New York Law Review

Tag: Attorney-Client Privilege

  • Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 17 (2016): Common Interest Doctrine and the Litigation Requirement

    <strong><em>Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 17 (2016)</em></strong></p>

    <p class="key-principle">The common interest doctrine, which protects attorney-client communications shared with a third party, applies only if the communication is in furtherance of a common legal interest in pending or reasonably anticipated litigation.</p>

    <p><strong>Summary</strong></p>
    <p>In a dispute over attorney-client privilege in a merger context, the New York Court of Appeals held that the common interest doctrine requires a reasonable anticipation of litigation. The case involved a monoline insurer, Ambac, suing Countrywide (and later Bank of America after its merger with Countrywide) over mortgage-backed securities. Ambac sought discovery of communications between Bank of America and Countrywide before the merger closed. Bank of America claimed attorney-client privilege, arguing the communications related to common legal issues in the merger. The court, reversing the Appellate Division, found that for the common interest doctrine to apply, the shared legal interest must relate to pending or anticipated litigation, not just the transactional aspects of a merger.</p>

    <p><strong>Facts</strong></p>
    <p>Ambac insured mortgage-backed securities issued by Countrywide. When the securities failed during the financial crisis, Ambac sued Countrywide and Bank of America (due to its merger with Countrywide) alleging breach of contract and fraud. During discovery, Ambac sought approximately 400 communications between Bank of America and Countrywide before their merger closed. Bank of America asserted attorney-client privilege, arguing that the communications related to legal issues the companies needed to resolve for the merger. The merger agreement directed them to share privileged information related to pre-closing legal issues, aiming to keep the information confidential. Ambac moved to compel production, claiming waiver of privilege because the entities weren't affiliated when sharing the confidential material and didn't have a common legal interest in litigation.</p>

    <p><strong>Procedural History</strong></p>
    <p>A Special Referee, appointed to handle privilege disputes, ordered the parties to review documents and produce those remaining in dispute for in camera review. Bank of America moved to vacate, arguing that communications were privileged even without pending litigation. Supreme Court denied the motion, holding that New York law required a reasonable anticipation of litigation. The Appellate Division reversed, finding the litigation requirement unnecessary, and remanded the case to the Special Referee. The Court of Appeals reversed the Appellate Division, reinstated the Supreme Court's order, and answered the certified question in the negative.</p>

    1. Whether the common interest doctrine applies to protect attorney-client communications shared between parties with a common legal interest, even if litigation is not pending or reasonably anticipated.
    1. No, because the common interest doctrine applies only when the shared legal interest relates to pending or reasonably anticipated litigation.

    <p>This case reinforces the narrow construction of the common interest doctrine in New York. Attorneys in New York must advise clients that sharing privileged communications with another party (or its counsel) will waive the privilege, unless that other party shares a common legal interest in current or reasonably anticipated litigation. This has practical effects on merger negotiations, where parties will need to be mindful of the potential loss of privilege when sharing communications with the other side. Clients should carefully consider whether the benefits of sharing confidential information outweigh the risk of future disclosure, especially if litigation is not on the immediate horizon. The court's distinction between mergers and litigation emphasizes the importance of documenting the anticipation of litigation in order to ensure that the common interest privilege applies. The ruling also suggests that parties may need to consider using separate counsel to ensure that their communications remain privileged.</p>

  • Wyly v. Milberg Weiss Bershad & Schulman, LLP, 13 N.Y.3d 400 (2009): Access to Class Counsel Files for Absent Class Members

    Wyly v. Milberg Weiss Bershad & Schulman, LLP, 13 N.Y.3d 400 (2009)

    Absent class members in a class action lawsuit do not have a presumptive right to access the case files of class counsel upon termination of the representation, unlike clients in traditional attorney-client relationships.

    Summary

    Sam Wyly, an absent class member in a securities class action, sought access to the case files of the class counsel, Milberg Weiss and other firms, after the representation concluded. Wyly argued that, like a traditional client, he had a presumptive right to access the files. The New York Court of Appeals held that absent class members do not possess such a presumptive right, distinguishing their relationship with class counsel from a traditional attorney-client relationship. The Court further concluded that the Appellate Division did not abuse its discretion in denying Wyly access to the requested records, as Wyly had already obtained substantial materials and failed to demonstrate a legitimate need for the remaining documents.

