, Inc.,
    et al.,
    Defendants,
    Bank of America Corp.,
    Respondent.
    Stephen P. Younger, for appellants.
    Jonathan Rosenberg, for respondent.
    New York State Trial Lawyers Association; New York
    State Academy of Trial Lawyers; Chamber of Commerce of the United
    States of America et al., amici curiae.
    PIGOTT, J.:
    This discovery dispute involves certain attorney-client
    communications that defendant Bank of America Corporation and
    defendant Countrywide Financial Corporation shared when the two
    entities were in the process of merging.   Generally,
    communications between an attorney and a client that are made in
    - 1 -
    - 2 -                          No. 80
    the presence of or subsequently disclosed to third parties are
    not protected by the attorney-client privilege.   Under the common
    interest doctrine, however, an attorney-client communication that
    is disclosed to a third party remains privileged if the third
    party shares a common legal interest with the client who made the
    communication and the communication is made in furtherance of
    that common legal interest.   We hold today, as the courts in New
    York have held for over two decades, that any such communication
    must also relate to litigation, either pending or anticipated, in
    order for the exception to apply.
    I.
    Plaintiff Ambac Assurance Corporation is a monoline
    insurer that guaranteed payments on certain residential mortgage-
    backed securities issued by defendant Countrywide Home Loans,
    Inc., a wholly-owned subsidiary of Countrywide Financial
    Corporation (referred to collectively in this appeal as
    "Countrywide").   When the mortgage-backed securities that Ambac
    insured failed during the recent financial crisis, Ambac
    commenced this action against Countrywide in Supreme Court
    alleging that Countrywide breached contractual representations,
    fraudulently misrepresented the quality of the loans and
    fraudulently induced Ambac to guaranty them.
    Ambac named Bank of America as a defendant in the
    action, based on its merger with Countrywide.   The merger began
    to take shape in 2007, as Countrywide faced increasing credit
    - 2 -
    - 3 -                          No. 80
    losses and negative expectations about its future performance.
    The two entities publicly announced a merger plan on January 11,
    2008 and closed on July 1, 2008.   As a result of the merger,
    Countrywide sold substantially all of its assets to Bank of
    America through a series of asset transfers, and Countrywide
    merged into a wholly-owned subsidiary of Bank of America called
    Red Oak Merger Corporation.   Ambac alleged that, as a result of
    the merger, Bank of America became Countrywide's successor-in-
    interest and alter ego and was responsible for Countrywide's
    liabilities to Ambac in the underlying action for fraud.
    Discovery ensued, and in November 2012, Ambac
    challenged Bank of America's withholding of approximately 400
    communications that took place between Bank of America and
    Countrywide after the signing of the merger plan in January 2008
    but before the merger closed in July.    Bank of America had listed
    the communications on a privilege log and claimed they were
    protected from disclosure by the attorney-client privilege
    because they pertained to a number of legal issues the two
    companies needed to resolve jointly in anticipation of the merger
    closing, such as filing disclosures, securing regulatory
    approvals, reviewing contractual obligations to third parties,
    maintaining employee benefit plans and obtaining legal advice on
    state and federal tax consequences.    Although the parties were
    represented by separate counsel, the merger agreement directed
    them to share privileged information related to these pre-closing
    - 3 -
    - 4 -                         No. 80
    legal issues and purported to protect the information from
    outside disclosure.   Bank of America argued that the merger
    agreement evidenced the parties' shared legal interest in the
    merger's "successful completion" as well as their commitment to
    confidentiality, and therefore shielded the relevant
    communications from discovery.
    Ambac moved to compel production of those documents,
    arguing that the voluntary sharing of confidential material
    before the merger closed waived any attorney-client privilege
    that might have otherwise attached.      According to Ambac, Bank of
    America and Countrywide waived the privilege because they were
    not affiliated entities at the time of disclosure and did not
    share a common legal interest in litigation or anticipated
    litigation.   Ambac further asserted that the allegedly privileged
    documents were relevant to its successor-in-interest and alter
    ego theories of liability and may have demonstrated that Bank of
    America structured the merger so as to conceal Countrywide's
    fraud and leave creditors without recourse.
    A Special Referee appointed to handle privilege
    disputes issued a report on Ambac's motion and ordered the
    parties to review the remaining documents in accordance with its
    decision (2013 NY Slip Op 32568[U] [Sup Ct, NY County 2013]).
    The Referee explained that the exchange of privileged
    communications ordinarily constitutes a waiver of the attorney-
    client privilege and that the communications at issue would be
    - 4 -
    - 5 -                         No. 80
    entitled to protection only if Bank of America could establish an
    exception to waiver.   The Referee discussed one such exception,
    the common interest doctrine, which permits a limited disclosure
    of confidential communications to parties who share a common
    legal (as opposed to business or commercial) interest in pending
    or reasonably anticipated litigation (id. at *6, citing Aetna
    Cas. & Sur. Co. v Certain Underwriters at Lloyd's, London, 
    176 Misc. 2d 605
    [Sup Ct, NY County 1998], affd 263 AD2d 367 [1st Dept
    1999]).   The Referee concluded that "[i]f there is such
    litigation and a common legal interest then the common-interest
    doctrine comes into play.    If there is not then the doctrine does
    not protect the document" (id. at *8 [emphasis in original]).
    Having announced this standard, the Referee instructed the
    parties to review the withheld documents, update the privilege
    log and submit any documents that remained in dispute for in
    camera review (id. at *9).
    Bank of America moved to vacate the Referee's decision
    and order on the ground that its communications with Countrywide
    were protected by the attorney-client privilege even in the
    absence of pending or anticipated litigation.   According to Bank
    of America, the items were privileged so long as they involved
    matters of a common legal interest between the parties -- i.e.,
    closing the merger -- and were otherwise protected by the
    attorney-client privilege.   Supreme Court denied the motion,
    holding that New York law "requires that there be a reasonable
    - 5 -
    - 6 -                          No. 80
    anticipation of litigation" in order for the common interest
    doctrine to apply (41 Misc 3d 1213[A], 2013 NY Slip Op 51673[U]
    [Sup Ct, NY County 2013]).
