Ambac Assurance Corporation, et al., Appellants,v.Countrywide Home Loans, Inc., et al., Respondents, Bank of America Corp., Defendant.BriefN.Y.June 6, 2018New York County Clerk's Index No. 651612/10 atnurt nf Appeals nf tip? ~fate nf New Vnrk ~~~~-- ....... ~~- AMBAC ASSURANCE CORPORATION and THE SEGREGATED ACCOUNT OF AMBAC ASSURANCE CORPORATION, Plaintiffs-Appellants, -against- COUNTRYWIDE HOME LOANS, INC., COUNTRYWIDE SECURITIES CORP. and COUNTRYWIDE FINANCIAL CORP., Defendants, -and- BANK OF AMERICA CORP., Defendant-Respondent. BRIEF FORAMICUS CURIAE NEW YORK STATE TRIAL LA WYERS ASSOCIATION IN SUPPORT OF PLAINTIFFS-APPELLANTS Date Completed: March 2, 2016 NEW YORK STATE TRIAL LAWYERS ASSOCIATION Amicus Curiae 132 Nassau Street, 2nd Floor New York, New York 10038 Tel.: (212) 349-5890 Fax: (212) 608-2310 TABLE OF CONTENTS TABLE 0 F A UTH 0 RITIES ................................................................................................. ii INTEREST 0 F AMI CUS CURIAE .................................................................................... 1 PRELIMINARY STATEMENT ........................................................................................... 1 QUESTION FOR REVIEW .................................................................................................. 3 STATEMENT OF THE CASE ............................................................................................. 4 ARGUMENT ............................................................................................................................ 5 THIS COURT SHOULD REINSTATE NEW YORK'S LONG-STANDING LITIGATION PRONG OF THE COMMON INTEREST DOCTRINE .................. 5 CONCLUSION ...................................................................................................................... 12 TABLE OF AUTHORITIES Page(s) Cases Aetna Cas. & Sur. Co. v. Certain Unden.vriters at Uoyd's London, 176 Misc.2d 605 (Sup. Ct. N.Y. County 1998) ................................................................ 8 Allied Irish Banks, p.Lc. v. Bank of Am., NA., 252 F.R.D. 163 (S.D.N.Y. 2008) ....................................................................................... 9 Blieler v. Bodnar, 65 N.Y.2d 65 (1985) ............................................................................................................ 6 Cooley v. Carter-Wallace 102 A.D.2d 642 (4th Dep't 1984) ..................................................................................... 7 D'Amico v. Christi.e, 71 N.Y.2d 76 (1987) ............................................................................................................ 6 DiMichel v. S. Buffalo Ry. Co., 80 N.Y.2d 184 (1992) .......................................................................................................... 2 Hudson Valley Marine, Inc. v. Town of Cortlandt, 30 A.D.3d 377 (2d Dep't 2006) ......................................................................................... 9 In re Megan-Racine Assocs., Inc., 189 B.R. 562 (N.D.N.Y. 1995) .......................................................................................... 8 O'Neill v. Oakgrove Constr., 71N.Y.2d521 (1988) .......................................................................................................... 7 Oswego Liborers' Local 214 Pension Fund v. Marine Midland Bank, NA., 85 N.Y.2d 20 (1995) ............................................................................................................ 7 Parisi v. Leppard, 172 Misc. 2d 951 (Sup. Ct. Nassau County 1997) .......................................................... 9 People v. Bloom, 193 N.Y. 1 (1908) ................................................................................................................ 8 11 Ross v. Curtis-Palmer Hydro-Blee. Co., 81 N .Y.2d 494 (1985) .......................................................................................................... 7 Spectrum Sys. v. Chem. Bank, 78 N.Y.2d 371 (1991) .......................................................................................................... 8 Welch v. Globe Indem. Co., 25 A.D .2d 70 (3d Dep't 1966) ........................................................................................... 3 Other Authorities 6-3101 N.Y. Civil Practice: CPLR (Weinstein, Korn & Miller) P 3101.01 (2d ed. 2015) ......................................................................................................................... 5 New York Plaintiffs Personal Injury Forms 5, Discovery and Litigation (2008) ..................................................................................................................................... 