While a fact-based investigation seeks to determine whether public interest privilege applies in a particular situation, there are several factors that make it more likely that a court will determine that there is a common legal interest. The second circuit disagreed. Although the refinancing and restructuring had both a commercial and fiscal component, the court found that the consortium and the Schaeffler Group had a common interest in achieving a specific legal outcome – preferential tax treatment for the refinancing and restructuring of the Schaeffler Group. Without that advantageous tax treatment, the Schaeffler Group would have defaulted on the consortium`s loan, which would have had serious negative financial consequences for the consortium. “It is the interest in avoiding losses that has created a common legal interest.” Id. at *7. This distinction between legal and management consulting touches on the privilege of the common good and was at the heart of Schaeffler`s decision. Although solicitor-client privilege is usually waived when communications are voluntarily given to others outside the relationship of privilege, privilege is not waived when the disclosure is to a person with a common legal interest. Id. at *4. The doctrine of common legal interest “serves to protect the confidentiality of communications transmitted from one party to counsel for another party where a joint defense effort or strategy has been decided and implemented by the parties and their respective counsel.” See United States v. Schwimmer, 892 F.2d 237, 243 (2d Cir. 1989).
The doctrine protects communications that “take place as part of an ongoing joint venture and are intended to promote the business.” Schaeffler Holdings, LLP, 2015 WL 6874979, at *5. (cited in Schwimmer, 892 F.2d, p. 243). Schaeffler`s decisive question was “whether the common interest of the consortium with [the Schaeffler Group] was of a sufficient legal nature to prevent a waiver by sharing these communications.” Id. at *5. The District Court ruled that the Schaeffler Group waived its solicitor-client privilege when it knowingly shared Ernst & Young`s note with the consortium because only the consortium`s business interests were at stake, but not its legal interests. In other words, the consortium could not have a “common legal interest” with the Schaeffler Group. In addition, if a non-party`s interest is of a commercial nature, the lien holder must prove that the non-party`s business interest is affected by a legal outcome and probably also demonstrate that the commercial interest is important. For example, proving the non-party`s involvement in the business interest in the legal strategy may show that it had an interest in the legal issue. The facts which the Court found to be important in the Schaeffler case provide guidance: (1) The consortium`s lawyer cooperated with the Schaeffler Group and advised it to restructure and refinance and to have the necessary access to confidential information, including tax advice, that the Schaeffler Group had received from Ernst & Young; (2) The parties exchanged information on the basis of a confidentiality agreement, which the court cited as evidence that the parties intended to keep their communications confidential. Id.
at *6; and (3) the Schaeffler Group has agreed with the consortium that it cannot act unilaterally during the IRS audit in certain circumstances. Id. In 59 P. 4th LLC vs. A-Top Ins. Brokerage, Inc., 2017 N.Y. Slip. Op. 30050[U] (Sup. Ct., N.Y. County, 10. January 2017), owner of a residential development project, filed a lawsuit against an insurance broker, claiming that the broker had distorted the extent of work the general contractor could do with his current insurance.
In addition, the owner obtained an unconditional assignment of any claim by the general contractor against the broker in connection with the acquisition of insurance. After the assignment and during the litigation, the plaintiff owner and the general contractor (not a party) entered into a “common interest agreement” before entering into a series of discussions. This agreement provided that certain communications between the owner and the general contractor were to be privileged and confidential. When the broker`s lawyer requested the presentation of these communications, the owner refused to submit them, invoking the doctrine of the common interest. The broker then continued to force. Despite the frequent use of agreements of common interest, there are limitations that can completely affect the privilege and make the communication unprotected and detectable for the other party. In applying the stake to Ambac, a New York County Supreme Court justice recently ruled that the doctrine of the common interest does not apply to communications between attorneys where one party has assigned claims to the other party. Given the relevance of these facts in Schaeffler, companies wishing to establish a common legal interest in a result or a strong financial interest in a legal outcome should consider documenting their interests at the same time. This can be done through a formal common defence agreement or a confidentiality agreement recognising the common interest.
In the absence of a formal agreement, the parties should consider indicating in their communications that they are shared within the framework of a common interest. Although the mere conclusion that there is a common legal interest does not justify that interest, it may constitute evidence of the intention of the parties that a court will later find convincing. Even without documentation, it is important that business partners act in a manner consistent with a common legal interest, for example. B by treating the information confidentially, except between them. It is a very common practice for lawyers for co-defendants or co-applicants to enter into agreements that protect their communications. Agreements are declarations of intent that communication is protected by the “doctrine of the common interest,” which extends solicitor-client privilege to conversations with parties who have a common interest. According to legal literature, solicitor-client privilege is not waived when such communications take place between parties who share a common legal interest. Accordingly, the Court held that the disclosure of Ernst & Young`s note in relation to the legal issues at stake in the refinancing and restructuring does not constitute a waiver of solicitor-client privilege. In summary, the Court stated: “[a] the financial interest of a party, however large, does not prevent a court from finding a common legal interest with another party where the legal aspects materially affect the financial interests.” Id. at *7. In granting the broker`s request, the court confirmed the limited applicability of the doctrine of the common interest as set out by the Court of Appeal in Ambac. The court held that, by definition, the general contractor could not become a co-plaintiff in the action, since the assignment had completely deprived the general contractor of any interest in the outcome of the dispute.
Therefore, any oral and written communication between the owner and the general contractor was considered unprivileged and subject to disclosure to the other party. In Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 NY3d 616 (2016), the New York Court of Appeals expressly limited the application of the common interest doctrine to “co-defendants, co-plaintiffs, or persons who reasonably believe they will become comrades-in-arms.” In doing so, the Court of Appeal clarified that the policy underlying the doctrine was to allow two or more parties to coordinate a joint prosecution or defence without fear that such efforts would later be disclosed. According to the stakes in Ambac and 59 S. 4th LLC, any attorney considering entering into a common interest agreement should take into account that these agreements are not automatically respected. Instead, prudent practitioners must confirm whether their situation meets the requirements set out in Ambac above, or they too may consider their private communications to be unprotected. [1] 26 U.S.C§ 7525(a)(1) provides that “the common law protection of confidentiality that applies to communications between a taxpayer and a lawyer also applies to communications between a taxpayer and a tax professional who is a government-licensed tax professional to the extent that the communication would be considered privileged communication if it were between a taxpayer and a lawyer.” This “tax advisor privilege” is therefore essentially consistent with the lawyer`s privilege, both in scope and in its waiver.
Schaeffler Holding, LLP, 2015 WL 6874979, at n. . . .