    Bank of America appealed, and the Appellate Division
    reversed, granted the motion to vacate and remanded for further
    proceedings (124 AD3d 129 [1st Dept 2014]).    Although the court
    recognized that, historically, "New York courts have taken a
    narrow view of the common-interest [doctrine], holding that it
    applies only with respect to legal advice in pending or
    reasonably anticipated litigation," it was unpersuaded by the
    reasoning of those courts and concluded that pending or
    reasonably anticipated litigation was no longer a necessary
    element of the exception (id. at 129).    The court observed that
    "when a single party seeks advice from counsel, the communication
    is privileged regardless of whether litigation is within anyone's
    contemplation" but that, under Supreme Court's formulation of the
    doctrine, "when two parties with a common legal interest seek
    advice from counsel together, the communication is not privileged
    unless litigation is within the parties' contemplation" (id. at
    135-136).    The Appellate Division could not reconcile that
    distinction with the purposes underlying the attorney-client
    privilege and decided instead to follow the federal courts that
    have "overwhelmingly rejected [a litigation] requirement" (id. at
    134 [citing cases from the Second, Third, Seventh and Federal
    Circuit Courts of Appeals]).    The Appellate Division remanded the
    - 6 -
    - 7 -                         No. 80
    matter to the Special Referee to determine whether the
    communications fell within its reformulation of the rule.    It
    subsequently granted Ambac leave to appeal to this Court,
    certifying the following question: "Was the order of this Court,
    which reversed the order of Supreme Court, properly made?"
    II.
    A.    The Attorney-Client Privilege
    The attorney-client privilege shields from disclosure
    any confidential communications between an attorney and his or
    her client made for the purpose of obtaining or facilitating
    legal advice in the course of a professional relationship (see
    CPLR 4503[a][1]).    The oldest among the common law evidentiary
    privileges, the attorney-client privilege "fosters the open
    dialogue between lawyer and client that is deemed essential to
    effective representation" (Spectrum Sys. Intl. Corp. v Chemical
    Bank, 78 NY2d 371, 377 [1991]).    "It exists to ensure that one
    seeking legal advice will be able to confide fully and freely in
    his attorney, secure in the knowledge that his confidences will
    not later be exposed to public view to his embarrassment or legal
    detriment" (Matter of Priest v Hennessy, 51 NY2d 62, 67 [1980]).
    Despite the social utility of the privilege, it is in
    "[o]bvious tension" with the policy of this State favoring
    liberal discovery (Spectrum, 78 NY2d at 376-377; see also CPLR
    3101[a][1] [directing that there be "full disclosure of all
    matter material and necessary in the prosecution or defense of an
    - 7 -
    - 8 -                          No. 80
    action"]).   Because the privilege shields from disclosure
    pertinent information and therefore "constitutes an 'obstacle' to
    the truth-finding process," it must be narrowly construed (Matter
    of Jacqueline F., 47 NY2d 215, 219 [1979]; see Spectrum, 78 NY2d
    at 377).   The party asserting the privilege bears the burden of
    establishing its entitlement to protection by showing that the
    communication at issue was between an attorney and a client "for
    the purpose of facilitating the rendition of legal advice or
    services, in the course of a professional relationship," that the
    communication is predominantly of a legal character, that the
    communication was confidential and that the privilege was not
    waived (Rossi v Blue Cross & Blue Shield, 73 NY2d 588, 593-594
    [1989]).
    The latter two elements -- confidentiality and waiver -
    - are of primary importance in this appeal.   "Generally,
    communications made in the presence of third parties, whose
    presence is known to the [client], are not privileged from
    disclosure" because they are not deemed confidential (People v
    Harris, 57 NY2d 335, 343 [1982]; see also Baumann v Steingester,
    213 NY 328, 333 [1915]).   Similarly, a client waives the
    privilege if a communication is made in confidence but
    subsequently revealed to a third party (see People v Patrick, 182
    NY 131, 175 [1905]).   The rationale for these rules is to ensure
    that the privilege is "strictly confined within the narrowest
    possible limits consistent with the logic of its principle" (8
    - 8 -
    - 9 -                          No. 80
    John Henry Wigmore, Evidence § 2291 at 554 [McNaughton ed 1961]).
    A lack of confidentiality and subsequent disclosure also destroy
    the privilege as a matter of fairness: "when [the privilege
    holder's] conduct touches a certain point of disclosure, fairness
    requires that his privilege shall cease whether he intended that
    result or not" (id. § 2327 at 636).
    As with any rule, there are exceptions.     We have held,
    for example, that statements made to the agents or employees of
    the attorney or client, or through a hired interpreter, 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 (see People v Osorio, 75 NY2d 80,
    84 [1989]).   So, too, when one attorney represents multiple
    clients concerning a matter of common interest, any confidential
    communications exchanged among them are privileged against the
    outside world (see Wallace v Wallace, 216 NY 28, 35 [1915],
    citing Hurlburt v Hurlburt, 128 NY 420, 424 [1891]).
    B.   The Common Interest Exception
    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
    - 9 -
    - 10 -                         No. 80
    interest, the common interest exception1 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" (Teleglobe Communications Corp. v BCE, Inc., 493 F3d
    345, 364 [3d Cir 2007]).   The first reported case to recognize
    the exception permitted criminal attorneys to coordinate the
    strategies of their clients, who were under joint indictment for
    conspiracy to defraud an estate, and retain the privileged nature
    of their communications (see Chahoon v Commonwealth, 62 Va 822,
    839-840 [1871]).   The rationale for the exception was that the
    parties "had the same defen[s]e to make" and therefore "the
    counsel of each was in effect the counsel of all" (id. at 841-
    842).
    Courts eventually replaced this "joint defense"
    1
    The exception has come to be known by many names:
    "common interest arrangement," "common legal interest doctrine,"
    "joint litigant privilege," "pooled information privilege,"
    "allied lawyer doctrine" and "allied litigant privilege," among
    others. "The nomenclature is less important than a determination
    of the outer boundaries of the doctrine" (North River Ins. Co. v
    Columbia Cas. Co., 
    1995 WL 5792
    at *2 [SD NY 1995]). For
    purposes of this appeal, we use the phrase "common interest
    doctrine" or "common interest exception," to make clear that the
    doctrine is not an independent privilege but an exception to the
    general rule that communications shared with third parties are
    not privileged.