5 111 INTEREST OF AMICUS CURIAE The New York State Trial Lawyers Association ("NYSTLA") is a statewide organization of attorneys, most of whom practice in the personal injury field. NYSTLA' s mission is: to promote a safer and healthier society; to advance representation of the public by ethical, well-trained lawyers; and - most relevant to this appeal - to assure that the wrongfully injured will have full access to the civil justice system. Accordingly, amicus has a compelling interest in making sure that New York continues to require broad disclosure from manufacturers, contractors, and other businesses and individuals whose products, services, and conduct are responsible for harm inflicted on New York citizens. To this end, amicus submits that the Appellate, First Department's dramatic expansion of the common-interest privilege - which can only serve to restrict the discovery available to wrongfully injured plaintiffs - is inconsistent with compelling public policy and New York's commitment to limit the scope of privileges generally and the common-interest doctrine privilege in particular. It is thus respectfully submitted that the order appealed from should be reversed. PRELIMINARY STATEMENT When seeking to enforce a legal right to compensation for wrongful injury, one of the most important devices in a plaintiffs toolkit is the entitlement to take broad 1 discovery of those responsible for causing the harm. This guarantee of open disclosure, which is codified in C.P.L.R. 3101, is designed to develop relevant evidence and to promote early case resolution by ensuring that wrongdoing is brought to light well before trial. As this Court has recognized: "New York has long favored open and far-reaching discovery" as a means to "advance the function of a trial to ascertain truth and accelerate the disposition of suits." DiMichel v. S. Buffalo Ry. Co., 80 N.Y.2d 184 (1992) (citation omitted). The Appellate Division's decision and order below (the "Order") represents a dangerous expansion of New York privilege law that would, if affirmed, undermine those core interests of our legal system. Its holding, that defendants can refuse to disclose documents exchanged with any third party with whom they share a common interest, would create a privilege rule that overwhelmingly favors corporate defendants at the expense of individual plaintiffs, and would serve to keep needed evidence out of the reach of injured plaintiffs. This new rule is destined to have a particularly hard impact on tort victims, who are frequently pitted against manufacturers, contractors, hospitals, and other entities who are particularly likely to invoke this broad-scale immunity from discovery. Furthermore, the ruling upsets almost twenty years of New York case law regarding the common-interest doctrine, in which courts in this State have consistently reaffirmed the need to limit the scope of discovery-defeating privileges. 2 That case law uniformly holds that the common-interest rule was narrowly confined to situations where litigation was pending or reasonably anticipated. The Order contains no compelling justification to depart from this settled law, and the Order failed to consider any of the added obstacles it would create for victims of wrongdoing. New York has rightly viewed with skepticism any measure that would tend to restrict the flow of information to the courts and to litigants, and the common-interest doctrine is no exception. See Welch v. Globe Indem. Co., 25 A.D.2d 70, 71 (3d Dep't 1966) ("[f]he courts agree that the discovery sections [of the C.P.L.R.] are to be ... construed in order to enable a full inquiry into the elements and issues by the litigants and the courts to better serve the interests of truth and justice."). Accordingly, to ensure that plaintiffs maintain full and fair access to discovery needed to prove their claims and potential claims, it is respectfully submitted that this Court should reverse the Order and reject the unduly broad common-interest privilege that the First Department created. QUESTION FOR REVIEW Did the Appellate Division below err in adopting a sweeping common-interest privilege that is not confined to communications shared in pending or reasonably anticipated litigation, and which instead permits defendants to freely disclose privileged information to anyone sharing a "common legal interest," yet still withhold that information from disclosure to a plaintiffs? 3 STATEMENT OF THE CASE Amicus largely adopts Appellants' statement of the Factual Background and Procedural History, as set forth in Appellant's Opening Brief, to the extent relevant to amicus's argument, and adds only a short summary of the Order below The Appellate Division addressed a question that it had "never squarely decided" before, although many other New York courts have done so: i.e., whether the standard for invoking New York's common-interest privilege requires that "the communication must affect pending or reasonably anticipated litigation." Order at 6. Despite "acknowledg[ing] that a line of New York cases" has recognized this limitation, the court below chose to follow case law from other jurisdictions and endorsed a broad common-interest privilege that was not grounded in New York case law. Id. at 11-12. The Appellate Division explained that keeping the privilege limited like it had been for 20 years "would make poor legal as well as poor business policy," and that its new approach makes "better policy." Id. at 14. While the particular facts of this case (in which counterparties to a proposed merger exchanged privileged communications prior to closing) appeared to inform the court's decision, the Order is not limited to its facts. Instead, its holding was couched in sweeping terms: "In today's business environment, pending or reasonably anticipated litigation is not a necessary element of the common-interest privilege," as "business entities often have important