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Whether documents or communications are subject to the attorney-client privilege (and thus not subject to disclosure) is a frequently litigated issue.  Given the various factual scenarios that can affect what is or isn’t protected, such matters often require judicial interpretation.

Generally speaking, once someone shares a privileged communication with a third party, the privilege is waived and the communication becomes fair game.  However, as with most general rules, there are exceptions.  One of the most frequent exceptions is the so-called “common interest doctrine.”  The basic premise is that a third party may be privy to an attorney-client privileged communication without losing the privilege if the communication is made for the purpose of furthering a nearly identical legal interest shared by the client and the third party. Hyatt v. State of Cal. Franchise Tax Bd., 105 A.D.3d 186, 205 (2d Dep’t 2013).  Courts have interpreted the “furthering a nearly identical legal interest” portion to require that the communication be made in pending litigation or in reasonable anticipation of litigation where the client and third party have a common legal interest. Id., Aetna Cas. and Sur. Co. v. Certain Underwriters at Lloyd’s London, 176 Misc.2d 605 (N.Y. Sup. 1998), aff’d, 263 A.D.2d 367 (1^st Dep’t 1999).

In June, the New York Court of Appeals, in Ambac Assur. Corp. v Countrywide Home Loans, Inc., 27 N.Y.3d 616 (N.Y. 2016), overturned a decision of the Appellate Division, First Department and ruled that the threat of litigation is a necessary element of the “furthering a nearly identical legal interest” portion of the common interest doctrine.  The Court refused to expand the doctrine to privileged documents shared between companies during a pending merger.  Back in 2013, the New York County Supreme Court refused to expand the common interest doctrine.  Subsequent to that decision, Bank of America/Countrywide appealed to the Appellate Division, which reversed the trial court and found that the documents exchanged during the course of a merger between Bank of America and Countrywide were, in fact, protected.  The First Department found at the time that business entities often have important legal interests to protect even without a potential lawsuit.

Specifically, Ambac challenged Bank of America’s withholding of approximately 400 communications between Bank of America and Countrywide after the signing of the merger plan in January 2008 but before the merger closed that July. Bank of America identified the communications in a privilege log and claimed they were protected from disclosure by the attorney-client privilege because they pertained to a number of legal issues the companies needed to resolve jointly in anticipation of the merger, such as filing disclosures, securing regulatory approvals, reviewing contractual obligations to third parties, maintaining employee benefit plans, and obtaining legal advice on state and federal tax consequences.  The parties were represented by separate counsel but the merger agreement directed them to share privileged information related to these pre-closing issues and purported to protect the information from outside disclosure.  Bank of America argued that the merger agreement evidenced the parties’ shared legal interest and the fact that the parties sought to maintain confidentiality, thus protecting the relevant communications from discovery.

Ambac, however, argued that the voluntary sharing of confidential material before the merger waived any privilege because Bank of America and Countrywide were not affiliated entities at the time of disclosure and did not share a common legal interest in actual or anticipated litigation.

The Court of Appeals, in refusing to expand the common interest doctrine, held: “We do not perceive a need to extend the common interest doctrine to communications made in the absence of pending or anticipated litigation, and any benefits that may attend such an expansion of the doctrine are outweighed by the substantial loss of relevant evidence, as well as the potential for abuse.”

The Court noted that while mandatory disclosure would inhibit the exchange of privileged information between parties who share a common legal interest in pending or reasonably expected litigation, “the same cannot be said of clients who share a common legal interest in a commercial transaction or other common problem but do not reasonably anticipate litigation.”

The Court added, “Put simply, when businesses share a common interest in closing a complex transaction, their shared interest in the transaction’s completion is already an adequate incentive for exchanging information necessary to achieve that end…Defendants have not presented any evidence to suggest that a corporate crisis existed in New York over the last twenty years when our courts restricted the common interest doctrine to pending or anticipated litigation, and we doubt that one will occur as a result of our decision today.”

This decision provides important clarification not only for litigants.  Businesses need to have a clear understanding of when they could be waiving the attorney-client privilege and when they could be required to turn over privileged communications. The Court of Appeals has now confirmed that if there is no pending or reasonably anticipated litigation and you share communications that otherwise would be protected by the attorney-client privilege with a third party who you think shares a common legal interest, you will be waiving the privilege.

