Lawyers who prudently seek confidential legal advice from their firm’s general counsel regarding potential disputes with a firm client often assume that their communications will be protected from discovery by the attorney-client privilege. But the Commercial Division in Manhattan last month held that these in-house counsel consultations would be fair game for discovery if a firm’s client sues for malpractice. In Stock v. Schnader Harrison Segal & Lewis, Index No. 651250/2013—in a decision of apparent first impression in New York state—the court applied what is sometimes referred to as a “fiduciary exception” to the attorney-client privilege to permit a former client to take discovery relating to otherwise confidential internal communications between a lawyer and his firm’s general counsel. Interim Order dated Dec. 5, 2014 (Slip Op). The decision breaks with a nationwide trend among state courts that largely uphold the privilege in similar circumstances, and instead echoes the rationale of many federal courts that have declined to do so.

In Stock v. Schnader Harrison Segal & Lewis, Keith Stock claimed that he retained the Schnader firm when he needed legal advice in connection with the termination of his employment. According to Stock, Christine Carty, a Schnader attorney, failed to advise him that his departure would accelerate the expiration of stock options that his employer had issued to him. When the options expired, Schnader advised Stock to file an arbitration claim against his former employer and the options plan administrator; Schnader represented Stock in that arbitral proceeding.

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