Thinking of Merging? Read this Blog.

June 10, 2016 at 8:44 am Leave a comment

One of the issues of which financial institutions have to be particularly mindful in this increasingly litigious world is how much they say to their attorney is privileged (i.e. shielded from disclosure to third parties).  I have previously talked about in a previous blog how federal law makes it almost impossible for credit unions to shield an attorney’s work product from examiners.  Now, a decision released yesterday by New York’s Court of Appeals, its highest court, underscores just how narrow that privilege is, especially for those of you involved in credit unions that are thinking about merging.

As a general rule of thumb, you can call up your attorney to get legal advice and that communication will be privileged.  Furthermore, if not only you but another credit union face pending litigation or reasonably anticipate a lawsuit, the privilege is extended so that you may work on a common defense.  But if that same conversation takes place with a third party that is not involved in your litigation, the privilege is waived.

In Ambac Assurance Corporation v.  Countrywide Home Loans, Inc. Bank of America was sued and the plaintiffs wanted access to 400 communications that took place between BoA and Countrywide between the time that the two companies had decided to merge but before the merger was finalized.  Plaintiffs argued that while BoA didn’t have to hand over communications between it and its attorneys, any communications between BoA and Countrywide were third party communications for which there is no privilege.

BoA argued to the Court of Appeals that even though it was not facing any litigation involving Countrywide at the time, it shared a “common legal interest” in facilitating their merger.  The plaintiffs argued, and the Court of Appeals agreed, that merger discussions aren’t protected by privilege.  It concluded that when two parties are engaged in or reasonably anticipate litigation in which they share a common legal interest, the threat of disclosure may chill the exchange of information necessary to coordinate a legal strategy. In contrast, “the same cannot be said of clients who share a common legal interest in a commercial transaction or other common problem but do not reasonably anticipate litigation.”  In other words, don’t assume all the information you are sharing to facilitate merger discussions is free from discovery if someone decides to sue you in the future.

Legislative Update

If any of you are involved in funding gift cards, or like your faithful blogger, finds gift certificates tucked away in the top draw  about a year and a half  after they are given to him, then the Legislature passed a bill earlier this week (S. 4771-e  Funke\ A. 7610 Ewith) with which you should familiarize yourself.  The bill increases to 25 months from 13 the amount of time a gift certificate must be dormant before a service fee can be assessed on the balance.  It also stipulates that these fees must be replenished when a member redeems a certificate within three years.  Finally, all gift certificates have to be valid for a period of at least five years.

By the way, in NY a gift certificate is defined as ”a written promise or electronic payment device that: (i) is usable at a single merchant or an affiliated group of merchants that share the same name, mark, or logo, or is usable at multiple, unaffiliated merchants or service providers; and (ii) is issued in a specified amount; and (iii) may or may not be increased in value or reloaded; and (iv) is purchased and/or loaded on a prepaid basis for the future purchase or delivery of any goods or services; and (v) is honored upon presentation.”  N.Y. Gen. Bus. Law § 396-i (McKinney).  The bill now goes to the Governor.

McWatters Nomination to Export Import Bank Blocked Again

The Export Import Bank and the NCUA have about as much in common as Kim Kardashian and Mother Teresa but yet their fates are strangely intertwined. Without J. Mark McWatters, the Ex-Im bank doesn’t have a quorum to operate; and so long as McWatters stays NCUA has a quorum.  Considering that there are proposals like FOM reform still waiting to be finalized, this is a big deal.

Senator Richard Shelby, Chairman of the Senate Banking Committee, a steadfast opponent of the Bank, refuses to take up the  nomination.  Supporters of the Export Import Bank tried to do an end run around Shelby yesterday.  North Dakota Senator Heidi Heitkamp (D-ND) asked the Senate to take up the nomination with unanimous consent. To the surprise of no one, Shelby objected but the maneuver gave Democrats an excuse to voice their increasing frustrations over the stalemate.

 

 

Entry filed under: Advocacy, General, Legal Watch, New York State. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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