Jeffrey Basso, a senior attorney at Campolo, Middleton & McCormick, LLP, represents business owners, corporations, corporate officers, shareholders, and investors in a variety of litigation matters in state and federal court involving business and contractual disputes.  An aggressive litigator, Jeff has vast experience prosecuting and defending matters on behalf of clients in actions involving employment contracts, non-compete agreements, trade secrets, fiduciary duty, breach of contract, hour and wage disputes, real estate transactions, investments, and construction matters. 

By Patrick McCormick

If it isn’t extreme and outrageous to film a trauma patient’s last minutes alive, the pronouncement of his death, and the family notification, then broadcast those intimate moments on national television in the name of entertainment, all without consent – then what is?

A recent decision from the New York State Court of Appeals leaves the legal community—and the family of that trauma patient—asking that very question.

In April 2011, Mark Chanko, 83, was struck by a sanitation truck as he crossed York Avenue to buy milk at a local deli.  He was still conscious and able to speak when he arrived at the emergency room of New York-Presbyterian Hospital/Weill Cornell Medical Center, but died within an hour.  Chief Surgery Resident Sebastian Schubl pronounced Mr. Chanko dead and notified his devastated family.

Unbeknownst to the Chankos, ABC News employees filming a medical documentary series, “NY Med,” had recorded Mr. Chanko’s treatment in the ER—including deeply personal moments such as moans of pain, asking if his wife knew what happened, and his actual death—as well as the family receiving the shattering news.

One evening over a year later, Mr. Chanko’s wife, Anita, turned on an episode of “NY Med.”   She recognized Dr. Schubl, then suddenly heard her husband’s voice.  The image was blurred and no name was used, but there was no doubt that she was witnessing her husband’s final moments.  Eventually she heard someone say, “Are you ready to pronounce him?”

Shocked by the fact that the worst night of their lives was televised to millions of people across the country without their knowledge, Mr. Chanko’s family filed complaints with the New York State Department of Health, the hospital, a hospital accrediting group, and the United States Department of Health and Human Services.  New York State eventually cited the hospital for violating Mr. Chanko’s privacy, and the family decided to commence a lawsuit against ABC, the hospital, and Dr. Schubl, among others.

The Supreme Court ultimately dismissed all but the causes of action for breach of physician-patient confidentiality against the hospital and Dr. Schubl and intentional infliction of emotional distress against those defendants and ABC.  The defendants appealed, and the Appellate Division dismissed the complaint in its entirety.  Chanko v. American Broadcasting Cos. Inc., 122 A.D.3d 487 (1^st Dep’t 2014).  The Chankos were granted leave to appeal.

The Court of Appeals reinstated the breach of physician-patient privilege claim, determining that the plaintiffs had sufficiently alleged the elements for that cause of action, namely: “(1) the existence of a physician-patient relationship; (2) the physician’s acquisition of information relating to the patient’s treatment or diagnosis; (3) the disclosure of such confidential information to a person not connected with the patient’s medical treatment, in a manner that allows the patient to be identified; (4) lack of consent for that disclosure; and (5) damages.”  Chanko v. American Broadcasting Companies Inc., __ N.E.3d__ (2016).  The Court rejected the defendants’ argument that the disclosed medical information must be of an embarrassing nature to support such a cause of action.  The Court also rejected the argument that the blurring of Mr. Chanko’s face on screen and the fact that his name was not used warranted dismissal of the breach of confidentiality claim.  Not only had someone outside the family recognized Mr. Chanko on the episode, but sensitive medical information and the patient’s identity had been revealed to the ABC employees themselves throughout the filming and editing process.  The Court surmised that additional information would come out in discovery to either support or negate the plaintiffs’ claim, but that they had met their burden to defeat the motion to dismiss.

Things got murkier, however, when the Court turned to the intentional infliction of emotional distress claim.  The Court revisited the four elements of the cause of action: “(i) extreme and outrageous conduct; (ii) intent to cause, or disregard of a substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and injury; and (iv) severe emotional distress.”  Chanko (2016), quoting Howell v. New York Post Co., 81 N.Y.2d 115, 121 (1993).  “‘Liability has been found,’” the Court warned, “‘only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.’”  Id., quoting Howell, 81 N.Y.2d at 122.