    Facts

    Sam Wyly acquired stock options in Computer Associates International, Inc. (CA). Several federal securities class actions were filed against CA, alleging questionable accounting practices. Wyly was a member of the settlement class in these actions. Following the settlement, Wyly alleged that the settlement was procured by fraud and sought to vacate the judgment. He also requested access to the class counsel’s files, arguing he was entitled to them as a member of the settlement class.

    Procedural History

    Wyly filed a Rule 60(b) motion in federal District Court to vacate the settlement judgment. While the motion was pending, he initiated a special proceeding in New York Supreme Court under CPLR Article 4, seeking to compel the class counsel to turn over their files. The Supreme Court granted Wyly’s petition, but the Appellate Division reversed, holding that Wyly was not entitled to the files as a matter of right. Wyly appealed to the New York Court of Appeals.

    Issue(s)

    Whether an absent class member in a class action lawsuit enjoys a presumptive right of access to the case files of class counsel upon the representation’s termination, similar to the right afforded to clients in traditional individual litigation under Matter of Sage Realty Corp. v Proskauer Rose Goetz & Mendelsohn.

    Holding

    No, because the relationship between class counsel and absent class members is fundamentally different from the traditional attorney-client relationship, and extending the Sage Realty presumption to absent class members would unduly burden class counsel and disrupt the management of class actions.

    Court’s Reasoning

    The Court of Appeals distinguished the class counsel-absent class member relationship from a traditional attorney-client relationship. The Court emphasized that absent class members occupy a special, nontraditional status in litigation. They are not subject to the same obligations or liabilities as named parties and do not have the same control over the litigation. The Court noted that while class counsel owes a fiduciary duty to the entire class, the relationship is not the same as that with an individual client. The Court also highlighted the role of the trial court in managing class actions and protecting the rights of absent class members. The Court reasoned that extending the Sage Realty presumption to absent class members would create an undue burden on class counsel, given the potential for numerous requests from geographically dispersed class members. The Court concluded that Supreme Court must consider how much the absent class member has at stake and whether the absent class member has demonstrated a legitimate need for the requested documents. The Court cited Greenfield v Villager Indus., Inc., stating that “[r]esponsibility for compliance [with the procedural rules governing class actions] is placed primarily upon the active participants in the lawsuit, especially upon counsel for the class, for, in addition to the normal obligations of an officer of the court, and as counsel to parties to the litigation, class action counsel possess, in a very real sense, fiduciary obligations to those not before the court.” In Wyly’s case, the Court upheld the Appellate Division’s decision, finding that Wyly had not demonstrated a legitimate need for the files, especially since he had already obtained substantial materials through the federal court proceedings. Judge Smith dissented, arguing that Wyly should have access to the work product because he paid a significant sum for it and affording such a right would help align the interests of class counsel and class members.

  • People v. Kozlowski, 11 N.Y.3d 223 (2008): Admissibility of Factual Testimony and Subpoena of Internal Investigation Materials

    11 N.Y.3d 223 (2008)

    An attorney’s factual testimony regarding an internal investigation is admissible if it doesn’t express a personal opinion on the defendant’s guilt, and internal investigation materials are protected by qualified privilege unless a substantial need and undue hardship in obtaining equivalent information are demonstrated, or a waiver of privilege occurred.

    Summary

    This case concerns the convictions of former Tyco executives, Kozlowski and Swartz, for crimes related to corporate wrongdoing. The court addresses whether an attorney’s testimony during an internal investigation improperly conveyed an opinion on the defendants’ guilt, and whether the defendants’ subpoena seeking interview notes from the investigation was properly quashed. The court finds the testimony was factual and didn’t express an opinion and that the subpoenaed materials were protected by a qualified privilege, as the defendants failed to show a substantial need or inability to obtain the information elsewhere. The court also addresses the constitutionality of the fines imposed but finds that the fines were harmless if erroneous.

    Facts

    Kozlowski and Swartz, former executives at Tyco, were convicted of multiple counts of grand larceny and falsifying business records related to the misuse of company loan programs. They used the Key Employee Loan Program (KELP) and relocation loan program for personal expenses, such as artwork and residences. To cover these debts, they arranged for unauthorized bonus payments from Tyco’s Incentive Compensation Plan. The Compensation Committee, typically responsible for approving bonuses, was bypassed. After Kozlowski’s resignation, Tyco hired Boies Schiller to conduct an internal investigation into potential executive misconduct.