    - 10 -
    - 11 -                          No. 80
    doctrine, which applied to criminal codefendants, with a broader
    exception that also protected communications between parties to
    civil litigation.   In Schmitt v Emery (211 Minn 547 [1942]), a
    privileged document was exchanged among counsel for several
    codefendants in a civil action, in order to prepare objections to
    the document's admission into evidence.   The Minnesota Supreme
    Court held that "[w]here an attorney furnishes a copy of a
    document entrusted to him by his client to an attorney who is
    engaged in maintaining substantially the same cause on behalf of
    other parties in the same litigation," the communication is
    protected from disclosure by the attorney-client privilege
    because it was "made not for the purpose of allowing unlimited
    publication and use, but in confidence, for the limited and
    restricted purpose to assist in asserting their common claims"
    (id. at 554).   The Uniform Rules of Evidence adopted this
    formulation of the doctrine, protecting attorney-client
    communications "by the client or a representative of the client
    or the client's lawyer or a representative of the lawyer to a
    lawyer or a representative of a lawyer representing another party
    in a pending action and concerning a matter of common interest
    therein" (Uniform R. Evid. 502[b][3] [emphasis added]).2
    2
    "This seems to have been the common law rule" (24 Charles
    A. Wright & Kenneth W. Graham, Jr., Federal Practice & Procedure:
    Evidence § 5493 at 467 [1986]), and at least eleven states have
    statutorily restricted the common interest doctrine to
    communications made in furtherance of ongoing litigation (see
    Ark. R. Evid. 502[b][3]; Haw. R. Evid. 503[b][3]; Ky. R. Evid.
    - 11 -
    - 12 -                           No. 80
    Our Court first recognized the common interest doctrine
    in 1989 in People v Osorio (75 NY2d 80).   In that case, we
    considered whether a defendant who communicated with counsel in
    the presence of a separately represented codefendant in a pending
    criminal prosecution could prevent the codefendant from
    testifying as to what he heard.   The codefendant was at the time
    acting as an interpreter between the defendant and his attorney.
    Although we acknowledged that the attorney-client privilege
    would, ordinarily, protect communications between codefendants
    that are shared for the purpose of "mounting a common defense,"
    we ultimately held that it did not apply in that case because the
    defendant "was not planning a common defense" and therefore did
    not share a common legal interest with him (id. at 85).   For
    support, we relied on two federal decisions that applied the
    common interest doctrine to statements made between codefendants
    in furtherance of a joint trial strategy or defense: the court in
    United States v McPartlin held that such communications were
    privileged because they "were made in confidence to an attorney
    for a co-defendant for a common purpose related to both defenses"
    (595 F2d 1321, 1336 [7th Cir 1979]), and the court in Hyundee v
    United States applied the same reasoning to communications
    503[b][3]; Me. R. Evid. 502[b][3]; Miss. R. Evid. 502[b][3]; NH
    Evid. R. 502[b][3]; N.D. R. Evid. 502[b][3]; 12 Okla. Stat.
    § 2502[B][3]; S.D. R. Evid. § 19-19-502[a][3]; Tex. R. Evid.
    503[b][1][C]; Vt. R. Evid. 502[b][3]; but see D.R.E. 502[b][3]
    [permitting disclosure to an attorney or client "representing
    another in a matter of common interest"]).
    - 12 -
    - 13 -                           No. 80
    between the attorneys of persons who were "subject to possible
    indictment" (355 F2d 183, 185 [9th Cir 1965]).
    After Osorio, New York courts applied the common
    interest doctrine in criminal as well as civil matters, to
    communications of both coplaintiffs and codefendants, but always
    in the context of pending or reasonably anticipated litigation.
    Indeed, until the First Department's decision in this case, New
    York courts uniformly rejected efforts to expand the common
    interest doctrine to communications that do not concern pending
    or reasonably anticipated litigation (see e.g., Hyatt v State of
    Cal. Franchise Tax Bd., 105 AD3d 186 [2d Dept 2013]; Hudson Val.
    Mar., Inc. v Town of Cortlandt, 30 AD3d 377, 378 [2d Dept 2006];
    Yemini v Goldberg, 
    12 Misc. 3d 1141
    , 1143 [Sup Ct, Nassau County
    2006]; Aetna 
    Cas., 176 Misc. 2d at 612-613
    ; see also Allied Irish
    Banks, P.L.C. v Bank of Am., N.A., 252 FRD 163, 171 [SD NY 2008]
    [recognizing that New York limits the doctrine "to communications
    with respect to legal advice 'in pending or reasonably
    anticipated litigation'"]; 4-160 Bender's New York Evidence
    § 160.02[6][e][2015] [stating that the common interest doctrine
    in New York is limited "to communication between counsel and
    parties with respect to legal advice in pending or reasonably
    anticipated litigation in which the joint consulting parties have
    a common legal interest"]; Wright & Graham § 5493 n 67 [2015
    Supp] [observing that the doctrine does not apply in New York
    where clients did not fear litigation at the time the
    - 13 -
    - 14 -                         No. 80
    communication was made or disclosed]).3
    C.   The Present Appeal
    The question presently before us is whether to modify
    the existing requirement that shared communications be in
    furtherance of a common legal interest in pending or reasonably
    anticipated litigation in order to remain privileged from
    disclosure, by expanding the common interest doctrine to protect
    shared communications in furtherance of any common legal
    interest.   We adhere to the litigation requirement that has
    historically existed in New York.
    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
    3
    Other jurisdictions have embraced the same limitation
    through judicial decision (see e.g., In re Santa Fe Intl Corp.,
    272 F3d 705, 711 [5th Cir 2001] [holding that "there must be a
    palpable threat of litigation at the time of the communication,
    rather than a mere awareness that one's questionable conduct
    might some day result in litigation, before communications
    between one possible future co-defendant and another . . . could
    qualify for protection"]; O'Boyle v Borough of Longport, 218 NJ
    168, 193, 198-199 [2014]; Boyd v Comdata Network, Inc., 
    88 S.W.3d 203
    , 214-215 [Tenn App 2002]; Gallagher v Off. of the Attorney
    Gen., 141 Md App 644, 676-677 [Ct Special App 2001]; Hicks v
    Commonwealth of Va., 17 Va App 535, 538 [1994]; Visual Scene,
    Inc. v Pilkington Bros., Plc., 508 So2d 437, 440 [Fla Dist Ct App
    1987]).
    - 14 -
    - 15 -                         No. 80
    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" (Chahoon, 62 Va at 841-842).    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.   Bank of
    America contends that highly regulated financial institutions
    constantly face a threat of litigation and that the protection of
    their shared communications is necessary to facilitate better
    legal representation, ensure compliance with the law and avoid
    litigation.   But no evidence has been presented here that
    privileged communication-sharing outside the context of
    litigation is necessary to achieve those objectives.   There is no
    evidence, for example, that mergers, licensing agreements and
    other complex commercial transactions have not occurred in New
    York because of our State's litigation limitation on the common
    - 15 -
    - 16 -                           No. 80
    interest doctrine; nor is there evidence that corporate clients
    will cease complying with the law.    Rather, "when parties share
    attorney-client communication for planning purposes outside of
    the specter of anticipated litigation, such as when parties
    cooperate to strengthen or obtain patent protection . . . it is
    more likely that [they] would have shared information even absent
    the privilege" (Melanie B. Leslie, The Costs of Confidentiality
    and the Purpose of Privilege, 2000 Wis L Rev 31, 68 [2000]).
