Commercial Litigation and Arbitration

At-Issue Waiver of Attorney-Client Privilege under Federal and New York Law

From Leviton Mfg. Co. v Greenberg Traurig LLP, 2010 U.S. Dist. LEXIS 128849 (S.D.N.Y. Dec. 6, 2010):

Under Second Circuit law, waiver of attorney-client privilege may occur,

when a client testifies concerning portions of the attorney-client communication, . . . when a client places the attorney-client relationship directly at issue, . . . and when a client asserts reliance on an attorney's advice as an element of a claim or defense.

In re County of Erie, 546 F.3d 222, 228 (2d Cir. 2008) (quoting Sedco Int'l S.A. v. Cory, 683 F.2d 1201, 1206 (8th Cir. 1982)). Courts have recognized that a party need not explicitly rely upon advice of counsel to implicate privileged communications. Instead, advice of counsel may be placed in issue where, for example, a party's state of mind, such as his good faith belief in the lawfulness of his conduct, is relied upon in support of a claim of defense. Because legal advice that a party received may well demonstrate the falsity of its claim of good faith belief, waiver in these instances arises as a matter of fairness, that is, it would be unfair to allow a party to "use[] an assertion of fact to influence the decisionmaker while denying its adversary access to privileged material potentially capable of rebutting the assertion." John Doe Co. v. United States, 350 F.3d 299, 306 (2d Cir. 2003); accord County of Erie, 546 F.3d at 229; see also Bilzerian, 926 F.2d at 1292; von Bulow, 828 F.2d at 103; Am. S.S. Owners Mut. Prot. and Indem. Ass'n v. Alcoa S.S. Co., 232 F.R.D. 191, 199 (S.D.N.Y. 2005).

As the Second Circuit has cautioned, however, determinations of fairness must be decided on a case-by-case basis, in the specific context in which the privilege has been asserted, rather than on the basis of generalizations. See John Doe, 350 F.3d at 302. Moreover, in the Erie decision, the Second Circuit reined in what it perceived to be an overbroad invocation of the fairness doctrine, based on principles set forth in Hearn v. Rhay, 68 F.R.D. 574 (E.D. Wash. 1975). ***

In Erie, the Second Circuit concluded that simply because privileged information is relevant to a claim or defense in the case does not give rise to an implied waiver; rather, to forfeit privilege, "the party must rely on privileged advice from his counsel to make his claim or defense." Erie, 546 F.3d at 229. The court declined, however, to specify what degree of reliance is required.

The New York Court of Appeals has adopted the Second Circuit's view that "to what extent waiver has occurred is inherently factual and turns on case-by-case considerations of 'fairness'." People v. Kozlowski, 11 N.Y.3d 222, 246, 869 N.Y.S.2d 848, 863 (2008) (citing John Doe Co. v. United States, 350 F.3d 299, 302 (2d Cir. 2003)) (quoting In re Grand Jury Proceedings, 291 F.3d at 183). And, New York courts have defined "at issue" waiver as occurring

where a party affirmatively places the subject matter of its own privileged communication at issue in litigation, so that invasion of the privilege is required to determine the validity of a claim or defense of the party asserting the privilege, and application of the privilege would deprive the adversary of vital information.

Deutsche Bank Trust Co. of Ams. v. Tri-Link Inv. Trust, 43 A.D.3d 56, 63, 837 N.Y.S.2d 15, 23 (1st Dep't 2007); accord Nomura Asset Capital Corp. v. Cadwalader, Wickersham & Taft LLP, 62 A.D. 3d 581, 582, 880 N.Y.S.2d 617, 619 (1st Dep't 2009); IMP Indus., Inc. v. Anderson Kill & Olick, P.C., 192 Misc. 2d 605, 609, 746 N.Y.S.2d 572, 575 (S. Ct. N.Y. Cty. 2002); see also Chin, 2008 WL 2073934, at *5.

Like the Second Circuit, New York courts will not find an at issue waiver merely because privileged information is relevant to the issues being litigated; "[r]ather, at issue waiver occurs when the party has asserted a claim or defense that he intends to prove by use of the privileged materials," Deutsche Bank, 43 A.D.3d at 23, 837 N.Y.S.2d at 64 (internal quotation marks omitted; accord Veras Inv. Partners, LLC v. Akin Gump Strauss Hauer & Feld LLP, 52 A.D.3d 370, 374, 860 N.Y.S.2d 78, 82 (1st Dep't 2008), or, where rather than being merely relevant, "the privileged documents are indispensable to a party's claims or defenses." Chin, 2008 WL 2073934, at *5; Carl v. Cohen, 23 Misc. 3d 1110(A), 886 N.Y.S.2d 66 (Table), 2009 WL 997517, at *3 (S. Ct. N.Y. Cty. 2009). For example, where a claim of malpractice is premised upon reliance on the erroneous advice of predecessor counsel, under both New York and federal law, the legal advice received from any other counsel on the same issue is placed at issue. See, e.g., Goldberg v. Hirschberg, 10 Misc. 3d 292, 297-98, 806 N.Y.S.2d 333, 337 (S. Ct. N.Y. Cty. 2005) (citing to the "remarkable similarity" to Bank Brussels Lambert v. Fiddler, Gonzalez & Rodriguez, No. 96 Civ. 7233 (LMM) (RLE), 2003 WL 21277139 (S.D.N.Y. June 2, 2003), aff'd, 2005 WL 756859 (S.D.N.Y. April 1, 2005), for the proposition that "because plaintiff was claiming that it relied on defendant's advice on a certain issue to its detriment, the legal advice it received from any other lawyers on that issue related to the reasonableness of plaintiff's reliance and was not subject to the attorney-client privilege").

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