    Procedural History

    Kozlowski and Swartz were convicted after a nearly six-month trial. They appealed, arguing that the admission of Boies’s testimony and the quashing of their subpoena were erroneous. The Appellate Division affirmed the convictions. The defendants then appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the admission of David Boies’s testimony regarding the internal investigation, and the prosecutor’s summation comments thereon, improperly conveyed an opinion regarding defendants’ guilt.

    2. Whether the trial court abused its discretion in quashing the defendants’ subpoena duces tecum seeking factual portions of interview notes and memoranda prepared during the internal investigation.

    3. Whether the fines imposed under Penal Law § 80.00 violated Apprendi v New Jersey.

    Holding

    1. No, because the testimony was factual and didn’t express an opinion on the defendants’ guilt.

    2. No, because the subpoenaed materials were protected by a qualified privilege, and the defendants failed to demonstrate a substantial need or an inability to obtain the information through other means.

    3. The Court does not reach the question. Assuming without deciding that an Apprendi violation occurred, any error was harmless because the defendants’ trial testimony established gains that corresponded to or exceeded the fine amounts.

    Court’s Reasoning

    The Court reasoned that Boies’s testimony was limited to firsthand factual accounts of his investigation and conversations with Swartz and Tyco’s management. The testimony provided relevant facts for the jury to consider without expressing a personal opinion about the defendants’ guilt. The court distinguished this case from People v. Ciaccio, where a detective offered an opinion on the victim’s credibility. The court also found that the subpoena was properly quashed because the defendants failed to show a substantial need for the materials or an inability to obtain equivalent information elsewhere. The requested materials were deemed trial preparation materials protected by qualified privilege. The court emphasized that the defendants had access to the same witnesses and failed to demonstrate an attempt to secure independent interviews. Regarding the fines, the court assumed an Apprendi violation, which holds that any fact increasing the penalty for a crime beyond the statutory maximum must be submitted to a jury and proven beyond a reasonable doubt, but it found it harmless, as the defendant testified to the amount they gained in the crime, which was equal to, or exceeded, the fines.

  • Muriel Siebert & Co., Inc. v. Intuit Inc., 8 N.Y.3d 506 (2007): Ex Parte Contact with Former Employees

    8 N.Y.3d 506 (2007)

    Adversary counsel may conduct ex parte interviews of an opposing party’s former employee, so long as measures are taken to avoid eliciting privileged or confidential information.

    Summary

    This case addresses whether Intuit’s attorneys should be disqualified from representing Intuit because they conducted an ex parte interview with a former employee of Muriel Siebert & Co. (Siebert) who had been involved in the underlying litigation. The New York Court of Appeals held that disqualification was not warranted because Intuit’s attorneys had cautioned the former employee against disclosing privileged information, and no such information was disclosed. The court emphasized the importance of informal discovery while also underscoring the need to safeguard attorney-client privilege.

    Facts

    Siebert and Intuit entered into a strategic alliance to create an Internet brokerage service. A dispute arose, and Siebert sued Intuit. Nicholas Dermigny, an executive at Siebert and part of Siebert’s litigation team, was terminated. Intuit’s attorneys, without Siebert’s consent, contacted and interviewed Dermigny after advising him not to disclose privileged or confidential information. Siebert sought to disqualify Intuit’s counsel, arguing an appearance of impropriety.

    Procedural History

    The Supreme Court granted Siebert’s motion, disqualifying Intuit’s attorneys. The Appellate Division reversed, finding no basis for disqualification because Intuit’s attorneys cautioned Dermigny against disclosing privileged information and no such information was disclosed. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether Intuit’s attorneys should be disqualified from representing Intuit in a lawsuit brought by Siebert because they conducted an ex parte interview with Siebert’s former employee who possessed privileged information about the litigation.

    Holding

    No, because Intuit’s attorneys cautioned the former employee against disclosing privileged information and, based on the record, no privileged information was disclosed.

    Court’s Reasoning

    The Court of Appeals relied on its prior decision in Niesig v. Team I, which addressed ex parte communications with current employees. The court extended the principles of Niesig to former employees, holding that ex parte interviews are permissible as long as counsel takes measures to avoid eliciting privileged or confidential information. The court emphasized the importance of informal discovery in resolving claims promptly. The court stated, “so long as measures are taken to steer clear of privileged or confidential information, adversary counsel may conduct ex parte interviews of an opposing party’s former employee.”

    The court cautioned that the right to conduct ex parte interviews is not a license to elicit privileged information. Attorneys must still conform to ethical standards. In this case, Intuit’s attorneys properly advised Dermigny of their representation and interest in the litigation and directed him to avoid disclosing privileged information. Because no such information was disclosed, there was no basis for disqualification.

