On November 9, 2018, Justice Schecter of the New York County Commercial Division issued a decision in Noven Pharms., Inc. v. Novartis Pharms. Corp., 2018 NY Slip Op. 32851(U), holding that a valuation prepared as part of a joint venture’s break up was not privileged, explaining:
Novartis has the burden of establishing that the valuation report is privileged and, therefore, exempt from the disclosure. It failed to meet its burden here.
The exemption for attorney work product (CPLR 3101[c]) does not apply because the valuation was not prepared by counsel acting as such and does not otherwise uniquely reflect a lawyer’s learning and professional skills. Nor has Novartis sufficiently shown that the valuation is exempt from disclosure as material prepared in anticipation of litigation (CPLR 3101[d]) because it did not demonstrate that the report was created solely and exclusively in anticipation of litigation. Under the circumstances, a mixed purpose cannot be ruled out.
It is undisputed that a valuation by Deloitte was contemplated for business purposes before Novartis claims that it appreciated that litigation potentially lay ahead. The record establishes that Novartis first contacted Deloitte about performing a valuation in response to the HL valuation with which Novartis disagreed. Novartis explained to Noven that it would be procuring the valuation, which would then inform their discussions.
Though Novartis has shown that shortly thereafter it contemplated possible litigation, it has not established that the nature, character or scope of the valuation that had already been discussed with Deloitte changed in any way whatsoever or that Novartis was exclusively in litigation mode and not still desirous of arriving at a mutually agreeable business solution with Noven. Indeed, there is no evidence between September 2015–when Novartis maintains that it first contemplated potential litigation–and the commencement of this action, that Novartis ever explicitly committed to Noven that, contrary to its earlier position, it was not going forward with nor would it exchange or discuss the valuation that it had earlier committed to. Novartis has not shown any proof (in camera or otherwise) that after its business people chose Deloitte to prepare the valuation for business purposes, the actual scope or nature of the retention changed in any material way. In fact, even after the valuation was prepared, the parties were still on course for and engaged in business discussions to resolve the disputes between them.
It is clear, moreover, that both parties fully appreciated that litigation was a possibility before they officially commissioned their respective valuations. That does not alter the analysis nor does the involvement of attorneys or the parties’ own privilege designations (which were likely designed to afford the parties with maximum flexibility depending on the outcome of the valuation).
In the end, while Novartis’ lawyers formally retained the valuator selected by its business people, and one of the purposes of procuring the valuation may have been to prepare for litigation, Novartis has not convinced the court that litigation was the sole reason and that it had entirely abandoned its earlier commitment. On this record, where the parties continued in the same course of negotiations for which the Deloitte valuation had been contemplated, it is hard to believe that Novartis decided, in September 2015, that potential litigation justified an uncommunicated change in course with respect to the valuation and that, despite verily believing that a valuation was irrelevant, it continued to pursue the very same valuation that it had anticipated earlier, yet it was for a completely different purpose (and that Novartis did so, at this stage and with urgency, solely for litigation that had not even been commenced and not for use in its ongoing business negotiations). Because Novartis has not negated that the valuation, at the very least, had a dual purpose–that it still served the function originally contemplated–it is subject to disclosure and must be produced.
(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 email@example.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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