On November 10, 2015, the Second Circuit, reversed the lower court’s denial of a petition to quash a IRS summon. The lower court had found that the sharing of a tax memo prepared by Shaeffler’s lawyers with a consortium of banks in connection with an offering of an $11 million refinancing destroyed the attorney-client privilege; also it found that the memo was not protected as work product (because the memo was prepared in a moment in which Shaeffler only anticipated scrutiny by the IRS and not necessarily litigation). The Second Circuit instead found that

“the attorney-client privilege was not waived by the sharing of documents [among which a Ernst & Young tax memo] with a consortium of banks sharing a common legal interest with the appellants and that the summons sought material protected by the work-product doctrine.”

The decision is significant because the Court enlarged the common interest doctrine to cases in which parties were not engaged in litigation, in particular to a case in which parties “had a strong common interest in the outcome of [a possible legal encounter with the IRS].” Here “the nature and viability of the refinancing and restructuring had a commercial component and tax law component … [and therefore] a common interest in seeing … law applied in a particular way”. The appellants had an interest in securing a refinancing while the Consortium had an interest in protecting its investment “goal… dependent on the resolution of legal tax issues”. Sharing information related to those issues “is not a waiver of the privilege” . Schaeffler v. United States, 806 F.3d 34 (2d Cir. 2015).

For more information, Francesca Giannoni-Crystal