The Appellate Division has ruled that plaintiff bank has lost its attorney-client privilege with subsequent attorneys over the securities gone bad legal malpractice case against Chadbourne & Parke. 

"Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered November 23, 2005, which, to the extent appealed from as limited by the briefs, declared that plaintiffs waived the attorney-client privilege as to legal advice they received regarding compliance of their Russian operation with Russian tax laws and licensure requirements, affirmed, without costs.

Defendant sufficiently demonstrated that the advice it gave in the course of its allegedly negligent representation was framed, in this malpractice action, as the sole cause of plaintiffs’ injury in Russia. Invasion of the attorney-client privilege is necessary, under these circumstances, to determine the validity of such claims, and is vital to the defense (see Orco Bank v Proteinas Del Pacifico, 179 AD2d 390 [1992]).

We have considered plaintiffs’ remaining arguments and find them unavailing." 

Note Justice McGuire’s dissent: " For these reasons, I would hold that by bringing this action plaintiffs did not put at issue, and thereby waive the attorney-client privilege with respect to, any advice they received on tax and licensure issues (Stark v Greenberg, Dauber & Epstein, 219 AD2d 571, 572 [1995] [communications between plaintiffs and their attorneys over issues not raised in malpractice action remain privileged]; TIG Ins. Co. v Yules & Yules, 1999 US DIST LEXIS 17607, *4-5, 1999 WL 1029712, *1 [SD NY, Nov 12, 1999] ["at issue" waiver recognized "where the party is in fact invoking the substance of the privileged conversation . . . or where the claim or defense is of such a nature that an assessment of its merits requires an examination of the substance of a privileged conversation"] [construing New York law] [emphasis added