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NY Court of Appeals Requires Pending or Reasonably Anticipated Litigation To Apply the Common Interest Doctrine

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In Ambac Assurance Corp., et al. v. Countrywide Home Loans, Inc., et al., 2016 N.Y. LEXIS 1649 (N.Y. June 9, 2016), the NY Court of Appeals defined the scope of the common interest doctrine. That doctrine allows parties to share materials that are subject to the attorney-client privilege or work-product protection with third-parties with whom they share a common legal interest, without waiving the privilege or protection. It is frequently invoked to protect communications between an insured and its insurer, and between an insurer and its reinsurers. The Court of Appeals held that to avoid waiver of attorney-client privilege or work product protection, the common interest must arise from a pending or reasonably anticipated litigation. (It rejected a bank’s contention that a large financial institution constantly faces a threat of litigation.) The holding reversed the First Department’s two-year old decision in the same case, which applied the doctrine more broadly, finding a common interest in communications exchanged in the course of negotiating a merger. The Court of Appeals holding is applicable to state court actions. Federal courts have their own rules, and many apply the doctrine more liberally than the Court of Appeals did, extending it to communications in furtherance of any common legal interest. In the Second Circuit, an actual or ongoing litigation is not required, but the full parameters of the doctrine have not been expressly decided.