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November 17, 2015

Stroock Special Bulletin

By: Bruce H. Schneider, James L. Bernard

In NAMA Holdings, LLC v. Greenberg Traurig LLP, 2015 NY SLIP Op. 07346 (1st Dept. Oct. 8, 2015), the New York Appellate Division, First Department, confirmed the limitation imposed by the fiduciary exception to the attorney client privilege and adopted the test established in Garner v. Wolfinbarger, 430 F.2d 1093, 1103-04 (5th Cir. 1970) for determining when the fiduciary exception should apply.  Decisions of the First Department are particularly significant because sophisticated commercial disputes heard in the Commercial Division of Supreme Court, New York County are appealed to that Court.
Garner posed a non-exhaustive list of factors (the “Garner Factors”) to be considered in determining whether the fiduciary exception carve-out from the attorney-client privilege applies.  The First Department found that the Garner factors “strike[] the appropriate balance between respect for the privilege and the need for disclosure.”  However, a drawback to the Garner approach is that it creates uncertainty whether the attorney-client privilege, which was assumed to protect the communication, will be found, after-the-fact, to be still available.  Because of this uncertainty, both outside and in-house counsel who represent a party that owes fiduciary duties need to be more sensitive to the possibility that their communications will not be deemed privileged in subsequent litigation.

This Stroock Special Bulletin provides a summary of the NAMA Holdings case, a discussion of how the Garner factors have been applied in a variety of actions, and the implications of NAMA going forward.

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