The common interest privilege is expanding, and corporations and corporate officials should take note. In many instances they can, and likely should, use the privilege to protect their confidential documents and communications from future discovery requests. A recent case in New York hammered that point home. In Ambac Assurance Corp., et al. v. Countrywide Home Loans Inc., et al. ( Dec. 4, 2014), the New York Supreme Court Appellate Division, First Department, agreed with the predominant view of the federal courts, as well as courts in California and Delaware, that the common interest privilege does not require that the advice at issue be given in anticipation of litigation.

The common interest privilege is rooted in the attorney-client privilege. The difference is that the presence of a third party destroys the attorney-client privilege. In such circumstances, the common interest privilege can be used to continue to protect communications with third parties. This article examines the potential application of the recent New York ruling to situations in which both corporations and individual corporate officials have an interest in protecting privileged documents, particularly during the negotiation of a transaction. By using the common interest privilege, corporations and corporate officials can avoid potentially complex future disputes regarding which party maintains the attorney-client privilege following a transaction.

It is settled that the purpose of the attorney-client privilege “is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” Upjohn Co. v. United States (1981). Whether state or federal law will apply, and which state's law, to questions of attorney-client privilege depends upon a choice-of-law analysis. See, e.g., Fitzpatrick v. American Intern. Group, Inc. (S.D.N.Y. 2010). Despite the presence of a third party at a communication between attorney and client, Ambac said that the common interest privilege protects such communications if the communication is “for the purpose of furthering a nearly identical legal interest shared by the client and the third party.” As the First Department explained in its ruling, in today's business environment, businesses often have important legal interests to protect even without knowingly facing the prospect of litigation.