The Court ultimately determined that while the plaintiffs’ allegations facially addressed all of the required elements of the claim, the allegations “do not rise to the level necessary to satisfy the outrageousness element.”  Id.  While the Court found the defendants’ conduct “offensive,” it was not “so atrocious and utterly intolerable” to support the claim.  Id.  The decision includes a highlight reel of conduct that the Court of Appeals and Appellate Divisions have deemed similarly not outrageous enough, such as a newspaper’s publication of a photo of a patient in a psychiatric facility (thus publicizing that person’s status as a patient there) and a TV station showing recognizable images of rape victims after repeatedly promising that they would not be identifiable.  Id.

This decision highlights what some may view as the dangers of an appellate court—in this case, New York’s highest—evaluating the facts on the merits, rather than considering only the sufficiency of a pleading (and leaving it to a trial judge or jury to sift through the facts).  The case also serves as a warning: if you’re ever headed to the emergency room, make sure to wear something you wouldn’t mind being photographed in.

On May 18, 2016, the United States Department of Labor released final updates to the Fair Labor Standards Act (FLSA), extending overtime eligibility to over 4.2 million workers.  The key change is to double the salary threshold – from $23,660 to $47,476 per year ($455 to $913 per week) – under which most salaried employees are now guaranteed overtime pay.  Employers should immediately begin preparing to comply with the updates by the effective date of December 1, 2016.

Previously, the FLSA’s salary threshold had been updated only once since the 1970s.  The change automatically entitles 35 percent of full-time salaried workers to overtime pay, based solely on salary.

The salary threshold will be automatically updated every three years beginning January 1, 2020, to counteract the prior rule’s effect of covering fewer workers each year as wages increased over time.

The new rule also increases the total annual compensation level above which highly compensated employees (“HCE”) are ineligible for overtime pay, from $100,000 to $134,004 a year.  Further, under the new rule, up to 10 percent of the salary threshold for non-HCE employees can be met by non-discretionary bonuses, incentive pay, or commissions, provided payments are made at least quarterly.

The “duties test,” which is used to determine whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay, remains unchanged.  However, fewer employers will need to apply this test due to the higher salary threshold; salary alone will provide a bright line answer as to more employees’ overtime eligibility.

Employers are advised to review their compensation and payroll policies without delay to ensure compliance by December 1, 2016.  Please contact us to discuss how the final rule will affect your organization and for compliance assistance.

Commercial property owners, landlords, and tenants should be aware that compliance with New York State’s new carbon monoxide detector law must be satisfied by June 27, 2016.  The law requires that all commercial buildings with a carbon monoxide source be equipped with carbon monoxide detection.[1]  Carbon monoxide sources include furnaces, boilers, heaters, stoves, and fireplaces that may emit carbon monoxide.  The requirements also apply to commercial buildings attached to a garage or other motor-vehicle related occupancy.

Generally, each story of the building must have a centrally located carbon monoxide detector.  In those buildings with more than 10,000 square feet per floor, detection is required in a central location as well as additional areas so that no point is more than 100 feet from detection.   The location of the detector may also depend on the location of the carbon monoxide source.

Carbon monoxide detection for buildings constructed before December 31, 2015 may either be hardwired to the building’s power supply or powered by a 10-year battery; in those buildings constructed after December 31, 2015, the detectors must be hardwired.  Landlords and building owners also have the option to install a carbon monoxide detection system that has an off-premises signal transmission.  Detectors that plug into a power outlet or combination carbon monoxide/smoke alarms will not satisfy the requirements of the law.  Noncompliance can carry civil, criminal, or administrative penalties imposed by local governments and agencies.

Commercial tenants are advised to review their lease agreements, as landlords may be able to flow down the cost of installation to tenants as “operating costs” if supported by the lease.   If you have any questions regarding compliance with the law or determining responsibility for compliance under a lease agreement, please contact us.

Please also see our Labor & Employment blog post about employer obligations regarding the new law.

[1] The law provides a narrow exception for buildings used entirely for storage.

