:: Legal Memorandum From Counsel Protected From Disclosure Despite Dissemination To Third Parties

 . . . the voluntary disclosure of confidential material to a third party “eliminates whatever privilege the communication may have originally possessed, whether because disclosure is viewed as an indication that confidentiality is no longer intended or as a waiver of the privilege.”

The common interest doctrine is a notable exception to this waiver rule. Generally speaking, it brings within the ambit of the attorney-client privilege confidential communications between a client and the client’s attorney that are divulged by the client to a third party if the client and the third party are engaged in some form of common enterprise.

In re Bank of N.Y. Mellon Corp. Forex Transactions Litig., 2014 U.S. Dist. LEXIS 159069 (S.D.N.Y. Nov. 10, 2014)

When a client disseminates a legal memorandum prepared by its attorneys to contractual partners relating to ERISA compliance responsibilities, is that memorandum protected by privilege in subsequent litigation by third parties?  That was the issue at bar in this case.

The Facts

On June 10, 2009, the bank’s outside legal counsel sent the bank a memorandum pertaining to compliance with ERISA.  A bank employee sent the memorandum to representatives of four of the bank’s pension plan’s investment management companies. He asked the recipients to review the memorandum, to confirm that their companies could comply with the advice therein and stated “that compliance with this memo is your responsibility . . .”

In a subsequent ERISA case, certain bank customers alleged that the bank was liable for breaches of fiduciary duties , among other things. The Department of Justice and several other groups of private plaintiffs also sued the bank for civil penalties or alleged damages stemming from its foreign exchange practices.

During the course of the litigation the memorandum aforementioned became the subject of a discovery dispute.

Issue

The nub of the dispute is whether the memorandum was protected by the attorney-client privilege or the work product doctrine, notwithstanding that dissemination, by virtue of the common interest doctrine.

The Arguments

The bank argued that the  memorandum was “protected from disclosure by the attorney-client privilege and work product doctrine” and that dissemination did not waive the privilege.

Plaintiffs, on the other hand, asserted (1) that the Bank forfeited the protection of the attorney-client privilege when it circulated the memorandum to third parties with whom it shared no common legal strategy and (2) that the Groom Memo is not work product because there is no evidence that it was prepared “in connection with active or contemplated litigation.”

Scope of the Common Interest Doctrine

The Court noted that “[t]he weight of the rather limited authority on this issue suggests that the common interest doctrine is narrow — that it shields from discovery confidential attorney-client communications voluntarily disclosed to a third party only if that third party shares with the disclosing party some identifiable and concrete legal interest.”

A common commercial interest alone is insufficient to invoke the doctrine:

Under this formulation of the doctrine, a common commercial interest is insufficient to trigger its protections.  So, too, is a shared goal or “concerns about potential litigation.” In fact, a party seeking the protection of the common interest doctrine in a court that adheres to what appears to be the majority view of that doctrine must show that it developed with the relevant third party an agreement, formal or informal, “embodying a cooperative  and common enterprise towards an identical legal strategy.”

Policy Considerations

The Court based its holding on a consideration of whether application of the common interest doctrine on these facts would serve the policies that underlie the attorney-client privilege better than a different conclusion.

On the one hand, extension of the common interest doctrine here would do nothing to protect the ability of the Bank to engage in full and candid communication with its attorneys about the subject in question. That communication took place when the Bank received the [memorandum] in the first instance.

On the other hand, we live in a very complex society. The Bank and its pension plans are obliged to comply with ERISA, a very complicated statute, and to do so in the context of a complicated investment world. The division of functions that characterizes every sector of our economy is reflected by the Bank’s delegation of at least some investment responsibilities to the investment managers. And society in general has an important interest in ensuring that those involved in such heavily regulated and complicated activities act in the fullest possible knowledge of the legal implications of what they do.

Based on the latter reasoning the Court held that the memorandum,”aimed as it was at securing compliance with the requirements of ERISA, was protected by the common interest doctrine and the attorney-client privilege.”

Note:  The Court found support for the policy behind its holding in the Upjohn Co. v. United States,449 U.S. 383 (1981) ( rejecting the so-called “control group” test as defining the outer limits of the attorney-client privilege in the corporate context) where the Court stated:

“The narrow scope given the attorney-client privilege by the court below . . . threatens to limit the valuable efforts of corporate counsel to ensure their client’s compliance with the law. In light of the vast and complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most individuals, ‘constantly go to lawyers to find out how to obey the law,’ particularly since compliance with the law in this area is hardly an instinctive matter.”

Additional Authorities – Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146, 1172 (D.S.C. 1974) (“A community of interest exists among different persons or separate corporations where they have an identical legal interest with respect to the subject matter of a communication between an attorney and a client concerning legal advice.”). (“The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial.”); see also, e.g., Fox News Network, 739 F. Supp. 2d at 563 (“The interest must be a common legal interest, not merely a common commercial interest.”); Bank of Am., N.A. v. Terra Nova Ins. Co., 211 F. Supp. 2d 493, 497 (S.D.N.Y. 2002) (“The mere fact that the parties were working together to achieve a commercial goal cannot by itself result in an identity of interest between the parties.”).

Fiduciary Exception – As a general rule, the attorney-client privilege does not apply when an attorney advises a plan fiduciary about the administration of an employee benefit plan.  An argument based on this exception was not before the court but I think it is one worth considering.  For more discussion on that topic, see :: Fiduciary Exception To Attorney Client Privilege Explained.