    The merger at the heart of this dispute provides the
    perfect example: Bank of America and Countrywide obtained
    regulatory approval and filed the requisite disclosures in
    anticipation of a closing merger, even when New York state courts
    had made clear that their joint communications would not remain
    privileged unless they were engaged in or anticipated 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.
    In short, we do not perceive a need to extend the
    common interest doctrine to communications made in the absence of
    - 16 -
    - 17 -                          No. 80
    pending or anticipated litigation, and any benefits that may
    attend such an expansion of the doctrine are outweighed by the
    substantial loss of relevant evidence, as well as the potential
    for abuse.   The difficulty of defining "common legal interests"
    outside the context of litigation could result in the loss of
    evidence of a wide range of communications between parties who
    assert common legal interests but who really have only non-legal
    or exclusively business interests to protect.   Even advocates of
    a more expansive approach admit that "in a nonlitigation setting
    the danger is greater that the underlying communication will be
    for a commercial purpose rather than for securing legal advice"
    (James M. Fischer, The Attorney-Client Privilege Meets the Common
    Interest Arrangement: Protecting Confidences While Exchanging
    Information for Mutual Gain, 16 Rev Litig 631, 642 [1997]).    At
    least one commentator has also observed that "[t]he greatest push
    to expand the common interest privilege comes from corporate
    attorneys representing multiple clients, often in an antitrust
    context," and that it is in precisely this context "that the
    potential for abuse is greatest" (Edna S. Epstein, The Attorney-
    Client Privilege and the Work-Product Doctrine 277 [5th ed
    2007]).
    Indeed, Ambac argues that the very communications Bank
    of America withheld from disclosure would have revealed that the
    merging entities structured their transaction to conceal
    Countrywide's fraudulent dealings and leave potential victims
    - 17 -
    - 18 -                         No. 80
    without recourse.   Defendants and amici respond that there is no
    evidence of actual abuse in this case or in jurisdictions that
    have done away with a litigation requirement, but the potential
    for abuse is sufficiently great, and the accompanying benefits so
    few, that expansion is not warranted.
    Bank of America's remaining counterarguments do not
    persuade us to the contrary.   First, it contends that we should
    not limit the common interest doctrine to pending or anticipated
    litigation when the attorney-client privilege from which the
    doctrine derives is not so limited.     While it is true that the
    attorney-client privilege is not tied to the contemplation of
    litigation, the common interest doctrine does not need to be co-
    extensive with the privilege because the doctrine itself is not
    an evidentiary privilege or an independent basis for the
    attorney-client privilege (see In re Megan-Racine Assocs, Inc.,
    
    189 B.R. 562
    , 573 n 8 [Bankr ND NY 1995] [observing that it is not
    necessary for the common interest doctrine to conform exactly
    with the purposes of the attorney-client privilege]).     Rather, it
    limits the circumstances under which attorneys and clients can
    disseminate their communications to third parties without waiving
    the privilege, which our courts have reasonably construed to
    extend no further than communications related to pending or
    reasonably anticipated litigation.4
    4
    We need not decide in this appeal what it means to share
    common legal interests in pending or anticipated litigation. We
    hold only that such litigation must be ongoing or reasonably
    - 18 -
    - 19 -                        No. 80
    Second, Bank of America argues that our holding will
    create an anomalous result: clients who retain separate attorneys
    like defendants did here cannot protect their shared
    communications absent pending litigation but the same
    communications made in the absence of litigation would be
    privileged if defendants had simply hired a single attorney to
    represent them in the merger.    In the joint client or co-client
    setting, however, the clients indisputably share a complete
    alignment of interests in order for the attorney, ethically, to
    represent both parties.   Accordingly, there is no question that
    the clients share a common identity and all joint communications
    will be in furtherance of that joint representation (see Grace M.
    Giesel, End the Experiment: The Attorney-Client Privilege Should
    Not Protect Communications in the Allied Lawyer Setting, 95 Marq
    L Rev 475, 535 [2011-2012]).    Not so when clients retain separate
    attorneys to represent them on a matter of common interest.    It
    is less likely that the positions of separately-represented
    clients will be aligned such that the attorney for one acts as
    the attorney for all (see Chahoon, 62 Va at 841-842), and the
    difficulty of determining whether separately-represented clients
    share a sufficiently common legal interest becomes even more
    obtuse outside the context of pending or anticipated litigation.
    Consequently, although a litigation limitation may not be
    anticipated, and the exchanged communication must relate to it,
    in order for the common interest exception to apply.
    - 19 -
    - 20 -                          No. 80
    necessary in a co-client setting where the fact of joint
    representation alone is often enough to establish a congruity of
    interests, it serves as a valuable safeguard against separately-
    represented parties who seek to shield exchanged communications
    from disclosure based on an alleged commonality of legal
    interests but who have only commercial or business interests to
    protect (see 
    Megan-Racine, 189 B.R. at 573
    [concluding that
    "although total identity of interest is not necessary, the
    parties asserting the privilege must have a common legal
    interest," which "exists where the parties asserting the
    privilege were co-parties to litigation or reasonably believed
    that they could be made a party to litigation"] [emphasis in
    original]).
    Finally, Bank of America urges us to follow the lead of
    the federal courts that have considered the question and extended
    the common interest exception to communications in furtherance of
    any common legal interest.   To be sure, the Restatement and some
    federal courts of appeals have eliminated the common law
    requirement that shared communications relate to pending or
    anticipated litigation (see Restatement [Third] of the Law
    Governing Lawyers § 76[1] [1997]; Teleglobe, 493 F3d at 364;
    United States v BDO Seidman, LLP, 492 F3d 806, 816 [7th Cir
    2007]; In re Regents of the Univ. of Calif., 101 F3d 1386, 1390-
    - 20 -
    - 21 -                           No. 80
    1391 [Fed Cir 1996]).5   Like Proposed Rule 503(b)(3) of the
    Federal Rules of Evidence -- which was proposed in 1972 but never
    adopted -- they allow "attorneys representing different clients
    with similar legal interests to share information without having
    to disclose it to others . . . in civil and criminal litigation,
    and even in purely transactional contexts" (Teleglobe, 493 F3d at
    364).    In their view, "[a]pplying the common interest doctrine to
    the full range of communications otherwise protected by the
    attorney-client privilege encourages parties with a shared legal
    interest to seek legal assistance in order to meet legal
    requirements and to plan their conduct accordingly" (BDO Seidman,
    492 F3d at 816 [internal quotations and citation omitted]).
    But this expansion of the doctrine has not been
    uniformly received (see nn 
    2,3, supra
    ), and one treatise has
    observed that the common interest exception in these
    jurisdictions "is spreading like crabgrass to areas the drafters
    of the Rejected Rule could have hardly imagined" (Wright & Graham
    § 5493 [2015 Supp]).
