On December 5, 2014, Justice Schweitzer of the New York County Commercial Division issued a decision in Stock v. Schnader Harrison Segal & Lewis LLP, 2014 NY Slip Op. 33171(U), holding that certain intra-law firm emails were not privileged.
In Stock, the plaintiff sued the defendant law firm for malpractice and breach of fiduciary duty. The plaintiff alleged that the firm did not tell him that his departure from MasterCard would accelerate the expiration date of stock options worth $5 million. After the options expired, the firm advised him to commence an arbitration against MasterCard and its plan administrator, Morgan Stanley Smith Barney. During the arbitration, Morgan Stanley Smith Barney sought to call one of the defendant’s partners to testify on the issue of whether the defendant’s failure to advise the plaintiff contributed to his losses. The partner was advised and prepared to testify by the defendant’s attorneys, including attorneys who were also representing the plaintiff in the arbitration. The plaintiff alleged that the firm never told him about the conflict or advised him to seek independent legal advice.
The defendant firm asserted that certain email communications regarding legal advice given to the partner in preparation for her testimony was privileged as against the plaintiff, but Justice Schweitzer disagreed. First, he held that there was no expectation that communications between the defendant’s lawyers would be kept confidential from the plaintiff. Second, the fiduciary exception to attorney-client privilege applied—the plaintiff alleged that the firm engaged in self-dealing and had a conflict of interest while it was representing him, and the court held that those claims were colorable. And third, the court held that by asserting a counterclaim for unpaid attorney fees—not recoverable if they are incurred through improper conduct—the defendant firm put their continued representation of Plaintiff “at issue.”
For all of the reasons stated above, the defendant firm’s claims of privilege were rejected.