    The court noted, “Counsel must still conform to all applicable ethical standards when conducting such interviews (see e.g. Code of Professional Responsibility DR 1-102 [a] [5] [22 NYCRR 1200.3 (a) (5)]; Niesig, 76 NY2d at 376…).”

  • People v. DePallo, 96 N.Y.2d 357 (2001): Attorney’s Duty When Client Intends to Perjure Themselves

    People v. DePallo, 96 N.Y.2d 357 (2001)

    When a criminal defendant intends to commit perjury, defense counsel’s disclosure of an ethical dilemma to the court, without revealing client confidences, does not deprive the defendant of a fair hearing or effective assistance of counsel; the attorney must first try to dissuade the client and can disclose the intent to commit a crime to the court.

    Summary

    DePallo was convicted of second-degree murder. Prior to a Huntley hearing, his attorney sought to withdraw due to an ethical conflict, suggesting the client intended to perjure himself. The court denied the motion. The attorney then informed the court, outside the defendant’s presence, that the defendant would testify in narrative form. The defendant testified and his motion to suppress was denied because his testimony was not credible. The New York Court of Appeals affirmed the conviction, holding that counsel’s actions appropriately balanced their duty to the client and the court, and the defendant’s right to be present was not violated. This case clarifies the attorney’s responsibilities when facing potential client perjury in a bench trial setting.

    Facts

    The defendant became enraged when he heard rumors that a woman with whom he had a sexual relationship was infected with HIV. The defendant, with the aid of a 14-year-old, confronted the woman, and a fight ensued. Subsequently, the defendant and the 14-year-old lured the woman to an isolated area where the defendant choked her with a bandana, and he and the 14-year-old stabbed her, killing her. The defendant was arrested and gave written and videotaped statements admitting to acting in concert with the 14-year-old in killing the woman.

    Procedural History

    The defendant moved to suppress his confessions, leading to a Huntley hearing. Before the hearing, the attorney asked to be relieved, citing an ethical conflict. The court denied the request. The defendant testified at the hearing, and the court denied the motion to suppress. The jury convicted the defendant of second-degree murder, and he was sentenced to 25 years to life. The Appellate Division affirmed. The New York Court of Appeals affirmed the conviction.

    Issue(s)

    Whether defense counsel’s disclosure to the court of an ethical dilemma, stemming from the defendant’s intent to testify, and decision to allow the defendant to testify in narrative form, deprived the defendant of a fair hearing and the effective assistance of counsel.

    Holding

    No, because the defense counsel properly balanced his duties to his client with his duties to the court and the criminal justice system, and the defendant was not deprived of a fair hearing or the effective assistance of counsel. Also, the defendant’s right to be present was not violated because the colloquy involved procedural matters at which the defendant could offer no meaningful input.

    Court’s Reasoning

    The Court of Appeals reasoned that a defense attorney’s duty to zealously represent a client is limited by their duty as an officer of the court to ensure the truth-seeking function of the justice system. An attorney cannot assist a client in presenting false evidence. The court noted the requirements of the Code of Professional Responsibility, preventing attorneys from knowingly using perjured testimony or false evidence. When faced with a client who intends to commit perjury, the attorney must first attempt to dissuade the client. If that fails, the attorney may seek to withdraw or, if withdrawal is denied, allow the client to testify in narrative form without the attorney eliciting the testimony in a traditional question-and-answer format, and counsel may not use the perjured testimony in making argument to the court. The court found that here, the defense counsel properly advised the defendant against lying on the witness stand, and when the defendant insisted on testifying, the attorney properly sought to withdraw. The court held that informing the court about the ethical dilemma did not violate the defendant’s rights, as the attorney never disclosed client confidences. The court stated, “Counsel could have properly made such a disclosure since a client’s intent to commit a crime is not a protected confidence or secret.” The court rejected the suggestion that counsel should have remained silent while the client committed perjury, stating that such an approach is incompatible with counsel’s role as an officer of the court. The court noted it was proper to exclude the defendant from the discussion on how to handle the testimony because “a colloquy of this nature involves procedural matters at which a defendant can offer no meaningful input.”

