Under New York law, the attorney-client privilege is generally waived if the privileged communication is made in the presence of, or is disclosed to, a third party. A significant exception to this general rule is the common interest doctrine, which holds that the disclosed communication remains privileged if the third party shares a common legal interest with the client and the communication is made in furtherance of that interest. Until recently, counsel and clients doing business in New York operated under the reasonable expectation that “a common legal interest” includes communications made in furtherance of non-litigation matters where the parties had a common legal interest.

The Court of Appeals’ recent decision in Ambac Assurance Corporation v. Countrywide Home Loans, Op. No. 80 at 2, 2016 WL 3188989 (N.Y. June 9, 2016) (Ambac II), however, has significantly eroded the protections provided by the common interest doctrine. In Ambac II, the Court of Appeals held that the doctrine applies only if the parties are engaged in, or have a reasonable anticipation of, litigation. In doing so, the Court of Appeals reversed the Appellate Division, First Department, which had sided with numerous federal courts in holding that the litigation element is not required in order for the doctrine to apply. As a result of Ambac II, clients and lawyers cooperating with counterparties on legal issues where litigation is neither pending nor reasonably anticipated should take care to avoid waiving privilege.

Background of Ambac Case

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