Court Opinion

ID: 5748571
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:53:25.995561+00
Date Added: 2024-06-11T08:41:13.296892
License: Public Domain

Friedman, J. (concurring).
The question presented is whether *204defendants Greenberg and Smith, former directors and officers of American International Group, Inc. (AIG), are entitled to an order compelling AIG to produce documents reflecting the legal advice on the transactions at issue that the company received— and that Greenberg and Smith themselves, in their capacities as directors and officers, also received—during the time Greenberg and Smith served on AIG’s board. As more fully discussed below, it is my view that the laws of both New York (the state of AIG’s principal place of business and the forum of this litigation) and Delaware (the state of AIG’s incorporation) entitle the former directors to review these documents, notwithstanding that the documents are shielded from others by AIG’s attorney-client privilege. I therefore concur in the reversal of Supreme Court’s denial of the motion to compel document production.
At the outset, I observe that, given the absence of any conflict between New York law and Delaware law on the issue presented, I see no need for us to resolve the dispute concerning which state’s law governs. Without taking a position on that question, I acknowledge that Greenberg and Smith have made a strong case for the application of Delaware law. Whether a former director is entitled, by virtue of that status, to have access to legal advice the corporation received during his or her tenure on the board seems to be a question of internal corporate governance, not of evidence, privilege or procedure generally (cf. Rubinstein v Bullard, 285 AD2d 366, 367 [2001] [director’s “access to minutes and corporate records” was an “issue( ) of corporate governance”]). Still, since the law is the same in both Delaware and New York, we need not resolve the choice of law issue. I am writing separately because, unlike the majority, I am not prepared to say that, if there were a conflict, New York law would be applicable, and, unlike Justice McGuire, I believe that we should make clear that, under New York law as under Delaware law, Greenberg and Smith are entitled to the documents.
The Delaware courts have held that a corporation cannot assert the attorney-client privilege to deny a former director access to legal advice provided to the corporation while the director served on the corporation’s board (see Moore Bus. Forms, Inc. v Cordant Holdings Corp., 1996 WL 307444, 1996 Del Ch LEXIS 56 [1996], appeal refused 682 A2d 625 [Del 1996]; Kirby v Kirby, 1987 WL 14862, 1987 Del Ch LEXIS 463 [1987]; accord Glidden Co. v Jandernoa, 173 FED 459, 473 [WD Mich 1997] [holding that, under Delaware law, former directors were entitled to access to legal advice the corporation received during the period they served on the board]; see also Wechsler v Squad*205ron, Ellenoff, Plesent & Sheinfeld, LLP, 994 F Supp 202, 211-212 [SD NY 1998] [citing Moore, Kirby and Glidden, inter alia, for the proposition that “a director is entitled to discovery of privileged documents from the time he was a director”]).* Nothing in these decisions supports AIG’s contention that this rule applies only to closely held corporations. Indeed, in a Delaware derivative action in which Greenberg and Smith have been sued based on their alleged conduct as directors and officers of AIG (Teachers’ Retirement Sys. of La. v Maurice R. Greenberg et al., C.A. No. 20106 [Del Ch]), the Delaware Chancery Court issued an order in July 2007 that resolved the identical question presented here in favor of Greenberg and Smith.
I believe that the application of New York law would lead to the same result. In Fochetta v Schlackman (257 AD2d 546 [1999]), the plaintiff, a former principal of the defendant corporations, challenged the validity of the surrender of his stock in the corporations. The appeal concerned the plaintiff’s motion to compel the corporations to produce documents reflecting legal advice the entities had received prior to the plaintiffs surrender of his stock. In holding that the plaintiff was entitled to production of such materials, this Court stated (id. at 546 [citation omitted]):
“Given the extent of plaintiffs ownership interest and managerial involvement in defendant corporations prior to the disputed stock surrender, the motion court properly determined that the attorney-client privilege was not properly invoked by defendants to deny plaintiff access to otherwise privileged pre-surrender materials essential to the proof of his claims.”