  • Kassis v. Teacher’s Insurance & Annuity Ass’n, 93 N.Y.2d 611 (1999): Imputed Disqualification and Chinese Walls

    Kassis v. Teacher’s Insurance & Annuity Ass’n, 93 N.Y.2d 611 (1999)

    When an attorney has actively represented a client in a matter and then moves to a firm representing the adversary in the same matter, the new firm is generally disqualified unless it can prove the attorney acquired no material confidential information during the prior representation; a “Chinese Wall” is insufficient if the attorney possessed such information.

    Summary

    This case addresses the imputed disqualification of a law firm when an attorney joins the firm after working on the opposing side of a case. Kassis hired Weg & Myers to represent them in a property damage case. Charles Arnold, an associate at Weg & Myers, worked on the case. Arnold then joined Thurm & Heller, the opposing counsel. Kassis moved to disqualify Thurm & Heller. The Court of Appeals held that Thurm & Heller should be disqualified because Arnold’s prior work on the case created a presumption that he possessed confidential information, which Thurm & Heller failed to rebut. The erection of a “Chinese Wall” was insufficient to cure the conflict.

    Facts

    Plaintiffs Kassis and North River Insurance Company retained Weg & Myers to represent them in a property damage action.

    Charles Arnold, an associate at Weg & Myers, assisted with the case by conducting depositions, attending mediation sessions, appearing at a physical examination of the property, and communicating with the client.

    Arnold joined Thurm & Heller, the firm representing the defendants, Teacher’s Insurance and Annuity Association and Cauldwell-Wingate Company, Inc.

    Thurm & Heller implemented safeguards to prevent Arnold from discussing the Kassis matter, including keeping the file in a separate office and instructing Arnold not to discuss the case.

    Procedural History

    Plaintiffs moved to disqualify Thurm & Heller; the Supreme Court denied the motion.

    The Appellate Division affirmed, finding that the “Chinese Wall” eliminated the danger of Arnold transmitting confidential information.

    The Appellate Division granted leave to appeal to the Court of Appeals.

    Issue(s)

    Whether a law firm should be disqualified from representing a client when it hires an attorney who formerly worked for opposing counsel on the same matter, where the attorney had active involvement in the case, and the firm implements a “Chinese Wall” to prevent disclosure of confidential information.

    Holding

    Yes, because given Arnold’s extensive participation in the Kassis litigation and Thurm & Heller’s representation of the adversary in the same matter, defendants’ burden in rebutting the presumption that Arnold acquired material confidences is especially heavy, and the erection of a “Chinese Wall” in this case, therefore, was inconsequential.

    Court’s Reasoning

    The Court of Appeals emphasized that attorneys owe a continuing duty to former clients not to reveal confidences. This duty forms the basis for the rule against representing a client against a former client in the same or a substantially related matter.

    The Court acknowledged that imputed disqualification is not an irrebuttable presumption, citing Solow v. Grace & Co., 83 N.Y.2d 303 (1994). A per se rule of disqualification is too broad and can be used for tactical advantages.

    However, the Court clarified that the presumption of shared confidences must be rebutted by proving that the attorney acquired no material confidential information. If the presumption arises, the party seeking to avoid disqualification must prove that any information acquired by the disqualified lawyer is unlikely to be significant or material in the litigation. A “Chinese Wall” is sufficient only if the presumption is rebutted.

    The Court found that Arnold’s active role in the Kassis litigation at Weg & Myers created a heavy burden for Thurm & Heller to rebut the presumption that he acquired material confidences. The firm’s conclusory averments were insufficient to rebut that presumption. As the Court stated, “Given Arnold’s extensive participation in the Kassis litigation and Thurm & Heller’s representation of the adversary in the same matter, defendants’ burden in rebutting the presumption that Arnold acquired material confidences is especially heavy.”

    Because the presumption was not rebutted, the “Chinese Wall” was inconsequential, and disqualification was required.

  • Doe v. Poe, 92 N.Y.2d 416 (1998): Attorney-Client Privilege and Third Parties

    Doe v. Poe, 92 N.Y.2d 416 (1998)

    Communications between a client and an attorney made in the presence of third parties are not protected by the attorney-client privilege.

    Summary

    This case concerns the scope of attorney-client privilege when a third party is present during communications. The New York Court of Appeals held that the attorney-client privilege does not protect communications made in the presence of third parties, especially when the attorney’s role is not representative of the client. The court affirmed the Appellate Division’s order to unseal the record of a prior hearing, finding that no evidence supported the claim that the attorney was acting in a legal capacity during the meetings in question. This ruling emphasizes that privilege hinges on the confidentiality of attorney-client interactions.