legal interests to protect even without the 4 looming specter of litigation." Id. at 2-3. This dramatic expansion of the privilege raises serious concerns for NYSTLA. Accordingly, Amicus respectfully submits this brief for the benefit of the Court to help expose why the First Department's new privilege rule makes bad policy, and to highlight why personal injury victims, no less than business entities, also have important legal interests to protect - interests that the Order undermines. ARGUMENT THIS COURT SHOULD REINSTATE NEW YORK'S LONG-STANDING LITIGATION PRONG OF THE COMMON INTEREST DOCTRINE Liberal discovery is a bedrock of New York's adversary system. See 6-3101 N.Y. Civil Practice: CPLR (Weinstein, Korn & Miller) P 3101.01 (2d ed. 2015) ("A basic tenet governing pretrial disclosure in New York jurisprudence is to ensure that, even within the adversarial settings of civil litigation, opposing counsel exchange all documents and information material to the prosecution or defense of an action.") Full disclosure serves as "a means of enhancing the fairness of the trial process and the prospects for settlement without trial," and thus, it is a black-letter principle that the scope of discovery "should include all information reasonably calculated to lead to relevant evidence." Id. at P 3101.04. While a broad discovery rule benefits parties in a variety of litigation settings, it is utterly indispensable to plaintiffs in the personal injury context. See New York 5 Plaintiffs Personal Injury Forms 5, Discovery and Litigation (2008) ("Discovery strategy, and what you obtain from the defense through discovery, is often the key to success in personal injury litigation.") In comparison to defendants, wrongful injury plaintiffs are typically on the short end of an especially significant asymmetry of information. Unlike much commercial litigation, where the plaintiff is a company or sophisticated businessperson who has had direct dealings with the defendant, in personal injury cases, the plaintiff often has never interacted directly with the defendant other than in connection with the injury-causing event and thus has little or no insight into the circumstances that may have contributed to her loss. Consider for example: In patient or elder abuse cases, only the hospital or elder care facility will be able to shed light on whether it undertook an appropriate investigation in selecting and furnishing personnel to care for the patient. See Blieler v. Bodnar, 65 N.Y.2d 65, 73 (1985). In a negligence suit arising from a vehicular accident, the victim may need to show that the driver was acting within the scope of his employment - information that will be in the exclusive possession of the defendants. See D'Amico v. Christie, 71 N.Y.2d 76, 79 (1987). In the labor context, a worker often requires evidence from the contractor (and/ or subcontractor) to establish that the contractor exercised the required degree 6 of supervisory control over the portion of the work that gave rise to his injury. See Ross v. Curtis-Palmer Hydro-Blee. Co., 81 N.Y.2d 494, 505-06 (1985). In consumer fraud and false advertising cases, a manufacturer is uniquely positioned to know whether substantiation exists for the advertising claims or business practices that are alleged to be deceptive. See Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, NA., 85 N.Y.2d 20, 26 (1995). In products liability litigation involving a failure to warn, "the consumer is not on an equal footing with the manufacturer who is in a unique position to know the specific risks involved," and thus, discovery into the manufacturer's understanding of those risks is needed to determine whether the warning given is adequate in light of "the manufacturer's knowledge of the nature and extent of the dangers from foreseeable use of its product." Cooley v. Carter-Wallace 102 A.D.2d 642, 644, 648-49 (4th Dep't 1984). In each of these cases - and in countless other cases in which amicus's members seek to vindicate the rights of the wrongfully injured - the common denominator is that recovery depends on the defendant "opening its books" to the plaintiff. The baseline rule is C.P.L.R. 3101's "sweeping exhortation" that "[t]here shall be full disclosure of all evidence material and necessary in the prosecution or defense of an action, regardless of the burden of proof." ONeiff v. Oakgrove Constr., 71 N.Y.2d 521, 526 (1988) (citing C.P.L.R. 3101(a)). The defendant's obligation to 7 disclose relevant material is limited only by the availability of evidentiary privileges, which New York construes narrowly to minimize their interference with the truth- seeking process. See Spectrum ..fys. v. Chem. Bank, 78 N.Y.2d 371, 377 (1991). And any claim of privilege is lost unless confidentiality is scrupulously preserved, "for when a secret is out it is out for all time and cannot be caught again like a bird and put back in its cage." People v. Bloom, 193 N.Y. 1, 10 (1908). The Order on appeal turns the rule of privilege on its head, as it provides defendants with a bottomless immunity bath in which to immerse material information that would otherwise be discoverable by plaintiffs. If affirmed, the Order would give defendants ample license to share privileged materials with third parties with impunity so long as it