A pillar of the attorney-client privilege is “confidentiality,” namely, the communication between the client and attorney was made confidentially and the communication remained confidential.1 As a general rule, any disclosure of the confidential communication to a third party outside the attorney-client relationship results in a waiver of the privilege because a voluntary disclosure is inconsistent with confidentiality.2 In a recent decision that has caught the attention of the mergers and acquisitions bar,3 the First Department in Ambac Assurance v. Countrywide, 2014 Slip Op. 08510 (Dec. 4, 2014) recognized an exception to that disclosure/waiver rule, holding under New York’s “common interest” rule an exchange of privileged information made among merging entities and their attorneys prior to closing does not destroy the confidentiality status of the exchanged information.

Ambac merits attention because it potentially permits a wide range of corporate documents to be disclosed without a loss of their privileged status. In that regard, its significance extends beyond the M&A bar and has implications for transactional attorneys generally as well as litigators. Ambac is also notable because it rejects the contrary view of the Second Department in Hudson Val. Mar. v. Town of Cortlandt, 30 A.D.3d 377 (2006). As a result, review by the Court of Appeals is appropriate,4 and due to the presence of conflicting authorities with their competing policy considerations, it is far from certain the court will affirm Ambac. The decision is worthy of discussion.

‘Ambac’: Facts and Rationale

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