    Facts

    A prior proceeding involved a sealed record from a hearing. An application was made to unseal the record. The Supreme Court initially refused, assuming the record contained privileged information. Mr. P., an attorney, attended meetings relevant to the sealed record. The appellants claimed Mr. P. attended these meetings as an attorney or agent for the bank.

    Procedural History

    The Supreme Court initially refused to unseal the record. The Appellate Division reversed the Supreme Court’s decision and ordered the record unsealed. The appellants appealed to the New York Court of Appeals. The Court of Appeals affirmed the Appellate Division’s order.

    Issue(s)

    Whether the communications and documents within the sealed record are protected by attorney-client privilege when an attorney was present in a nonrepresentative capacity.

    Holding

    No, because communications between a client and an attorney made in the presence of third parties are not privileged, especially when the attorney’s role is not representative. Appellants failed to provide proof that Mr. P. was acting as an attorney or agent for the bank during the meetings.

    Court’s Reasoning

    The Court of Appeals reasoned that the attorney-client privilege protects confidential communications made between an attorney and a client for the purpose of obtaining legal advice. However, this privilege is waived when the communications are made in the presence of a third party. The court cited People v. Harris, 57 NY2d 335, 343, stating that “Communications between a client and an attorney made in the presence of third parties are not privileged.” The court emphasized that the appellants bore the burden of proving that Mr. P. was acting as an attorney or agent for the bank during the meetings, and they failed to provide sufficient evidence to support this claim. The court noted the absence of proof indicating Mr. P.’s legal representation during the relevant meetings. The decision highlights the importance of maintaining confidentiality for attorney-client privilege to apply. The presence of a third party generally negates the expectation of confidentiality, thereby precluding the privilege. Because the communications were not privileged, the Court of Appeals affirmed the Appellate Division’s order to unseal the record.

  • Tekni-Plex, Inc. v. Meyner and Landis, 89 N.Y.2d 123 (1996): Attorney Disqualification and Control of Attorney-Client Privilege in Corporate Acquisitions

    Tekni-Plex, Inc. v. Meyner and Landis, 89 N.Y.2d 123 (1996)

    When a corporation is acquired, the control of the attorney-client privilege transfers to the new management regarding general business operations, but not necessarily regarding communications about the acquisition itself if the parties contemplated adverse interests in post-acquisition disputes.

    Summary

    Tekni-Plex, Inc. (new Tekni-Plex) sued its former sole shareholder, Tang, alleging breaches of warranties in the merger agreement when Tang sold the company. Tang retained Meyner and Landis (M&L), who had been Tekni-Plex’s counsel for many years, including on environmental compliance matters now at issue. New Tekni-Plex sought to disqualify M&L and prevent them from disclosing privileged information. The court held that M&L should be disqualified due to their prior representation of Tekni-Plex, and that the attorney-client privilege regarding general business operations transferred to new Tekni-Plex. However, communications specifically about the merger remained under Tang’s control.

    Facts

    Tang was the sole shareholder of Tekni-Plex (old Tekni-Plex). M&L represented old Tekni-Plex for over 20 years, including on environmental compliance matters. In 1994, Tang sold Tekni-Plex to Acquisition, a shell corporation, in a merger. The merger agreement contained warranties regarding environmental compliance, and provided for indemnification. After the acquisition, Acquisition became “Tekni-Plex, Inc.” (new Tekni-Plex). New Tekni-Plex sued Tang, alleging breaches of the environmental warranties, claiming Tang misrepresented compliance with environmental laws, specifically regarding VOC emissions from a laminator machine.

    Procedural History

    New Tekni-Plex initiated arbitration proceedings against Tang, who retained M&L as his counsel. New Tekni-Plex moved to disqualify M&L. After the arbitrator declined to rule on the motion, New Tekni-Plex filed suit in New York Supreme Court to disqualify M&L, enjoin them from representing Tang and disclosing confidential information, and compel return of old Tekni-Plex files. The Supreme Court granted the motion, disqualifying M&L. The Appellate Division affirmed. The New York Court of Appeals modified the ruling.

    Issue(s)

    1. Whether M&L should be disqualified from representing Tang in the arbitration given their prior representation of old Tekni-Plex?

    2. Whether the attorney-client privilege regarding pre-merger communications between old Tekni-Plex and M&L passed to new Tekni-Plex?

    Holding

    1. Yes, because M&L’s prior representation of old Tekni-Plex on environmental compliance matters, which are substantially related to the current dispute, creates a conflict of interest.

