What Lawyers Do

Corporate and insurance attorneys will often bend over backwards to prevent the disclosure of client documents. But in a recent case, New York County Supreme Court Justice Sheila Abdus-Salaam saw through the smokescreen of attorney-client privilege created by defense counsel and ordered the production of financial documents that were sought in order to collect on a judgment.

[The case is Auratequ Systems Int'l, Inc. v. Black-NYC, LLC, and the order was issued on Oct. 28, 2008].

The short version of the facts: judgment was entered in favor of the petitioner after he won an arbitration award. When he attempted to obtain financial information from the defendant, Three Goodfellows, Inc., by way of an information subpoena in order to collect on the judgment, its attorneys gave them the Heisman, saying, I don’t think so.

More specifically, they claimed that the information it had in its possession, such as transfers of assets, assets, and names of corporate officers, was protected by the attorney-client privilege.

The Court was not receptive to this argument. It found that the information was the type commonly found in bank and other financial records and further, citing established case law, stated that the attorney-client privilege applies to legal advice and not these types of record.  As the Court put it, “A corporation cannot ‘funnel’ its records and documents into the hands of its attorneys and then claim privilege.”

Bravo to the Court for seeing through this smokescreen.

The judge, however, denied petitioner’s request for sanctions to be imposed on the defendant. And therein lies the problem with the NYC court system, at least in the eyes of this practicioner.

That is because when this type of situation arises in another setting, the party with the sought after documents, if unscrupulous, may consider it a wise course of action not to disclose them. After all, what’s the downside? The other party may not be inclined to expend the time and resources to get them, and the worst case scenario is that that the court will order them to be disclosed.

I am aware that sanctions are a tough measure. In an ideal world, they should be rarely doled out. But the problem is that in NYC many attorneys are inclined to push the envelope, and their relative anonymity in this large city with an overburdened court system encourages this type of behavior. The unfortunate result is that for many attorneys, maintaing and cultivating one’s reputation does not factor significantly into ethical decision-making. Put differently, there is less self-policing than in other places. Hence you have attorneys withholding relevant financial documents for no justifiable reason….