Patrick McCormick, Esq., CMM partner and head of the firm’s Litigation & Appeals practice, will be on the faculty of a CLE program entitled “Electronic Evidence Show and Tell: Admitting Social Media Evidence” sponsored by the Suffolk County Bar Association.  The program will include a live demonstration of the proper way to admit Facebook and other social media posts and pages, text messages, and emails into evidence at trial.  The faculty also includes Robert A. Cohen, Esq. and Hon James F. Quinn (Acting Supreme Court Justice, Suffolk County) and will be moderated by Hon. John J. Leo (Supreme Court Justice, Suffolk County).

The lunchtime program will take place in the District Court Jury Room at the Cohalan Court Complex in Central Islip on Wednesday, May 11 at 12:30 p.m.  To register, please visit https://www.scba.org

In 2015, the State of New York added “familial status” as a class of persons protected under state discrimination laws, prohibiting discrimination against pregnant employees and employees with minor children.  On May 4, 2016, the New York City Human Rights Law (“NYCHRL”) will add a new protected class that offers an even greater degree of protection.  The NYCHRL will be expanded to protect “caregivers” from employment discrimination based on one’s actual or perceived status as a “caregiver.”

As amended, the NYCHRL will add “caregivers” to the increasing number of classes already covered under the law, including age, race, creed, color, national origin, gender, disability, marital status, partnership status, sexual orientation, alienage, and citizenship status.  The NYCHRL defines the term “caregiver” as “a person who provides direct and ongoing care for a minor child or a care recipient.”  The NYCHRL stops short of defining what “direct and ongoing care” means, leaving employers without guidance until either the NYCHRL provides clarification or the courts interpret the meaning.  “Covered Relatives” are broadly defined to include the following disabled persons residing in the caregiver’s household: children (including adopted, foster, or otherwise), spouses, domestic partners, parents, siblings, grandchildren or grandparents, children or parents of the caregiver’s spouse or domestic partner, or any other individuals in a familial relationship with the caregiver.  Practically speaking, the amendment’s intertwining definitions provide that a “caregiver” includes any employee providing ongoing care for a minor, a disabled relative or a non-relative living in the caregiver’s house.

As with the other protected classes, extending legal coverage to caregivers prohibits employers from discriminating against caregivers with respect to job advertising, job applications, pre-employment inquiries, hiring, compensation, or the terms and conditions of employment.  While the employee must still be able to perform the essential functions of his or her job, caregivers cannot be terminated, demoted, or denied a promotion because of their status or perceived status as a caregiver.

The new amendment does not address whether employers have the right to request proof of an employee’s caregiver status and is silent on whether employers are obligated to provide caregivers with reasonable accommodations.  To the latter, it remains to be seen if the NYCHRL follows New York State’s lead as to “familial status” discrimination, where the employer is not required to accommodate the needs of the child or children, and is not required to grant time off for the parent because of a child’s needs, or to attend school meetings, concerts, sporting events, etc., as an accommodation.  The takeaway here is that employers should uniformly apply company policies and procedures to all employees, regardless of the employee’s class status.

NYCHRL guidance is expected to be released shortly before the amendment goes into effect on May 4, 2016.  To prepare, New York City employers should consider expanding their anti-discrimination policies, anti-harassment policies, and associated training materials to include caregivers.

If an agency such as a Town Board, Planning Board, or a Board of Zoning Appeals finds that an application before it may cause a substantial adverse impact on the environment, it is required by the State Environmental Quality Review Act (“SEQRA”) to adopt a positive declaration, and require preparation of a Draft Environmental Impact Statement (“DEIS”) before it may determine the merits of the application.  The immediate impact of such a determination on an applicant is that a final ruling on an application will be substantially delayed, and a great deal of money will be spent to prepare the DEIS.  Prior to 2003, the lower courts fairly uniformly held that the applicant cannot challenge a SEQRA positive declaration in a CPLR Article 78 Petition because the SEQRA determination of significance was but the initial step in the decision-making process, and therefore did not give rise to a justiciable controversy.