    2. No, in part. The attorney-client privilege regarding general business operations transferred to new Tekni-Plex, but the privilege regarding communications pertaining specifically to the merger negotiations remained with Tang.

    Court’s Reasoning

    The Court of Appeals applied DR 5-108 (A) (1) of the Code of Professional Responsibility, which prohibits attorneys from representing interests adverse to a former client on substantially related matters. New Tekni-Plex met the three-prong test for disqualification: (1) a prior attorney-client relationship existed between M&L and old Tekni-Plex, which new Tekni-Plex assumed; (2) the current and former representations are substantially related; and (3) the interests of Tang and new Tekni-Plex are materially adverse. The court reasoned that when a corporation is acquired and the business operations continue, the control of the attorney-client privilege transfers to the new management. The Court cited Commodity Futures Trading Commn. v Weintraub, 471 U.S. 343 (1985), stating that “when control of a corporation passes to new management, the authority to assert and waive the corporation’s attorney-client privilege passes as well.” However, regarding communications about the merger, the court determined that because the merger agreement contemplated the potential for disputes between the buyer and seller, and because Tang was the sole shareholder of the seller, the privilege regarding those communications remained with Tang. Allowing new Tekni-Plex to control those communications “would thwart, rather than promote, the purposes underlying the privilege.” The court emphasized the need to encourage “full and frank communication between attorneys and their clients.”

  • People v. Saunders, 81 N.Y.2d 533 (1993): Conflict of Interest Must Affect Defense to Warrant Reversal

    People v. Saunders, 81 N.Y.2d 533 (1993)

    The mere existence of a conflict or potential conflict of interest between defense counsel and a prosecution witness does not automatically warrant reversal of a conviction; the defendant must demonstrate that the conflict actually affected the conduct of the defense.

    Summary

    Saunders was convicted of grand larceny for forging a mortgage satisfaction to obtain a bank loan. He argued for reversal, citing a conflict of interest because his attorney and a prosecution witness (Dollinger, bank’s title insurer counsel) represented each other in unrelated matters. The prosecution avoided questioning Dollinger about his relationship with defense counsel. The Court of Appeals affirmed the conviction, holding that Saunders failed to demonstrate that the potential conflict adversely affected his defense. The Court also found that a conversation with a former attorney was not privileged, and a warning about perjury was unpreserved for review.

    Facts

    Defendant Saunders forged a mortgage satisfaction. He then used the forged document to obtain a $1.7 million bank loan, leading to charges of grand larceny.
    Prior to trial, it was revealed that defense counsel and Matthew Dollinger, outside counsel for the bank’s title insurer (a prosecution witness), had a prior attorney-client relationship in matters unrelated to the Saunders case.
    The prosecution agreed not to elicit any testimony from Dollinger regarding his relationship with defense counsel.
    Saunders also had a phone conversation with a former attorney where he admitted to fraudulently using the attorney’s notary stamp without permission.

    Procedural History

    Saunders was tried and convicted of grand larceny.
    He appealed, arguing that the trial court erred by not inquiring further into the potential conflict of interest after being informed of the relationship between his counsel and the witness Dollinger. He also claimed attorney-client privilege regarding the phone conversation and that the judge’s warning about perjury violated his right to testify.
    The Appellate Division affirmed the conviction.
    Saunders appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether the trial court’s failure to inquire further into a potential conflict of interest between defense counsel and a prosecution witness, after being informed of their prior attorney-client relationship in unrelated matters, constitutes reversible error.
    2. Whether a telephone conversation between Saunders and his former attorney, during which Saunders admitted to fraudulently using the attorney’s notary stamp, was inadmissible on the grounds of attorney-client privilege.
    3. Whether the trial court’s warning about the possibility of a perjury prosecution if Saunders testified violated Saunders’ right to testify.

    Holding

    1. No, because Saunders failed to demonstrate that the potential conflict of interest actually affected the conduct of his defense.
    2. No, because Saunders failed to prove that he contacted his former attorney for the purpose of obtaining legal advice.
    3. The issue was not preserved for review because the defendant did not object to the warning at trial.

