United States: New York's Restrictive Interpretation Of Common Interest Doctrine Unlikely To Have Significant Impact In Bankruptcy

Last Updated: September 28 2016

On June 9, 2016, the New York State Court of Appeals, in Ambac Assur. Corp. v. Countrywide Home Loans, 2016 BL 184648 (N.Y. June 9, 2016), reversed a lower court decision, consistent with the overwhelming majority of federal court decisions, that the common interest doctrine under New York law is not limited to communications made in connection with pending or reasonably anticipated litigation. In so ruling, the New York Court of Appeals distanced itself from the approach applied in most federal courts and in other states with a significant volume of corporate transactions, such as Delaware and California. However, the impact of this development in bankruptcy cases, where courts generally apply federal law and treat bankruptcy as a form of litigation, may be limited.

The Common Interest Doctrine

The common interest doctrine, which in most jurisdictions is an extension of the attorney-client privilege and the work product doctrine, serves to protect the confidentiality of information and documents that are shared by attorneys representing different clients with aligned legal interests. Although issues concerning the common interest doctrine must usually be analyzed under the relevant state law, the general rule is that parties invoking the privilege must demonstrate that: (1) the communication was made by separate parties in the course of a matter of common interest; (2) the communication was designed to further that effort; and (3) the privilege was not otherwise waived. Velo Holdings, Inc. v. Paymentech, LLC (In re Velo Holdings, Inc.), 473 B.R. 509, 514 (Bankr. S.D.N.Y. 2012); In re Leslie Controls, Inc., 437 B.R. 493, 496 (Bankr. D. Del. 2010).

The first element requires that the communication be made between separate parties in the course of a matter of common interest. However, the common interest doctrine is not limited to parties who are perfectly aligned on the same side of a single litigation. Rather, "the doctrine applies where parties demonstrate actual cooperation toward a common legal goal with respect to the documents [that] they seek to withhold." Costello v. Poisella, 291 F.R.D. 224, 232 (N.D. Ill. 2013). Thus, the common interest doctrine does not require complete agreement or accord among the parties. The focus of an inquiry concerning the common interest doctrine should be the purpose for which the information was disclosed among the parties asserting a common interest.

The second element requires that the purpose of the communication at issue be to further the common interest shared among the parties. Stated otherwise, the existence of a theoretical common interest is not sufficient; parties must affirmatively demonstrate a collective cooperation in the development of a shared legal strategy. Leslie Controls, Inc., 437 B.R. at 496–97.

The third element simply requires that the parties have not otherwise waived the attorney-client privilege or protections afforded under the work product doctrine. Id.

Ambac Assurance

In 2007, Countrywide Home Loans ("Countrywide") and Bank of America ("BOA") began negotiating a merger. The merger was publicly announced on January 11, 2008, and closed on July 1, 2008. After the merger was consummated, Ambac Assurance Corporation ("Ambac") sued Countrywide, alleging that Countrywide had breached contractual representations, fraudulently misrepresented the quality of certain loans, and fraudulently induced Ambac to guarantee certain loans. Ambac also named BOA as a defendant in the action on the basis of its merger with Countrywide.

In November 2012, BOA refused to produce approximately 400 communications made during its merger negotiations with Countrywide, notwithstanding the fact that the communications took place after the merger was announced but before the merger was consummated. BOA argued that New York's common interest doctrine protected the communications from discovery because the communications pertained to legal issues which the companies needed to resolve jointly in anticipation of the merger closing. These issues included filing disclosure statements, securing regulatory approvals, reviewing contractual obligations to third parties, maintaining employee benefit plans, and obtaining legal advice on state and federal tax consequences. In addition, the merger agreement signed by BOA and Countrywide required them to share privileged information relating to these issues. Thus, BOA argued that the merger agreement was evidence of the shared legal interest of BOA and Countrywide in the successful completion of the merger.

Ambac moved to compel production of the communications, arguing, among other things, that the parties did not share a common legal interest in litigation or anticipated litigation at the time of the communications. According to Ambac, because BOA and Countrywide failed to share a common legal interest in litigation or anticipated litigation at the time of the communications, they waived the attorney-client privilege when they voluntarily shared confidential material.

