Thomas F. Gleason

It has been 20 years since the Advisory Committee proposed a new CPLR 4502-a, to establish a privilege for parent-child confidential communications. The proposal had its origin in the Clinton-Lewinsky affair, which captivated national attention after Linda Tripp surreptitiously recorded her conversations with White House aide Monica Lewinsky.

Those conversations and other evidence apparently confirmed Ms. Lewinski’s relationship with the President, but Ms. Lewinski had signed an affidavit in the Paula Jones’ sexual harassment lawsuit against the President that had denied it. Not satisfied with the Tripp evidence, Independent Counsel Kenneth Starr subpoenaed Ms. Lewinski’s mother, and compelled her to testify about her conversations about the affair with her daughter.

This outraged many lawmakers, and federal as well as state laws were proposed to establish a broad parent-child privilege. Congress and most states ultimately declined to take up such proposals. There are a few New York cases that suggest something close to such a privilege for minor children (see, e.g., People v. Hilligas, 175 Misc. 2d 842; People v. Fitzgerald, 101 Misc.2d 712 (County Court, County of Westchester, 1979)), including a 1978 Fourth Department case that involved a 16-year-old suspect in a grand jury arson investigation (People v. Doe, 61 A.D.2d 426, 435 (4th Dept. 1978)). Doe may be the high water mark in New York for anything close to a parent-child privilege—no Court of Appeals decision or any statute goes so far in protecting these communications in New York.

The Court of Appeals has long recognized that testimonial privileges are to be restrictively applied (see People ex rel. Mooney v. Sherriff of N.Y. County, 269 N.Y. 291, 295 (“the tendency is not to extend the classes to whom the privilege from disclosure is granted but to restrict that privilege”), and this is consistent with the wide-open scope of disclosure under CPLR 3101, which generally allows full inquiry into any matter the may lead to evidence.

The U.S. Supreme Court also follows the “general rule disfavoring testimonial privileges” and required that any new privilege be supported by a “public good transcending the normally predominate principle of utilizing all rational means for ascertaining truth.” Jaffe v. Redmond, 518 U.S. 1, 9 (1996). However, the Supreme Court in Jaffe showed some flexibility in accepting a new federal psychotherapist privilege, and, in stating that there is an “evolutionary development of testimonial privileges,” explained that Federal Rule of Evidence 501 “did not freeze the law governing privileges at a particular point in history.” Justice Antonin Scalia was pointedly critical of this view in his dissent, citing the “traditional judicial preference for the truth” and “the fundamental principle that ‘the public … has a right to every man’s evidence.’” Citing Trammel v. United States, 445 U.S. 40, 50 (1980).

In New York, numerous privileges are provided in the first 10 sections of CPLR article 45, which governs evidence. The attorney-client privilege is found in CPLR 4503, but the statute does not address many questions that arise in its application, such as when the privilege is waived. However, it is well settled that this privilege will be waived by the client’s disclosure of the privileged communication to third parties, except if that third party is another defendant or their counsel in a criminal case, the communications may still be deemed privileged under the “joint defense” exception to waiver. Ambac Assurance v. Countrywide Home Loans, 27 N.Y.3d 616 (2016).

The Court of Appeals also made it clear in Ambac that the joint defense exception has been expanded to apply in civil litigation, in which counsel to separate parties transmit information in confidence, for the limited and restricted purpose of assisting their clients on common claims or defenses. Prior to Ambac, it was not clear whether the Court of Appeals would recognize the common interest exception to waiver in the non-litigation business context.

Is there the required “transcendent public good” in preventing a waiver of the privilege if parties to a business deal confidentially exchange their attorney-client advice on the particular subject of the transaction? In Ambac v. Countrywide, the majority said “no,” or at least if the answer is to be “yes,” then it must be supplied by the Legislature.

Ambac v. Countrywide was the result of the 2008 financial crisis and the massive defaults that occurred on mortgage backed securities. The plaintiff Ambac was an insurer guaranteeing payments on such securities issued by Countrywide, and alleged that Countrywide had fraudulently induced Ambac to guarantee shoddy investments. Bank of America was named as a defendant because that firm had merged with Countrywide in 2008, and allegedly became responsible for Countrywide’s fraud.

The privilege dispute in Ambac related to the extensive communications on legal issues between the merger parties after the signing of the merger plan but before the merger closed in July of 2008. Apparently suspecting that many of the documents Countrywide and Bank of America sought to withhold could be used to substantiate the alleged fraud, Ambac moved to compel disclosure.

Ambac argued that the voluntary sharing of the confidential material before the merger waived any attorney client privilege, and that there was no common interest exception applicable in New York courts if the documents had been shared outside of actual or anticipated litigation. Countrywide opposed disclosure, claiming that the common-interest exception to the waiver should be applied in the transaction context.

The majority opinion in Ambac provides an informative history of the attorney-client privilege, including the evolution of the “joint defense” doctrine. Acknowledging that some federal courts of appeal and the Restatement (Third) of the Law Governing Lawyers do recognize the common interest exception to the privilege for transactional and other business matters (even though litigation is not contemplated), the majority found such an expansion of the privilege too risky, leaving the wisdom of any such rule to be decided by the Legislature.

Judge Jenny Rivera’s dissent explained the policy reasons supporting the common interest attorney-client privilege between multiple parties in the non-litigation context, including “the legal demands of a highly regulated financial business environment” in which “separately represented parties work collaboratively towards a mutual goal of transforming existing business entities and relationships.”

In addition, Judge Rivera recognized the increasingly common imposition by the government of regulatory and legal requirements that may involve multiple parties, as well as legal advice that affects multiple parties. She would hold that “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.”

Even such a narrowly crafted exception to third-party waivers of privilege was unacceptable to the majority, who were concerned about “the difficulty of defining ‘common legal interests’ outside the context of litigation … .” Such conflicting and well-reasoned differences on an important policy obviously invite legislative attention.

A proposal has been advanced by the New York City Bar Association to legislatively overrule Ambac. The federal rules and some other states, such as Delaware, already allow for a common interest counsel privilege outside the context of pending or anticipated litigation, and it is thought by many that such a rule would make New York a more attractive forum for business and corporate litigation, perhaps eclipsing London as a forum of choice in international transactions. Such a rule may take on greater importance with electronic filing of court papers that are presumptively available to the public on line.

Others, particularly trial lawyers on the plaintiff side, are very concerned that the broader exception would have wide application in shielding impropriety. There clearly would be benefits from a prudent expansion of the common interest doctrine into the non-litigation context, but there are risks that are difficult to quantify and which may outweigh the benefits.

A corporate lawyer walks into a bar, says “I’ll have the usual.” The Barkeep asks, “Sure, and what’s on your privilege list today?” “Same as yesterday,” the lawyer responds: “EVERYTHING!” OK, perhaps such abuse would not be common, but seasoned counsel do worry. The City Bar proposal does not require a written agreement, and perhaps the proposal would have a greater chance of enactment if it were stricter.

This could be done by requiring a pre-disclosure written agreement for a reasonably finite period of time identifying: (1) with particularity the privileged information to be shared; (2) the common interest which supports the sharing of privileged attorney client confidences; (3) why the sharing of privileged content serves an objectively substantial interest that cannot be otherwise accomplished; and (4) the proposed disposition of such privileged communications at the end of the finite period in the event that the common interest ceases to exist.

Thomas F. Gleason is a member of Gleason, Dunn, Walsh & O’Shea in Albany and an adjunct professor at Albany Law School.