    Court’s Reasoning

    Conflict of Interest: The Court of Appeals cited People v. Lombardo, 61 NY2d 97, reiterating that a potential conflict alone is insufficient for reversal. Quoting People v. Ortiz, 76 NY2d 652, 657, the Court emphasized that the defendant must show “‘the conduct of his defense was in fact affected by the operation of the conflict of interest’” for reversible error to occur. Saunders failed to make this showing.
    Attorney-Client Privilege: Citing Matter of Priest v. Hennessy, 51 NY2d 62, 69, the Court stated that Saunders had the burden of proving the communication with his former attorney was for the purpose of seeking legal advice, which he failed to do. Since the call was not for legal advice, it was not protected by attorney-client privilege.
    Right to Testify: The Court found that Saunders’ argument regarding the trial court’s warning about perjury was unpreserved for review, referencing Webb v. Texas, 409 US 95, 96. Because Saunders did not object to the warning at trial, he could not raise the issue on appeal. This highlights the importance of making timely objections to preserve issues for appellate review.

  • People v. Cassas, 84 N.Y.2d 718 (1995): Admissibility of Attorney Statements Against a Client in Criminal Cases

    People v. Cassas, 84 N.Y.2d 718 (1995)

    An attorney’s out-of-court statement incriminating a client is inadmissible against the client in a criminal trial unless there is evidence the client authorized the statement as a waiver of the attorney-client privilege.

    Summary

    The New York Court of Appeals held that an attorney’s statement to police, made in the presence of his client, that the client shot his wife was inadmissible as evidence against the client because there was no showing the client authorized the statement as a waiver of attorney-client privilege. The Court reasoned that admitting the statement without such authorization would violate the privilege and undermine the client’s fundamental right to make key decisions about their defense. The Court also held that the trial court erred by refusing to instruct the jury that no adverse inference could be drawn from the defendant’s silence when his attorney made the statement.

    Facts

    Defendant was charged with murdering his wife. On the morning of the murder, the defendant and his attorney, Samuel Hirsch, went to a police precinct. Hirsch told the desk sergeant that there was a problem at defendant’s home and a prompt police response was needed. At the defendant’s home, police found the defendant’s wife dead. Back at the precinct, Hirsch allegedly stated, with the defendant present, “I brought my client in to surrender. I believe he shot his wife. You’ll find the gun in the room. It will have my client’s prints on it.” The police arrested the defendant and recovered a gun from the scene.

    Procedural History

    The trial court denied the defendant’s motion to suppress the attorney’s statement, reasoning that Hirsch was the defendant’s agent and authorized to speak on his behalf. The Appellate Division affirmed the trial court’s decision, concluding that the statement was direct evidence of guilt from the defendant’s agent. The New York Court of Appeals then reversed the Appellate Division’s order.

    Issue(s)

    1. Whether an attorney’s out-of-court statement incriminating his client is admissible against the client as direct evidence of guilt in a criminal trial when there is no evidence the client authorized the statement as a waiver of the attorney-client privilege.

    2. Whether the trial court erred by refusing to instruct the jury that no adverse inference could be drawn from the defendant’s silence at the time of the attorney’s statement.

    Holding

    1. Yes, because absent a showing that the client authorized the attorney’s statement as a waiver of the attorney-client privilege, the statement is inadmissible as it violates the privilege and undermines the client’s fundamental right to make key decisions about their defense.

    2. Yes, because the jury could have inferred that the defendant’s silence was an adoption or corroboration of his attorney’s assertions; therefore, the trial court was required to guard against the adverse inference.

    Court’s Reasoning

    The Court reasoned that while statements made by an attorney within the scope of employment can be admissible against the client, there was no evidence that the defendant authorized his attorney’s statement as a waiver of the attorney-client privilege. The Court emphasized that in criminal cases, the defendant retains the authority to make fundamental decisions regarding the case. It distinguished the case from People v. Rivera, where the attorney’s statement was a written affidavit used for impeachment after the defendant testified inconsistently. Here, the attorney’s statement was oral, made out of court, and used as direct evidence of guilt in the prosecution’s case-in-chief.

    The Court also cited United States v. Valencia, cautioning against setting a precedent for admitting all informal, out-of-court statements by attorneys against their clients, as it would violate the attorney-client privilege. The court quoted Matter of Priest v. Hennessy, stating that the attorney-client privilege “exists to ensure that one seeking legal advice will be able to confide fully and freely in his [or her] attorney, secure in the knowledge that his [or her] confidences will not later be exposed to public view to his [or her] embarrassment or legal detriment.”

    Regarding the jury instruction, the Court found that despite the defendant’s right to remain silent, the trial court should have instructed the jury that no adverse inference could be drawn from the defendant’s silence because the jury could have inferred the silence as an adoption of the attorney’s statement.