The attorney-client privilege, as codified in CPLR 4503, “fosters the open dialogue between lawyer and client that is deemed essential to the effective representation.”1 However, the privilege is not without its costs, namely an “obstacle to the truth-finding process.”2 As stated by then Judge Bernard Sheintag over 80 years ago: “[T]he exercise of the privilege may at times result in concealing the truth and in allowing the guilty to escape. That is an evil which…is considered to be outweighed by the benefit which results to the administration of justice generally.”3 With this concern in mind, New York courts have historically emphasized that the privilege and its claimed protection “must be narrowly construed.”4 Expressed differently, the applicability of the privilege will be limited to circumstances that are necessary to achieve its purpose.5
In June, the Court of Appeals announced a decision that addressed the privilege with this constrained approach in mind. It held in Ambac Assurance Corp. v. Countrywide Home Loans, 2016 N.Y. Slip Op. 04439 (June 9, 2016), a 4-2 decision, that the common interest doctrine, which allows separately represented parties with common legal interests to share privileged information with each other and their respective attorneys without a loss of the privilege,6 applies only when the communications relate to pending or anticipated litigation. In so holding, the court rejected an effort to have the doctrine apply in a purely transactional setting as it perceived no demonstrated need for such an extension because transactional parties and their attorneys already have sufficient incentive to share information to close the transaction.
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