    We conclude that the policy reasons for keeping a
    litigation limitation on the common interest doctrine outweigh
    5
    Although the Second and Ninth Circuits have made clear
    that actual or ongoing litigation is not required, they do not
    appear to have expressly decided whether there must be a threat
    of litigation in order to invoke the exception (see Schaeffler v
    United States, -- F3d --, 
    2015 WL 6874979
    at *4-5 [2d Cir 2015],
    citing United States v Schwimmer, 892 F2d 237 [2d Cir 1989];
    United States v Zolin, 809 F2d 1411, 1417 [9th Cir 1987], affd in
    part and vacated in part on other grounds, 
    491 U.S. 554
    [1989]).
    - 21 -
    - 22 -                          No. 80
    any purported justification for doing away with it, and therefore
    maintain the narrow construction that New York courts have
    traditionally applied.6   Accordingly, the order of the Appellate
    Division should be reversed, with costs, the order of Supreme
    Court reinstated and the certified question answered in the
    negative.
    6
    The Legislature is free to consider the alternative
    arguments articulated by the dissent and to expand the common
    interest exception as other state legislatures have done (see
    e.g., D.R.E. 502[b]).
    - 22 -
    Ambac Assurance Corp., et al. v Countrywide Home Loans Inc.,
    et al.
    No. 80
    RIVERA, J.(dissenting):
    The purpose of the attorney-client privilege is to
    encourage candid and open communication between client and
    attorney to promote the public interest "in the observance of law
    and administration of justice" (Upjohn Co. v United States, 
    449 U.S. 383
    , 389 [1981]).   The assumption justifying this oldest of
    common law evidentiary privileges is that it "fosters the open
    dialogue between lawyer and client that is deemed essential to
    effective representation" (Spectrum Sys. Intern. Corp. v Chem.
    Bank, 78 NY2d 371, 377 [1991] [internal citations omitted]).
    Effective representation furthers the goal of compliance with the
    law, thus benefitting not only clients but society in general.
    Whether this privilege should extend to confidential
    communications between separately represented parties, in which
    they have a common legal interest in a transaction, not involving
    pending or reasonably anticipated litigation, is the question
    posed in this appeal, and one which I would answer in the
    affirmative under the circumstances presented here.   Given that
    the attorney-client privilege has no litigation requirement and
    the reality that clients often seek legal advice specifically to
    - 1 -
    - 2 -                         No. 80
    comply with legal and regulatory mandates and avoid litigation or
    liability, the privilege should apply to private client-attorney
    communications exchanged during the course of a transformative
    business enterprise, in which the parties commit to collaboration
    and exchange of client information to obtain legal advice aimed
    at compliance with transaction-related statutory and regulatory
    mandates.
    I.
    The attorney-client privilege recognized at common law
    and codified at Civil Practice Law and Rules § 4503 "protects
    confidential communications between a lawyer and client related
    to legal advice sought by the client" (In re Nassau County Grand
    Jury Subpoena Duces Tecum Dated June 24, 2003, 4 NY3d 665, 678
    [2005]; see CPLR 4503).    The privilege "encourage[s] full and
    frank communication between attorneys and their clients and
    thereby promote[s] broader public interests in the observance of
    law and administration of justice" (Upjohn 
    Co., 449 U.S. at 389
    ;
    Rossi v Blue Cross and Blue Shield of Greater New York, 73 NY2d
    588, 592 [1989]; Matter of Jacqueline F., 47 NY2d 215, 218
    [1979]).    The free flow of information promotes effective
    representation based on "sound legal advice or advocacy,"
    leading, optimally, to the salutary goal of lawfully compliant
    behavior (see Upjohn 
    Co., 449 U.S. at 389
    -390; Spectrum Sys.
    Intern. Corp., 78 NY2d at 381; United States v Schwimmer, 892 F2d
    - 2 -
    - 3 -                           No. 80
    237, 243 [2d Cir 1989]).    This goal justifies treatment of the
    privilege "as an exception to the general requirement that all
    persons give testimony upon facts within their personal knowledge
    inquired of in a court of law" (Jacqueline F., 47 NY2d at 219).
    Notably, the privilege "is not tied to the
    contemplation of litigation" (Spectrum Sys. Intern. Corp., 78
    NY2d at 380) because litigation may not be the motivating factor
    leading to a client's communication of private information.
    Rather, "[l]egal advice is often sought, and rendered, precisely
    to avoid litigation, or facilitate compliance with the law, or
    simply to guide a client's course of conduct" (id.).    All the
    more so in the corporate context, where corporate staff attorneys
    "may serve as company officers, with mixed
    business-legal responsibility; whether or not
    officers, their day-to-day involvement in
    their employers' affairs may blur the line
    between legal and nonlegal communications;
    and their advice may originate not in
    response to the client's consultation about a
    particular problem but with them, as part of
    an ongoing permanent relationship with the
    organization"
    (Rossi, 73 NY2d at 592-593).
    In determining "what is encompassed by the privilege,
    courts . . . must look to the common law" (Spectrum Sys. Intern.
    Corp., 78 NY2d at 377).    However, our inquiry considers the
    circumstances of each case, relevant general principles, and
    public policy informing the proper application of the privilege
    (Matter of Priest v Hennessy, 51 NY2d 62, 68-69 [1980]; Spectrum
    Sys. Intern. Corp., 78 NY2d at 380).    In our analysis, just as we
    - 3 -
    - 4 -                          No. 80
    are cautious not to extend the privilege beyond the bounds of
    necessity, we also carefully measure waivers of the privilege to
    protect the parties' reasonable expectations in the privacy of
    their communications (People v Osario, 75 NY2d 80, 84-85 [1989]).
    As the majority well details, third-party
    communications destroy the privilege (majority op., at 8).    This
    waiver rule is subject to limitations that promote communication
    and effective legal representation, as well as the parties
    reasonable expectations in confidentiality (Osario, 75 NY2d at
    84-85; see majority op., at 9).