A special referee appointed to handle privilege disputes ruled in favor of Ambac, reasoning that New York law required a common legal interest in litigation or anticipated litigation in order for the common interest doctrine to apply. BOA moved to vacate the special referee's decision, but the New York Supreme Court denied the motion. See Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 2013 BL 285640 (N.Y. Sup. Ct. Oct. 16, 2013).

BOA appealed to the Appellate Division, which reversed, holding that "in today's business environment, pending or reasonably anticipated litigation is not a necessary element of the common-interest privilege." Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 124 A.D.3d 129, 130 (N.Y. App. Div. 2014). The Appellate Division noted that communications between a single party and counsel are privileged, regardless of whether litigation is anticipated or pending, and it reasoned that imposing the anticipated or pending litigation element on communications between two parties with a common legal interest could not be reconciled with the purposes underlying the attorney-client privilege. The Appellate Division also noted that federal courts have overwhelmingly rejected a litigation requirement in the context of the common interest doctrine.

The New York State Court of Appeals reversed on appeal. It explained that requiring pending or anticipated litigation limits use of the common interest doctrine to situations where the benefit and necessity of communications are at their highest and the potential for misuse is minimal. The court also noted that when businesses share a common interest in closing a transaction, their shared interest in the transaction's completion is already an adequate incentive for exchanging the information necessary to achieve that end. As such, the court concluded, any benefits that supported an expansion of the common interest doctrine were outweighed by the substantial loss of relevant evidence and the potential for abuse.

After Ambac, parties in New York seeking to invoke the common interest doctrine must demonstrate that: (1) the communication was made with respect to legal advice in pending or reasonably anticipated litigation in which the parties have a common legal interest; (2) the communication was designed to further the common legal interest; and (3) the privilege was not otherwise waived. Federal and state courts in Texas, which also has a large volume of mergers and commercial disputes, have adopted a similar approach. See U.S. v. Newell, 315 F.3d 510, 525 (5th Cir. 2002) (the Fifth Circuit requires a palpable threat of litigation for the common interest doctrine to apply); In re XL Specialty Ins. Co., 373 S.W.3d 46, 51–52 (Tex. 2012) ("Texas requires that the communications be made in the context of a pending action. . . . Thus, in jurisdictions like Texas, which have a pending action requirement, no commonality of interest exists absent actual litigation."). Like New York, Texas imposes this requirement because it "restricts the opportunity for misuse [and] limits the privilege to situations where the benefit and the necessity are at their highest." XL Specialty, 373 S.W.3d at 51–52 (internal quotations omitted).

This differs from the approach taken in many other states, including Delaware and California. Parties in Delaware can invoke the common interest doctrine absent pending or anticipated litigation. See, e.g., 3Com Corp. v. Diamond II Holdings, Inc., 2010 BL 133915 (Del. Ch. May 31, 2010) (Delaware's common interest doctrine is applicable when two companies have a common interest in the approval of a merger). However, parties in Delaware can invoke the common interest doctrine only if the communications primarily concern legal advice. See Glassman v. Crossfit, Inc., 2012 BL 270254 (Del. Ch. Oct. 12, 2012) ("The common-interest doctrine does not protect communications between parties, or even between their attorneys, when those communications primarily concern a common commercial objective.") (internal citations omitted).

Similarly, California does not require pending or anticipated litigation to invoke the common interest doctrine. Parties must establish: (i) a common interest in securing legal advice related to the same matter; and (ii) that the communications were made to advance the parties' shared interest in securing legal advice on the common matter. See Seahaus La Jolla Owners Assn. v. Superior Court, 169 Cal. Rptr. 3d 390 (Cal. App. 4th Dist. 2014).

