Second Circuit Reaffirms That Attorney-Client Privilege Is Not Waived By Sharing Documents With Parties Pursuant to a Common Legal Interest—Even Where That Interest Has Commercial Objectives

On November 10, 2015, the US Court of Appeals for the Second Circuit issued an opinion reaffirming that the attorney-client privilege and work product protections were not waived by a businessman and his company when they shared legal opinions and communications with a consortium of banks pursuant to a common interest agreement, even though the common legal interest among them—obtaining favorable tax treatment for a transaction—had significant commercial goals. Schaeffler v. United States, 2015 U.S. App. LEXIS 19617 (2d Cir. N.Y. Nov. 10, 2015). As the Court held, "the fact that the Consortium [of banks] stood to lose a lot of money (along with appellants) if appellants' tax arguments failed is not support for the position that no common legal interest existed. To the contrary, it was the interest in avoiding the losses that established a common legal interest." Id.

The significance of the Second Circuit’s Schaeffler opinion is the court’s apparent effort to stem the tide of judicial opinions that limited application of the attorney-client privilege, or found a waiver, where the reviewing court finds interests beyond a common legal interest (such as a shared commercial interest) and concludes, as did the lower court in Schaeffler, that the existence of that common commercial interest invalidated a legitimate common legal interest. Be careful though; it will not suffice to simply claim “Attorney-Client Privileged” on communications made for such purposes as evaluating “the commercial wisdom” of various options. There must be the benchmark purpose of communicating “solely for the obtaining or providing of legal advice.” Once that can be established, the Second Circuit is now prepared to protect that privilege even where the privileged information that was shared relates to a common business interest as well.