    Those same concerns were present in People v Osario,
    when this Court recognized an exception to the waiver rule in the
    criminal context -- referred to as the "joint defense exception"
    -- by which a court treats as privileged any statements disclosed
    by one defendant in the presence of a codefendant, where the
    disclosure is for the purpose of mounting a common defense (75
    NY2d at 85).   The Court concluded that under those circumstances
    a defendant has an expectation of the continued confidentiality
    between attorney and defendant (id.).
    Not long thereafter New York courts extended the
    underlying rationale of Osario to civil cases (see Parisi v
    Leppard, 
    172 Misc. 2d 951
    , 956 [Sup Ct, New York County 1997];
    Aetna Cas. & Sur. Co. v Certain Underwriters at Lloyd's, London,
    
    176 Misc. 2d 605
    , 612-613 [Sup Ct, NY County 1998], affd 263 AD2d
    367 [1st Dept 1999], lv dismissed 94 NY2d 875 [2000]).   Those
    - 4 -
    - 5 -                           No. 80
    courts generally required pending or reasonably anticipated
    litigation in order to apply what was often termed a common
    interest privilege (see e.g. Hyatt v State of Cal. Franchise Tax
    Bd., 105 AD3d 186, 205 [2d Dept 2013]; Hudson Val. Mar., Inc. v
    Town of Cortlandt, 30 AD3d 377, 378 [2d Dept 2006]).
    However, it is worthy of note that the majority of
    federal courts that have addressed the issue, and a significant
    number of state jurisdictions, either through case law or by
    statute, have held that the privilege applies even if litigation
    is not pending or reasonably anticipated.1   Several legal
    commentators also support a broad application of the privilege.
    For example, the Restatement (Third) of the Law Governing Lawyers
    1
    See United States v Zolin, 809 F2d 1411, 1417 (9th Cir
    1987) ("Even where the non-party who is privy to the
    attorney-client communications has never been sued on the matter
    of common interest and faces no immediate liability, it can still
    be found to have a common interest with the party seeking to
    protect the communications."), affd in part, vacated in part on
    other grounds, 
    491 U.S. 554
    (1989); United States v BDO Seidman,
    LLP, 492 F3d 806, 816 (7th Cir 2007); In re Teleglobe
    Communications Corp., 493 F3d 345, 364 (3d Cir 2007); In re
    Regents of Univ. of California, 101 F3d 1386, 1390-1391 (Fed Cir
    1996); Schaeffler v United States, 806 F3d 34, 40 (2d Cir 2015);
    Hanover Ins. Co. v Rapo & Jepsen Ins. Servs., Inc., 449 Mass 609,
    616 (2007) (rejecting a litigation limitation on the common
    interest doctrine); S.F. Pac. Gold Corp. v United Nuclear Corp.,
    
    143 NM 215
    , 222 (NM Ct App 2007) ("A third party to whom
    privileged disclosures are made under the common interest
    doctrine may be a nonparty to any anticipated litigation and may
    be a legal entity distinct from the client who receives the legal
    advice"); see also D.R.E. 502 (b) (extending the attorney-client
    privilege to confidential communications made by the client to a
    lawyer "representing another in a matter of common interest").
    - 5 -
    - 6 -                          No. 80
    has adopted a rule that applies the attorney-client privilege to
    disclosures by clients with a common interest in litigated or
    nonlitigated matters (Restatement [Third] of the Law Governing
    Lawyers § 76 [2000]).   Similarly, Weinstein's on Evidence
    explains that the common interest doctrine "should apply not only
    if litigation is current or imminent but whenever the
    communication is made in order to facilitate the rendition of
    legal services to each of the clients involved in the conference"
    (3-503 Weinstein's Federal Evidence § 503.21 [2015]).   Indeed,
    many courts and commentators recognize the important interests
    served by the free flow of information between parties with a
    common legal interest, even without the threat of litigation (see
    BDO Seidman, LLP, 492 F3d at 816; In re Regents of Univ. of
    California, 101 F3d at 1390-1391).
    Given the purpose of the attorney-client privilege to
    encourage communication essential to the rendition of adequate
    legal advice, I agree with the majority that we should stamp our
    imprimatur on a "common interest doctrine" and its application in
    civil cases (majority op., at 1, 14).   I part company from the
    majority in its adoption of a pending or reasonably anticipated
    litigation requirement.   Such requirement does not derive from
    the common law roots of the attorney-client privilege, which
    lacks any litigation requirement.    Further, the rule adopted by
    the majority ignores the unique common legal interests of parties
    to a merger, and the statutory and regulatory compliance mandates
    - 6 -
    - 7 -                          No. 80
    as motivating factors for client exchanges in these types of
    commercial transactions.   The better rule is grounded not in the
    rote application of a litigation requirement, but in the legal
    dynamics of a modern corporate transactional practice.
    II.
    A.
    The legal demands of a highly-regulated financial
    business environment affect the management of information shared
    between client and attorney where separately represented parties
    work collaboratively towards a mutual goal of transforming
    existing business entities and relationships.   Confidences shared
    with attorneys under an appropriate common law privilege may
    further compliance with legal mandates.
    Where the government imposes regulatory and legal
    requirements that invariably, if not specifically, anticipate
    disclosure of information that is best developed by cooperation
    among clients, application of the attorney-client privilege
    strikes an appropriate balance between the benefits of
    disclosure--ensuring legal advice that advances the creation of
    accurate and compliant legally mandated information--and the
    costs to the truth-seeking process of our legal system from
    barring discovery of certain information.   The privilege should
    apply where disclosure of client communications facilitates the
    provision of legal services to advance a joint strategy developed
    - 7 -
    - 8 -                          No. 80
    to ensure compliance with regulatory or other legal mandates for
    the production of documents, and the framing of legal positions,
    necessitated by regulatory and legal obligations.   It should
    apply to nonlitigation transactional matters in which the
    separately represented parties share a common legal interest in
    the transfer of liability to a successor, and in furtherance of
    which the parties exchange information in the presence of a third
    party to facilitate legal advice on a common strategy for
    compliance with statutory and regulatory requirements,
    necessarily accomplished by production of joint representations
    essential to the transformative enterprise (see Anne King, The
    Common Interest Doctrine and Disclosures During Negotiations for
    Substantial Transactions, 74 U Chi L Rev 1411, 1417 [2007]).
