A New York federal court in 2005recognized the common interest doctrine in a case involving a breach of contract dispute between Merrill Lynch & Co. and Allegheny Energy Inc. Merrill Lynch gave its auditor copies of two reports on internal investigations that were conducted by its in-house and outside counsel — on the condition that the records be kept confidential. Allegheny subpoenaed the reports, claiming that any privilege was waived when Merrill Lynch gave the reports to the auditor. In July 2005 Manhattan federal district court judge Harold Baer Jr., said that while courts “are split in their treatment of disclosures to a corporation’s accountants or auditors,” he upheld the privilege, reasoning that there was no “adversarial” relationship between the company and its auditor.

However in another case, a company called Medinol sued Boston Scientific in 2001, accusing it of theft of intellectual property.

Medinol wanted to see the minutes of a meeting at Boston Scientific regarding an internal investigation of the company’s exposure to costly litigation. Boston Scientific had already disclosed the minutes to its auditor, Ernst & Young, which used them when preparing the company’s financial return.

The judge, Alvin K. Hellerstein, ruled in 2002 that because Boston Scientific had already turned over the documents to its auditors, it had waived the privilege governing their confidentiality. “In order for auditors to properly do their job, they must not share common interests with the company they audit,” Judge Hellerstein wrote.

We shall see…