On December 12, 2024, Justice Cohen of the New York County Commercial Division issued a decision in AmBase Corp. v. 111 W. 57th Sponsor LLC, 2024 NY Slip Op. 34400(U), holding that the fiduciary exception to attorney-client privilege does not apply when fiduciary duties have been waived, explaining:
In the corporate context, where a shareholder (or, as here, an investor in a company) brings suit against corporate management for breach of fiduciary duty or similar wrongdoing, courts have carved out a fiduciary exception to the privilege that otherwise attaches to communications between management and corporate counsel. If Plaintiffs’ assertion—that by virtue of their membership interest in Partners, they share in the privilege between Sponsor and Partners’ attorneys—were true, there would be no need to rely upon an exception to the privilege. Thus, the issue is whether the
fiduciary exception applies.Under the circumstances presented, Plaintiffs are not entitled to Sponsor Defendants’ attorney-client communication under the narrow fiduciary exception given the parties’ adversarial relationship. The principle behind the fiduciary exception is that the privilege should not permit a fiduciary to shield communications from the parties on whose behalf the fiduciary is acting. Here, Plaintiffs do not dispute that all fiduciary duties were contractually waived. The existence of an implied duty of good faith and fair dealing—which is inherent in every contract—does not trigger the type of fiduciary relationship that can vitiate attorney-client privilege between the entity and its counsel. Furthermore, Plaintiffs have not cited any case law for the proposition that where, as is the case here, all fiduciary duties have been waived, the Court may still find a fiduciary relationship between the parties.
Second, the applicability of the fiduciary exception depends on whether the real client of the attorney rendering counsel was the fiduciary in his or her individual capacity or the beneficiaries to whom the fiduciary duty was owed. The question of good cause for disclosure arises only after it has been determined that the party seeking the disclosure was the real client entitled to invoke the exception. Here, Plaintiffs have failed to demonstrate that they were the real client of Kasowitz. Thus, because plaintiffs were not the real client entitled to invoke the fiduciary exception, the good cause analysis of whether they are entitled to attorney-client communications is not applicable.
(Internal quotations and citations omitted).