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I Think We’re Alone Now: Applying the Common-Interest Privilege When No Litigation is Pending

I Think We’re Alone Now: Applying the Common-Interest Privilege When No Litigation is Pending

Recently, the New York Appellate Division broadened that state’s common-interest privilege doctrine. In Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 124 A.D.3d 129 (N.Y. App. Div. 1st Dep’t 2014), the court removed the requirement that the communicators be co-parties in open litigation and allowed the privilege to be asserted in a merger/acquisition scenario. The court noted that “in today’s business environment, pending or reasonably anticipated litigation is not a necessary element of the common-interest privilege.” “[B]usiness entities often have important legal interests to protect even without the looming specter of litigation,” the court said. Id. at 130-31. New York state courts now agree with the “overwhelming majority” of federal courts to decide this question. Id. at 134.

In general, the presence of a third party (not the attorney or her agent and not the client or her agent) will preclude application of the attorney-client privilege. In other words, you can tell your lawyer your secrets, but don’t tell her on a subway or in a Subway®. The common-interest doctrine extends the application of the privilege to allow a third party to be present during the communications and to claim the privilege and refuse to reveal those communications when the two parties have a common legal interest.

In Mississippi (and some other jurisdictions), however, “the party asserting the privilege must have been, at the time of the communication, a co-party to pending litigation with the party to whom it bears a relationship of common interest.” United Investors Life Ins. Co. v. Nationwide Life Ins. Co., 233 F.R.D. 483, 488 (N.D. Miss. 2006) (emphasis added) (discussing Miss. R. Evid. 502).

A potential workaround in Mississippi for the common-interest privilege to apply outside of the litigation context, although counter-intuitive, is to abandon the attempt to invoke the common-interest doctrine altogether. The general attorney-client privilege is not limited to pending or anticipated litigation; it is only limited to “confidential communications made for the purpose of facilitating the rendition of professional legal services to the client.” Miss. R. Evid. 502(b) (emphasis added). Therefore, the two commonly-interested parties can invoke the general privilege protections outside the context of litigation if they alter their status as third parties and become co-clients for the limited purpose of exchanging confidential communications. The Mississippi Rules of Professional Conduct explicitly allow for limited scope of representation. See MRPC 1.2(c) (“A lawyer may limit the objectives or scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.”)

Note, however, that exception (d)(5) to Rule 502 may apply in this situation. If the communication between commonly interested co-clients is offered in an action between or among those co-clients, then the privilege does not apply. In practical terms, if the business deal later results in litigation, the communications between the co-clients and the commonly-retained attorney would no longer be privileged in that litigation.

John H. Dollarhide

high-dollar commercial litigation