On August 28, 2025, Justice Bannon of the New York County Commercial Division issued a decision in AREPIII MVTS, LLC v. El-Gamal, 2025 NY Slip Op. 33243(U), holding that the attorney-client privilege was waived by the presence of a vendor, explaining:
Regarding MOT SEQ 006, per the status conference order dated April 2025, the plaintiffs were directed to produce documents that were withheld as communications with counsel and agents related to the UCC disposition as described in the first row of plaintiffs’ privilege log previously served on October 25, 2024. This production was due by May 1, 2025. Of the 773 documents included in this privilege log, the plaintiffs produced 528 of these documents. In MOT SEQ 006, the defendants seek an order compelling the plaintiffs to produce the remaining 245 documents. In opposition, the plaintiffs argue that of the 245 documents it failed to produce, 237 of them were withheld citing attorney-client privilege. Of the remaining 8 documents, one document was “improperly classified” in this privilege log, and the remaining 7 documents were non-responsive to the defendants’ demands. The plaintiff’s argument that these communications, which included nonparties Newmark Group, Inc., and Mannion Auctions, the auction marketer and auction company hired by the plaintiffs to effectuate a sale of their interest in the subject property, are privileged is unavailing.
To be sure, the attorney-client privilege shields from disclosure confidential communications between an attorney and client made for the purpose of obtaining legal advice. Generally, communications made in the presence of third parties, whose presence is known to the client, are not privileged from disclosure because they are not deemed confidential, and a client similarly waives the privilege if a communication is made in confidence but subsequently revealed to a third party. It is well settled that the party asserting the privilege bears the initial burden of establishing its entitlement to the privilege.
As observed by the plaintiffs, an exception to the privilege may exist as to statements made to the agents of the attorney or client which retain their confidential (and therefore, privileged) character, where the presence of such third parties is deemed necessary to enable the attorney client communication and the client has a reasonable expectation of confidentiality. However, the plaintiffs provide no persuasive argument, authority or proof to support their position that email communications between them and their counsel and a real estate auction house or the marketing service for the auction house are necessary to enable any attorney- client communication or that the plaintiffs had any reasonable expectation of confidentiality. This is particularly true considering that the agency exception theory must be narrowly construed. As observed by the defendants, Newmark Group, Inc., and Mannion Auctions were hired by the plaintiffs as independent functionaries to conduct a UCC auction based on their purported experience in conducting commercially reasonable auctions. They were hired to organize, coordinate and market the sale of collateral independent of counsel’s provision of legal services. The plaintiffs’ do not meaningfully refute that characterization. Their conclusory assertions of nonwaiver are insufficient. In any event, the court considered the plaintiffs’ present arguments at the time of the April 23, 2025, status conference and directed them to produce the subject documents. The plaintiffs again are cautioned that failure to provide document discovery in a timely manner may result in sanctions, including the preclusion of evidence.
(Internal quotations and citations omitted).