is done under the cover of a "common legal interest," and would give them a new basis to deny their adversaries the right to discover those materials. This would be an affront to the truth-seeking process, and a serious blow to victims who will be denied critical evidence from culpable parties. This impermissible "carving out of a large class of communications between potential parties so as to immunize their communications between themselves and counsel for other parties" is precisely what the first New York courts to recognize the common-interest privilege warned about, and it is why they took pains to limit the scope of the privilege. Aetna Cas. & Sur. Co. v. Certain Underwriters at Uoyd's London, 176 Misc.2d 605, 612 (Sup. Ct. N.Y. County 1998); see also In re Megan-Racine Assocs., 8 Inc., 189 B.R. 562, 570, 573 (N.D.N.Y. 1995) (ruling that New York would only recognize a narrow common-interest privilege; explaining that "[a] narrow interpretation of privileges rests on the assumption that while privileges have some social good, there is the concern that they may be used as a device for cover-ups"). For 20 years, New York courts had heeded those warnings and refused to expand the common-interest privilege any further. See, e.g., Hudson Valley Marine, Inc. v. Town of Cortlandt, 30 A.D.3d 377, 378 (2d Dep't 2006); Parisi v. Leppard, 172 Misc. 2d 951, 956 (Sup. Ct. Nassau County 1997); see also Allied Irish Banks, p.Lc. v. Bank of Am., NA., 252 F.R.D. 163, 171 (S.D.N.Y. 2008). The Order, however, did not even address these legitimate concerns. It takes no stretch of the imagination to see how the resulting rule disparately harms personal injury victims. Consider the five scenarios outlined supra at 7 -8: Hospitals or elder care facilities may use management companies to run their day-to-day operations. But in a negligent hiring case, if counsel for the management company has investigated an employee's professional history and shares red flags with the facility, a "common legal interest" in jointly operating a heavily regulated institution may be used to shield those findings from discovery. On construction sites, contractors and subcontractors could assert a common interest in ensuring that the worksite is up to code. This "common legal interest" 9 could be used as a basis for withholding communications between contractors, subcontractors and their attorneys as to how legal responsibility for supervising various aspects of the project should be allocated, thus obscuring which parties supervised which parts of the work. A commercial driver responsible for a vehicular accident may work for an independent contractor hired by the company whose goods are being transported. In this situation, the company and contractor could invoke a "common legal interest" in the orderly and legal transportation of goods through interstate commerce that would serve to suppress evidence that the driver was acting within the scope of his employment at the time of the accident. To substantiate advertising claims, a manufacturer often hires a testing lab to conduct studies on the product attributes that the manufacturer wishes to advertise. Under the Order, a manufacturer could hide a lawyer's memo discussing holes in the testing methodology if the memo is shared with the lab that conducted the tests, since both the manufacturer and lab may have a "common legal interest" in surmounting challenges to the reliability of that methodology. In products liability litigation, a company exploring a potential sale of its manufacturing division may share in negotiations with a prospective buyer documents reflecting the company's evaluation of a product's known risks. Just like the parties in the case at bar, the parties to such a transaction could claim a "common legal interest" 10 in getting their deal done, and thus prevent the manufacturer's awareness of undisclosed risks from coming to light. This is just a small sampling of the numerous ways in which the Appellate Division's Order, if permitted to stand, will stifle legitimate discovery with no real justification for why this additional privilege protection is necessary or socially beneficial. The Order contains no consideration of the costs on plaintiffs who, as a consequence, will be deprived of information that cannot be gathered through other means. Nor does it reflect any consideration of the litigation advantage it will give to defendants who will be better positioned to avoid legal accountability by utilizing this vaguely defined privilege to bury damaging evidence. The Order can only impinge on the rights of victims to obtain recovery and hold wrongdoers responsible. That is an unacceptable cost of the new privilege rule that the Order would create. 11 CONCLUSION If affirmed, the Appellate Division's dramatic expansion of the common- interest privilege would deny much needed evidence to injury victims who cannot prevail on their claims without it. Thus, it is respectfully submitted that the Order should be reversed, and the matter remanded for further proceedings. Dated: New York, New York March 2, 2016 Respectfully submitted, NEW YORK STATE TRIAL LA WYERS ASSOCIATION By: Evan Gold erg, Esq., Presi t 132 Nassau Street, 2nd Float , New York, New York 10038 Phone: (212) 349-5890 Fax: (212) 608-2310 12