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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: December 10, 2019

Privilege Determined by Law of Location of Trial or of Proceeding Seeking Discovery

On November 27, 2019, the Second Department issued a decision in Askari v. McDermott, Will & Emery, LLP, 2019 NY Slip Op. 08547, holding that a question of privilege must be determined by the law of the location of trial or of the proceeding seeking the evidence, explaining:

Here, in the complaint, the plaintiffs seek the documents contained in McDermott’s file related to the transaction, which they allege included not only the execution of the MIPA, but also the reorganization of Sina and the employment agreement. While the MIPA provided that it and any disputes hereunder would be governed by and construed in accordance with the laws of Delaware, the reorganization plan only provided that this Plan would be governed by and construed in accordance with Delaware law. Moreover, the employment agreement stated that it would be governed by New York law. Similarly, the promissory notes, which were executed as part of the reorganization of Sina, stated that they would be governed by New York law. Consequently, the Supreme Court should not have held that the choice-of-law provision set forth in the MIPA governed the plaintiffs’ request for copies of McDermott’s files concerning the “transaction” as a whole when the transaction concerned multiple stages and documents.

Significantly, the issue at bar does not concern a dispute arising under the MIPA. While some of the documents in McDermott’s possession with respect to the MIPA may ultimately be relevant in potential subsequent litigation between the plaintiffs and Specialty concerning a dispute arising under the MIPA, the cause of action here pertains to the plaintiffs’ right to the documents in McDermott’s possession with respect to its representation of various individuals and/or entities. Consequently, the choice-of-law provision in the MIPA is not even implicated here. The gravamen of the plaintiffs’ claim sounds in replevin, not the interpretation or enforcement of the MIPA or any other agreement.

In a situation where documents are sought, New York will apply the law of the forum where the evidence will be introduced at trial or the location of the proceeding seeking discovery of those documents Here, the privileged communications being sought by the plaintiffs in this New York replevin action were made in New York between New York-based attorneys at McDermott and Sina, a New York corporation, involving its then-majority shareholder and president, Askari, a New York resident. The sole nexus that Delaware has to this action is that Specialty is a limited liability company formed under the laws of that state. Consequently, New York law applies in this action sounding in replevin seeking the disclosure of McDermott’s files.

It would indeed be incongruous to enforce a law which effectively forecloses New York corporations merging with foreign corporations from having the ability to pursue their claims against their counsel or the newly formed, post-merger entities based on the post-merger entities’ control of the documents needed by the former entities to prosecute potential claims. Here, Delaware law gives the new corporation, a putative defendant, sole access to and control of the merger-related documents by the exercise of the attorney-client privilege. This is contrary to New York public policy as enunciated in Tekni-Plex.

(Internal quotations and citations omitted).

An issue that arises in almost all complex commercial litigation is identifying evidence that should be withheld from production in evidence because it is subject to the attorney-client or other privilege. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding the attorney-client, common interest, work product or other privileges or exemptions from production of evidence.

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