2138747 Ontario Inc. v. Lehman Bros. Holdings, Inc.
2022 NY Slip Op 06087 (2022)
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Rule of Law:
Filing a legal malpractice claim against a former attorney does not, by itself, trigger the 'at-issue' waiver of attorney-client privilege in a separate, concurrent claim against a third party. A waiver only occurs if the party affirmatively places the privileged communications at issue to prove the separate claim.
Facts:
- Lehman Brothers Holdings, Inc.'s (Lehman) subsidiary, LB SkyPower, shared confidential information with Samsung under a nondisclosure agreement (NDA) to evaluate a potential transaction.
- Plaintiff, 2138747 Ontario Inc., alleges that Samsung misappropriated this information to launch a competing renewable energy project in violation of the NDA.
- After LB SkyPower went bankrupt and became unwilling to prosecute a claim, Lehman assigned to Plaintiff any cause of action LB SkyPower had against Samsung.
- As part of the assignment agreement, Lehman provided an express contractual warranty to Plaintiff that the assignment was valid and enforceable.
- Relying on this assignment, Plaintiff retained the law firm Goodmans and initiated a lawsuit against Samsung.
Procedural Posture:
- Plaintiff, 2138747 Ontario Inc., commenced a breach of contract action against Samsung in the Supreme Court of New York (trial court).
- The trial court dismissed the action against Samsung, ruling that the assignment of the claim from Lehman to Plaintiff was invalid.
- Plaintiff then commenced the instant action in the Supreme Court, New York County, asserting malpractice claims against its former law firm (Goodmans) and breach of contract claims against Lehman.
- The trial court dismissed the claims against Goodmans on jurisdictional grounds and also dismissed tort claims against Lehman, leaving only the breach of warranty claim against Lehman.
- In discovery, Lehman filed a motion to compel Plaintiff to produce privileged communications with its counsel.
- The Supreme Court (trial court) granted Lehman's motion to compel disclosure.
- Plaintiff (as appellant) appealed the trial court's order compelling disclosure to the Appellate Division, First Department, with Lehman as the respondent.
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Issue:
Does a plaintiff's act of filing a legal malpractice claim against its former counsel automatically waive the attorney-client privilege in a separate breach of contract claim against a different defendant, thereby compelling disclosure of privileged communications?
Opinions:
Majority - Per Curiam
No. A party's legal malpractice claim against its former counsel does not trigger the 'at-issue' waiver doctrine for a separate breach of contract claim against another party. The court reversed the lower court's order compelling disclosure, holding that the 'at-issue waiver' applies only when a party affirmatively places the subject matter of its own privileged communications at issue to prove a claim or defense. Here, Plaintiff did not put the advice of its counsel at issue in its breach of contract claim against Lehman; the claim is based on Lehman's alleged breach of warranty, not on the quality of legal advice Plaintiff received. While Plaintiff waived privilege for any information actually revealed in the malpractice pleadings, this did not result in a broad subject-matter waiver for all related confidential communications.
Analysis:
This decision reinforces the narrow scope of the 'at-issue' waiver of attorney-client privilege in New York. It clarifies that the waiver is not automatically triggered by filing a related, but separate, malpractice claim. This protects litigants by allowing them to seek remedies for malpractice without being forced to forfeit privilege in other ongoing litigation, thus preventing adversaries from using a malpractice claim as a discovery tool to access otherwise protected communications. The ruling preserves the strength of the privilege and ensures it can only be waived by the holder's affirmative act of putting the advice itself at the center of a claim or defense.