Impact on Communications Made in Anticipation of or During Bankruptcy

The common interest doctrine applies in bankruptcy. See, e.g., In re Mortg. & Realty Trust, 212 B.R. 649 (Bankr. C.D. Cal. 1997). In bankruptcy cases, the doctrine has been applied to communications between a debtor and an ad hoc committee, a future asbestos claims representative, a creditors' committee, an affiliate of the debtor, and a creditor. Seee.g., In re Tribune Co., 2011 Bankr. LEXIS 299, at *4 (Bankr. D. Del. Feb. 23, 2011) (discussing federal common law and Delaware law); Leslie Controls, 437 B.R. at 496 (citing federal court rulings); Kaiser Steel Corp. v. Frates, 84 B.R. 202, 205 (Bankr. D. Colo. 1988) (citing federal common law and state law); In re Quigley Co., 2009 Bankr. LEXIS 1352, at *1 (Bankr. S.D.N.Y. Apr. 24, 2009) (applying federal common law); Village at Lakeridge, LLC v. United States Bank N.A. (In re Village at Lakeridge, LLC), 2013 BL 370668 (B.A.P. 9th Cir. Apr. 5, 2013) (applying federal common law), aff'd, 814 F.3d 993 (9th Cir. 2016).

It remains to be seen if Ambac and its reasoning will have any significant impact on whether communications made in anticipation of or during a bankruptcy case are protected by the common interest doctrine. For a couple of reasons, however, the impact may be limited. First, bankruptcy courts, in determining matters of privilege, generally apply federal common law, which generally does not impose a litigation requirement for the common interest doctrine to apply (see the cases cited above). Second, "bankruptcy itself constitutes litigation for purposes of delineating privilege." Brown v. Adams (In re Fort Worth Osteopathic Hosp., Inc.), 2008 Bankr. LEXIS 3156, at *44 (Bankr. N.D. Tex. Nov. 14, 2008); see also In re McDowell, 483 B.R. 471, 494 (Bankr. S.D. Tex. 2012) ("The Fifth Circuit has implied that the filing of a bankruptcy petition itself creates litigation."); Tri-State Outdoor Media Group, Inc. v. Official Comm. of Unsecured Creditors (In re Tri-State Outdoor Media Group, Inc.), 283 B.R. 358, 364 (Bankr. M.D. Ga. 2002) ("While Bankruptcy is not entirely litigation, it is an adversarial proceeding, particularly when considering the rights of the debtor versus the rights of an unsecured creditor.").

McDowell is illustrative in this regard. In that case, which involved the application of Fifth Circuit law (which is relatively restrictive) on the common interest doctrine, the bankruptcy court reasoned that the filing of a bankruptcy petition constitutes litigation because: (1) the filing of a bankruptcy petition imposes the automatic stay on all creditors; (2) the automatic stay is nothing more than an injunction; and (3) injunctions can be obtained only through the filing of a lawsuit. As such, the McDowell court held that documents prepared in anticipation of a bankruptcy filing were protected by the common interest doctrine.

Similarly, the court in Quigley held that a debtor's bankruptcy was considered litigation for purposes of the work product doctrine. The court reasoned that "[a]sbestos bankruptcies, by their nature, are designed to stop existing and threatened litigation." Similarly, in Osherow v. Vann (In re Hardwood P-G, Inc.), 403 B.R. 445, 460 (Bankr. W.D. Tex. 2009), the bankruptcy court held that the common interest doctrine was applicable to a report which was prepared by the debtors' forensic accountants and shared with the official committee of unsecured creditors as well as certain of the debtors' lenders. The court reasoned that although the Fifth Circuit requires pending or anticipated litigation to trigger the common interest doctrine, this element was satisfied when the parties who received the report agreed to work together to confirm a chapter 11 plan of liquidation.


Even in jurisdictions requiring pending or anticipated litigation to invoke the common interest doctrine, Ambac and its reasoning may not have a significant impact on whether communications made in anticipation of or during a bankruptcy case are protected by the common interest doctrine. This is because communications made in anticipation of or during a bankruptcy case should be protected by the doctrine because bankruptcy is generally deemed by the courts to qualify as litigation for purposes of the common interest doctrine. Nevertheless, careful attention to the law of the jurisdiction involved is warranted to determine whether particular communications would be protected under this doctrine.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions