Court Holds Common Interest Agreement Covers Privileged Documents Predating the Litigation

• Posted on: Sep 19 2018

Last month, this Blog examined the common interest exception to the attorney-client privilege. (Here.)  As discussed in that post, the presence of a third party will not destroy a claim of privilege where two or more clients separately retain counsel to advise them on matters of common legal interest. In New York, the “common interest” exception will apply to such communications when they are shared in connection with “pending or anticipated litigation.” Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616, 628 (2016).

What if, however, the communications at issue predate the litigation or were made when litigation was not anticipated?  Does the common interest exception apply? In PMC Aviation 2012-1 LLC v. Jet Midwest Group LLC, 2018 N.Y. Slip Op. 32142(U) (Sup. Ct., N.Y. County Aug. 30, 2018) (here), Justice Jennifer G. Schecter of the Supreme Court, New York County, Commercial Division, answered the question in the affirmative, holding that the common interest exception protects the exchange of privileged documents created before the common interest relationship existed.

PMC Aviation arose from a discovery dispute over the assertion of the attorney-client privilege. The defendants moved to compel the production of documents exchanged by one of the plaintiffs, Amur Finance IV LLC (“Amur”), through its then-in-house counsel, Elliott Klass, with PMC Aviation 2012-1 LLC (the “Company”). The defendants argued that Amur’s disclosure of the documents to the Company – which is represented by independent counsel in the action – constituted a waiver of the attorney-client privilege. Amur countered, arguing that it shared the documents with the Company’s counsel during the case to further their joint legal interest against the defendants and, therefore, no waiver occurred.

The Court agreed with Amur.

The Court noted that “Amur shared the subject documents with the Company during this litigation while united in interest against the [defendants].” Slip op. at 3 (orig’l emphasis). The “wrinkle”, however, had to do with whether the communications, which predated the pending litigation, were made when litigation was anticipated. Id. Noting that the motion did not involve the “ordinary situation in which the common interest exception is invoked,” the Court nonetheless held that the common interest exception applied. Id. In that regard, the Court explained that “it makes sense that co-litigants in an active litigation who share a common interest should be able to share their own prelitigation privileged communications if that disclosure furthers their common interest in the litigation without any fear of waiver.” Id. at 3-4.

Takeaway

As this Blog previously noted, it is not uncommon for co-litigants to enter into agreements that shield their privileged communications from adverse parties. Under the common interest doctrine, the attorney-client privilege is not waived when such communications are made between litigants (or parties who reasonably anticipate they will be litigants) sharing a common legal interest.

Although PMC Aviation involved an unusual situation – the exchange of privileged documents predating the litigation – it nonetheless fit within the contours of the exception.  As the Court emphasized, the documents at issue were “share[d] … during this litigation while [the parties were] united in interest….” Slip op. at 3 (orig’l emphasis). Therefore, despite the uniqueness of the circumstance, it made sense to shield privileged, pre-litigation communications by co-litigants in an active litigation who share a common interest. This practical application of Ambac Assurance comports with the rationale of the exception – to limit the exception to “situations where the benefit and the necessity of shared communications are at their highest, and the potential for misuse is minimal.” 27 N.Y.3d at 628.  And, as the Court observed, this approach was not contradicted by the defendants in PMC Aviation. Slip op. at 4 (noting that “[t]he JMG Parties have not cited any authority to the contrary.”).

Tagged with: Attorney-Client Privilege, Business Litigation, Commercial Litigation, Common Interest Agreement, Common Legal Interest Exception, Joint Defense Agreement