    As relevant to this appeal, where parties to a merger
    agreement have a common legal interest in the successful
    completion of the merger, the privilege should apply to
    communications exchanged to comply with legal and regulatory
    requirements related to consummation of the merger.   This
    application of the privilege functions as a narrowly crafted
    exception to third-party waivers in the merger context, and is
    justified because signatories to a pre-merger agreement are bound
    with a common interest in completion of the merger.   In such
    case, the privilege would maximize the quality of disclosure
    necessary for accurate and competent representation leading to
    compliance with regulatory and legal mandates.   In other words,
    - 8 -
    - 9 -                          No. 80
    the privilege encourages parties committed to a merger to
    disclose confidential information to avoid submission of
    incomplete or noncompliant documents.
    B.
    The majority concludes that the common interest
    doctrine should apply solely to "codefendants, coplaintiffs or
    persons who reasonably anticipate that they will become
    colitigants" because for these actors, the threat of litigation
    "may chill the exchange of privileged information" necessary to
    "coordinate legal strategy" or "mount a common claim or defense"
    (majority op., at 14-15).   The majority's reasoning for adopting
    a litigation requirement is doctrinally and pragmatically
    unpersuasive.
    First, the common interest doctrine is grounded in the
    attorney-client privilege, which has no litigation requirement.
    Indeed, the majority's underlying premise--that the privilege is
    necessary to entice parties to share confidential information
    they would otherwise refuse to divulge--is true for any person
    who seeks legal advice without the threat of litigation.     Yet,
    this Court has rejected this limitation on the common law and
    statutory privilege (Spectrum Sys. Intern. Corp., 78 NY2d at
    380).   The majority responds that the common interest doctrine
    need not be coextensive with the attorney-client privilege
    because it is not an evidentiary privilege or an independent
    basis for the attorney-client privilege (majority op., at 18).
    - 9 -
    - 10 -                           No. 80
    Putting aside that the doctrinal status of the common interest
    doctrine is contested (see Katharine Traylor Schaffzin, An
    Uncertain Privilege: Why the Common Interest Doctrine Does Not
    Work and How Uniformity Can Fix It, 15 BU Pub Int LJ 49, 53
    [2005]), the fact is that we are called upon in this case not to
    create subclassifications for client-attorney communications, but
    to determine "what is encompassed by the [attorney-client]
    privilege" (Spectrum Sys. Intern. Corp., 78 NY2d at 377).
    Which leads to the second flaw in the majority's
    analysis, namely its limited view of the attorney-client
    privilege in a transaction such as a merger.   The majority
    rejects the application of the privilege in this case as
    unnecessary because parties to a business deal already have an
    incentive to share information that will close the transaction.
    However, the majority fails to identify any distinction between
    coparties or persons who reasonably anticipate litigation, and
    parties committed to the completion of a merger.   Both are
    incentivized to cooperate in order to secure a mutually
    beneficial outcome -- one a successful litigation outcome, the
    other a successful commercial outcome.   No rational basis exists
    to recognize the expectations for maintaining confidences in the
    former but not the latter.
    Furthermore, to the extent the majority attempts to set
    a bright-line rule, that the common interest doctrine should
    apply only where parties with a common legal interest share
    - 10 -
    - 11 -                             No. 80
    information in reasonable anticipation of litigation, it ignores
    the inherent vagueness in the term.     Indeed, whether the parties
    reasonably anticipated litigation inevitably requires judicial
    consideration of case-specific facts.
    Third, the majority's contention that application of
    the privilege might lead to misuse is purely speculative
    (majority op., at 17).   The majority notes the "potential for
    abuse" of the common interest doctrine in the context of
    corporate attorneys representing multiple clients (id.).
    However, there is certainly as much or more such potential in
    assertions of the common interest doctrine by those
    "anticipating" litigation and seeking to shield communications
    from a potential adversary.   In any event, the majority fails to
    explain why a party's attempted abuse of the privilege cannot be
    addressed through our legal system's existing methods for
    preventing and sanctioning obstruction of proper discovery (see
    e.g. CPLR 3126 [authorizing court to penalize for refusal to
    comply with order or to disclose]).
    There is also nothing to support the majority's
    contention that the privilege will sweep too broadly due to the
    difficulty of differentiating between common legal interests and
    strictly business interests (id.).     To the contrary, courts
    realize that while the privilege encourages and protects an open
    flow of communication, its scope extends only as necessary to
    achieve its common law and statutory purposes of compliance with
    - 11 -
    - 12 -                          No. 80
    the law and effectuating the orderly administration of justice
    (see Spectrum Sys. Intern. Corp., 78 NY2d at 380; Rossi, 73 NY2d
    at 592).   As a consequence the privilege is limited to matters of
    common legal interest, and does not protect from discovery
    communications exchanged to further commercial or personal
    interests in the business deal, or efforts to leverage
    information to enhance a client's financial position.    The fact
    is that courts are fully equipped to take on this challenge and
    it is what they regularly do in discovery: separate privileged
    communications from nonprivileged.     This is certainly the case in
    numerous federal and state courts that have adopted a
    nonlitigation version of the common interest doctrine without
    disastrous results,2 and there is no reason to presume New York
    Courts are any less capable of making these same determinations.
    Hence, in a corporate merger case, like the one before us, the
    common interest doctrine applies to communications made in the
    presence of third parties in order to obtain legal advice on the
    preparation of a joint proxy statement and federal securities
    registration, but would not shield from discovery client
    information shared during negotiations related solely to
    commercial interests.
    Significantly, the common interest doctrine is also
    2
    See Zolin, 809 F2d 1411 (9th Cir 1987); BDO Seidman, LLP,
    492 F3d 806 (7th Cir 2007); In re Teleglobe Communications
    Corp., 493 F3d 345 (3d Cir 2007); In re Regents of Univ. of
    California, 101 F3d 1386 (Fed Cir 1996).
    - 12 -
    - 13 -                          No. 80
    circumscribed by two requirements.      First, "the communication
    must satisfy the requirements of the attorney-client privilege"
    (Schwimmer, 892 F2d at 244 [holding that a "claim resting on the
    common interest rule requires" the same showing as "all claims of
    privilege arising out of the attorney-client relationship"]).
    Second, the communication must "further[] a common legal
    interest" -- rather than commercial interest -- of the relevant
    parties (Schaeffler v United States, 806 F3d 34, 40-41 [2d Cir
    2015]).