In 2003, the Court of Appeals, New York’s highest court, permitted an Article 78 challenge to a SEQRA positive declaration.  In Matter of Gordon v. Rush, 100 N.Y.2d 236 (2003), the Court established a two-part test to determine when a case is far enough along (“ripe”) to permit a court to resolve the controversy.  The Court held that a SEQRA positive declaration is ripe for judicial review when two requirements are satisfied. First, “the action must ‘impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process’” and second, “there must be a finding that the apparent harm inflicted by the action ‘may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party.’”  In Gordon v. Rush, a Town Board requested that the Department of Environmental Conservation serve as SEQRA lead agency, and the DEC did so.  The DEC adopted a SEQRA negative declaration (meaning that the application would not have any significant adverse impact on the environment) and approved a wetlands permit requested by a property owner.  The Town Board then declared itself lead agency, and issued a SEQRA positive declaration, requiring the property owner to prepare a DEIS before it would consider the request for a Town coastal erosion permit.  The property owner challenged the positive declaration, and the Court of Appeals upheld its right to do so.  The Court concluded that, pursuant to SEQRA’s regulations, when a SEQRA lead agency after coordinated review makes a SEQRA determination of significance, it is binding on all other involved agencies that also have approval authority over the project.  For that reason, the Town Board was without authority to require preparation of a DEIS.

Subsequent to Gordon v. Rush, there was some confusion amongst the lower courts.  Some held that the case was limited to its unique facts, and continued to hold that a SEQRA positive declaration could not be challenged in an Article 78.  Others, applying the two-part test in Gordon v. Rush, found that a SEQRA positive declaration could be challenged.  These courts found that the requirement that a DEIS be prepared “imposed an obligation,” and that the significant delay and costs which could not be recovered could not be prevented by further administrative action or steps by the applicant. Thus the two-part Gordon v. Rush test was met.

On March 31, 2016, in Ranco Sand and Stone Corp. v. Vecchio, the Court of Appeals clarified what was intended by its decision in Gordon v. Rush.  There, the property owner leased a parcel of land to a private school bus company that used it as a bus yard and trucking station. Although the parcel at all times was zoned residential, the Town had not enforced residential zoning requirements on Ranco. Nevertheless, in 2002, Ranco applied to rezone this parcel from residential to heavy industrial use so that the use would be made lawful.  The Town Board concluded that a SEQRA positive declaration was appropriate, and that a SEQRA DEIS must be prepared.

The lower courts concluded that the case was not ripe for adjudication because future actions by the Town Board could ameliorate harm to the property owner.  The Court of Appeals agreed with the property owner that the obligation to prepare a DEIS imposed by the positive declaration satisfied the first part of the two-part test established by Gordon v. Rush, but the property owner’s complaint about delay and costs that could not be recovered was insufficient to satisfy the second part of the test.  Such impacts arise every time there is a requirement that a DEIS be prepared, and to find them sufficient to satisfy the second part of the Gordon v. Rush test would render the second part of the test meaningless, the Court of Appeals ruled.

The Court of Appeals made clear that Gordon v. Rush did not “disrupt the understanding of appellate courts that a positive declaration imposing a DEIS requirement is usually not a final agency action, and is instead an initial step in the SEQRA process.”  Rather, Gordon v. Rush “stands for the proposition where the positive declaration appears unauthorized, it may be ripe for judicial review,” such as where the action is not subject to SEQRA in the first instance (because it is a Type II action), or, as in Gordon v. Rush, a prior negative declaration by a lead agency following coordinated review is binding on other involved agencies.

It is established that an agency may not deny an application based solely on community opposition.  The Court of Appeals decision in Ranco Sand and Stone Corp. v. Vecchio was fully supported by the facts – a report had been prepared by the Planning Director which in great detail set out all the adverse impacts from the precedent of legalizing the industrial use in the residentially zoned area of the Town.  Unfortunately, one unintended outcome of the decision may be that lead agencies, such as Town Boards consisting of elected officials, may conclude that enormous public opposition to a project is best addressed by issuing a SEQRA positive declaration, hoping that the delay and cost of preparing a DEIS will cause the application to go away before a determination on the merits must be made.  Should it be apparent that this is the result of the Court of Appeals decision in Ranco Sand and Stone Corp. v. Vecchio, the Court may have to revisit its ruling.  Until then, unless a lead agency acts without authority, a mere abuse of discretion that requires an applicant to prepare a DEIS will be beyond review by the courts.