On April 9, 2026, Justice Masley of the New York County Commercial Division issued a decision in Chaowai 101 AOA LLC v. 101 A of A LLC, 2026 NY Slip Op. 31493(U), holding that the new controlling member of a business was not entitled to pre-change of control privileged communications if they related to a dispute in which the old and new controlling members were adverse, explaining:
As a general rule, when an attorney client relationship is terminated, a client has presumptive access to the attorney’s entire file on the represented matter, subject to narrow exceptions. However, a former attorney should not be required to disclose documents which might violate a duty of nondisclosure owed to a third party. The privilege belongs to the client and attaches if information is disclosed in confidence to the attorney for the purpose of obtaining legal advice or services.
Here, Fried Frank argues that it should not be required to turn over the entire casefile because at the time it represented HoldCo leading up to this litigation, HoldCo shared a common legal interest with Minskoff Member, New Member, and Edward J. Minskoff, and turning over documents and communication to HoldCo, and by extension PE Member, would violate a duty of nondisclosure it owed to these other parties. HoldCo acknowledges that turning over documents to HoldCo, includes turning them over to PE Member as well, since pursuant to the LLC Agreement, the Manager shall have all the rights and powers as are necessary or advisable to the management of the business and affairs of the Company in accordance with this Agreement.
While the parties fail to cite any controlling authority which is directly on point with this unique situation, where management duties of an LLC, transfer between two adverse members mid-litigation, the Court of Appeals has addressed similar issues when a corporation has changed ownership. When ownership of a corporation changes hands, whether the attorney-client relationship transfers as well to the new owners turns on the practical consequences rather than the formalities of the particular transaction.
In Tekni-Plex, a corporation (Old-Tekni) was acquired by plaintiff (New-Tekni) and plaintiff sought to compel, Old-Tekni’s former counsel to provide its file related to OldTekni’s representation. The Court of Appeals distinguished communications regarding the company’s day-to-day operations, which it determined belonged to the successor, New-Tekni, as opposed to records the firm created during, and related to the merger/acquisition. The Court held that during the merger process, the predecessor and successor company were in an adverse relationship, and thus the attorney-client privilege with respect to these communications still belonged to Old-Tekni, and the firm was entitled to refuse disclosure to its successor. Similarly, in Barasch v Williams Real Estate Co., Inc., the First Department held that a corporate director and shareholder was not entitled to communications made by that corporation’s in-house counsel, who was advising the corporation on how to handle that director’s hostility towards a specific transaction. A director of a corporation should not be allowed to use her corporate position to waive the privilege that attaches to the corporation in a litigation relating to her own rights or in which she is asserting claims that are or may be adverse to the corporation.
Here, Fried Frank was retained by HoldCo, under Minskoff Member’s management, to represent it in potential adverse litigation commenced by PE Member. Thus, applying the rationale in Tekni-Plex, and considering the practical consequences rather than the formalities of the particular transaction, HoldCo is not entitled to communications created by Fried Frank in preparation for litigation commenced by PE Member. The practical reality of this dispute is that there are two competing interests, those of (1) Minskoff Member, New Member, and Edward J. Minskoff (Minskoff Entities), and those of (2) PE Member, and the operative question of the dispute is whether the LLC Agreement allows for the transactions that occurred. Allowing PE Member to obtain communications made to directly defend its own allegations, would contravene the intended purpose of the attorney-client privilege and would prevent a company from freely consulting with counsel when dealing with a dispute involving a sitting member. However, as stated above, to the extent that Fried Frank is in possession of records and communications created in its representation of HoldCo, which are unrelated to any adverse relationship with PE Member, HoldCo is entitled to those records.
(Internal quotations and citations omitted).