    The discovery process in the present case is
    instructive.    The challenged communications at issue consist of
    366 communications made during the six-month period between the
    signing of the pre-merger agreement and the merger.      After Bank
    of America withdrew the claim of privilege with respect to 28 of
    those communications, a special referee conducted a review to
    determine whether the remaining communications were properly
    withheld.    Those communications were distilled down to
    corresponding documents, and the special referee reviewed a total
    of 117 documents to determine whether (1) each qualified for
    protection under the attorney-client privilege; and (2) if so,
    whether that document was made for the purpose of furthering a
    legal interest or strategy common to Bank of America and
    Countrywide.    As a result, three of the documents were found not
    to qualify for the privilege because no legal advice was given or
    requested, and an additional three were determined to contain
    - 13 -
    - 14 -                          No. 80
    both privileged and non-privileged material, requiring
    redaction. The remaining 110 documents were deemed privileged
    under the common interest doctrine.    Clearly the process served
    to ensure that only this very limited universe of documents from
    a finite period in the transaction, fell squarely within the
    bounds of the common interest doctrine and were therefore
    properly withheld.
    As an additional layer of protection, the crime-fraud
    exception to the attorney-client privilege continues to permit
    discovery of communications "when the advice sought relates 'not
    to prior wrongdoing, but to future wrongdoing' " (BDO Seidman,
    LLP, 492 F3d at 818, quoting 
    Zolin, 491 U.S. at 562-563
    [internal
    quotation marks omitted]; see In re New York City Asbestos
    Litig., 109 AD3d 7, 10-11 [1st Dept 2013] [crime-fraud exception
    applies to communications made in furtherance of the fraud or
    crime]).
    III.
    Here, the privileged communications were made in
    furtherance of consummating the merger of defendant Countrywide
    Financial Corporation (Countrywide Financial) and its
    subsidiaries with defendant Bank of America Corporation's wholly-
    owned subsidiary, Red Oak Merger Corporation.   Defendant Bank of
    America is a public holding company regulated by the Bank Holding
    Company Act (12 USC §§ 1841 et seq.), and its subsidiary, Bank of
    - 14 -
    - 15 -                           No. 80
    America, N.A., is a federally chartered bank, governed by the
    National Bank Act (12 USC §§ 22 et seq.) and regulated by the
    Office of the Comptroller of the Currency and the Federal Reserve
    Board (see 12 USC § 1828).3   Countrywide Financial's subsidiary
    bank was regulated by the Office of Thrift Supervision (see 12
    USC §§ 1467 et seq. [Home Owners Loan Act]).4   Both Countrywide
    Financial and Bank of America were public reporting companies
    and, in anticipation of the merger, were required to satisfy US
    Securities and Exchange Commission (SEC) regulations,
    necessitating filing of a proxy statement to stock holders, the
    SEC's Form 8-K (i.e. to notify investors of the status of the
    target company's outstanding stock) and Form S-4 (i.e. to
    register newly issue shares acquired from the target company).
    The documents for which defendants assert the privilege
    thus fit neatly within the attorney-client privilege as refined
    by the common interest doctrine.   The defendants' attorneys
    prepared disclosures required by federal law, including SEC joint
    proxy statements and a Form S-4 registration statement.
    3
    The Holding Company Act also requires prior written
    approval from the Federal Reserve Board to acquire and to merge
    with another bank holding company (see 12 USC § 1842).
    4
    In 2011, Office of Thrift Supervision was transferred to
    the Office of the Comptroller of the Currency by the Dodd–Frank
    Wall Street Reform and Consumer Protection Act (Pub. L. 111–203,
    §§ 1046, 1047[b]; 124 U.S. Stat. 1376, 2017 [2010]), and has
    ceased to exist (see 12 USC § 5413).
    - 15 -
    - 16 -                          No. 80
    Countrywide was required to obtain the approval of its public
    shareholders by soliciting proxies, which in turn required it to
    file a proxy statement.   Bank of America Corporation registered
    the newly issued Bank of America shares it was using to pay for
    Countrywide's outstanding shares. Bank of America and Countrywide
    Financial also prepared preliminary and amended disclosures
    necessary for this joint proxy/registration statement filing.
    Bank of America and Countrywide attorneys provided
    legal advice regarding notice of the acquisition to Countrywide's
    subsidiary bank account holders via the filing of a proxy
    statement, and Bank of America and Countrywide consulted on
    providing legal advice regarding draft written testimony in
    preparation for and in response to Federal Reserve hearings.
    Additionally, Bank of America and Countrywide attorneys
    communicated regarding analyses of lending and servicing
    practices to ensure that immediately after the merger's closing,
    the new mortgage business would comply with all applicable
    mortgage lending and servicing regulations, including
    fair-lending laws, consumer-protection laws, foreign registration
    requirements, and conform to changes in the governing state and
    federal regulations.   Under these circumstances, the privilege
    should extend to defendants' pre-merger client communications,
    exchanged to secure legal advice in furtherance of defendants'
    common interest in the merger.
    - 16 -
    - 17 -                           No. 80
    IV.
    The attorney-client privilege is a long-standing
    exception to the general rule promoting discovery as part of the
    truth-finding process, and one tolerated because it serves the
    individual and societal goals of furthering the proper
    administration of justice by encouraging the free flow of
    information essential to legal representation.         It has never been
    limited to client communications involving pending or anticipated
    litigation.    Even so, the privilege is deemed waived where a
    client shares information with a third party, under circumstances
    that reflect the client's disinterest in the continued protection
    of the confidences.    However, where parties to a merger seek to
    comply with legal requirements and agree to treat as confidential
    any exchanges of information made for purposes of seeking legal
    and regulatory advice to complete the merger, the parties cannot
    be assumed to have vitiated the private nature of the
    information, or to harbor an unreasonable expectation of privacy
    in these exchanges.    Therefore, extension of the attorney-client
    privilege to these communications is fully in line with the goals
    of our common law and the needs of our complex system of
    commercial regulation.
    *   *   *     *   *   *   *   *     *      *   *   *   *   *   *   *   *
    Order of the Appellate Division, First Department, reversed, with
    costs, order of Supreme Court, New York County, reinstated and
    certified question answered in the negative. Opinion by Judge
    Pigott. Judges Abdus-Salaam, Stein and Fahey concur. Judge
    Rivera dissents in an opinion in which Judge Garcia concurs.
    Chief Judge DiFiore took no part.
    Decided June 9, 2016
    - 17 -
    

Document Info

Docket Number: 80

Judges: Pigott, Abdus-Salaam, Stein, Fahey, Rivera, Garcia, Difiore

Filed Date: 6/9/2016

Precedential Status: Precedential

Modified Date: 10/19/2024