Here, Greenberg and Smith, like the plaintiff in Fochetta, had extensive “managerial involvement” in the corporation with which they were formerly associated. In fact, besides being directors, Greenberg was AIG’s chairman and chief executive officer, and Smith was its chief financial officer, at the time of the transactions in question. Further, the complaint in this action alleges that Greenberg and Smith were the executives who *206caused AIG to enter into the challenged transactions, and AIG does not deny that this was the case. AIG’s contention that the Fochetta holding should be limited to closely held corporations is not persuasive; a director of a public corporation is entitled to rely on the legal advice of corporate counsel on purely corporate matters no less than a director of a closely held corporation. Accordingly, I conclude that Greenberg and Smith are entitled to review the documents in question under New York law.
Contrary to AIG’s contention, the Court of Appeals’ decision in Tekni-Plex, Inc. v Meyner & Landis (89 NY2d 123 [1996]), which is cited in Fochetta, does not require us to deny Green-berg and Smith access to the privileged documents in question. In Tekni-Plex, the Court of Appeals affirmed an order enjoining Tekni-Plex’s former outside counsel (Meyner and Landis [M&L]) from disclosing to Tekni-Plex’s former director (Tang) confidential communications between Tekni-Plex and the firm relating to environmental compliance that were generated during Tang’s tenure on Tekni-Plex’s board. The Court of Appeals made this determination on the specific ground that “the record fail[ed] to establish that M&L also represented Tang individually on these matters” (89 NY2d at 130). As commentators have observed, the basis for the Tekni-Plex result was the absence of “factual support for [Tang’s] assertion” that he was a “joint client with the corporation” (Sher and Dely, When Former Director Battles Company, NYLJ, Dec. 2, 2002, at SI, col 1). The same article noted that the Tekni-Plex decision “left open whether a director who had intimate involvement in the privileged communications at issue [as Greenberg and Smith did here] is entitled to those communications after leaving the company” (id.).
In contrast to the silence of the record in Tekni-Plex, here, both Greenberg and Smith have affirmatively alleged, in their respective answers, that they engaged in the conduct for which they are now being sued in reliance on the legal advice of AIG’s counsel, and AIG has not disputed the truth of this allegation. Further, there is no suggestion that any conflict of interest existed at the time of the subject transactions between AIG, on the one hand, and either Greenberg or Smith, on the other, that would have obligated the executives to retain separate counsel to advise them individually on such matters. In the latter regard, it is noteworthy that AIG was originally named as a defendant in this action but has since settled plaintiffs’ claims against it. Under these circumstances, affording Greenberg and *207Smith access to the documents in question is consistent with Tekni-Plex, in accord with Fochetta, and fundamentally fair.
It should be noted that, at this juncture, we are called upon to determine only whether Greenberg and Smith are entitled to production of the documents in question. What use, if any, the former directors may make of such documents, or of the legal advice reflected therein, in defending this action, is a question for another day.
Finally, I am not persuaded by the alternative ground Supreme Court adduced for denying the former directors’ motion, namely, that plaintiffs (the Attorney General and Superintendent of Insurance), by their “recent amendment of the complaint,” have “eliminate^] [from their case] the element of scienter which would implicate advice of counsel” as a defense (Spitzer v American Intl. Group, 2006 NY Slip Op 30372[U], *2). We need not decide whether plaintiffs could, as they claim, prevail on their causes of action under the Martin Act (General Business Law § 352-c [1] [a], [c]) and Executive Law § 63 (12), as pleaded in the amended complaint, without proving scienter. Even if we assume for the sake of argument that plaintiffs are correct on this point, documents reflecting the legal advice AIG received concerning the very transactions under attack plainly constitute “matter material and necessary” to the defense of this action under CPLR 3101 (a), a category long held to be broader than that of evidence admissible at trial (see Siegel, NY Prac § 344, at 550 [4th ed]).

 Although Greenberg and Smith characterize Wechsler as a case applying New York law, the decision does not indicate which state’s law the court viewed as applicable. The corporation at issue in Wechsler was, like AIG, a Delaware corporation with its principal place of business in New York (see In re Towers Fin. Corp. Noteholders Litig., 1995 WL 571888, *2, 1995 US Dist LEXIS 21147, *5 [SD NY 1995]).