Veras Investment Partners, LLC, et al., Plaintiffs-Appellants, v Akin Gump Strauss Hauer & Feld LLP, Defendant-Respondent.

3812N, 600340/07

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT

2008 NY Slip Op 5563;
June 19, 2008, Decided

The court granted a motion by defendants requiring plaintiffs to divulge attorney client discussions ‘granting defendant’s motion for a declaration that plaintiffs waived the attorney-client privilege by placing certain subjects "at issue," and to compel the disclosure of otherwise privileged communications and attorney work product, unanimously modified, on the law and the facts, disclosure of otherwise privileged materials relating to defendant’s 2002 advice to plaintiffs and the October 2003”
“In this legal malpractice and fraud action, defendant moved for an order compelling disclosure of communications plaintiffs may have had with their nonparty counsel as well as the work product of such counsel. The judicial hearing officer supervising discovery granted the motion on the ground that plaintiffs waived the attorney-client privilege. Thereafter, the Commercial Division denied plaintiffs’ motion to vacate the JHO’s order. The instant appeal, from the Commercial Division’s order, concerns the scope of plaintiffs’ waiver.”

“In rendering his decision, the JHO determined that any relevant advice plaintiffs received from their nonparty counsel bears on the issue of plaintiffs’ reasonable reliance on defendant’s advice regarding the legality of their trading practices. Based solely on the [**9] relevance of such advice, the JHO concluded that plaintiffs had waived the privilege with respect to any attorney-client communications that bear on plaintiffs’ state of mind regarding the legality of their trading practices. The JHO similarly reasoned that plaintiffs waived the privilege as to communications with nonparty counsel regarding defendant’s disclosure of its potential conflicts and plaintiffs’ understanding and waiver of such conflicts.

HN3 "[T]hat a privileged communication contains information relevant to issues the parties are litigating does not, without more, place the contents of the privileged communication itself at issue’ in the lawsuit" (Deutsche Bank, 43 AD3d at 64). Instead, "at issue" waiver occurs when a party has asserted a claim or defense that he or she intends to prove by use of the privileged material (id.). Accordingly, it was error for the JHO to find waiver on the basis of relevance alone. By itself, relevance also provides no basis for the JHO’s conclusion that plaintiffs’ claims stemming from defendant’s 2002 late trading advice and its preparation of McBride and Larson for their proffers raise "factual assertions which can only be resolved by an examination [**10] of the advice given by the other attorneys." The JHO’s order also directs the disclosure of nonparty [*4] counsels’ "analyses and evaluations of plaintiffs’ jeopardy" with respect to plaintiffs’ rationale for entering into the settlement agreement with the regulators. Such materials would constitute attorneys’ work product, immune from disclosure under CPLR 3101(c), because they involve strategy and legal theory (see Rodriguez v City of New York, 29 AD2d 962, 289 N.Y.S.2d 233 [1968], appeal dismissed 26 NY2d 833, 257 N.E.2d 906, 309 N.Y.S.2d 362 [1970]). HN4 The assertion of a cause of action with a claim for damages arising out of the settlement agreement does not constitute a waiver of the work product immunity (see Deutsche Bank, 43 AD3d at 66).”