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Schaeffler v. United States - 806 F.3d 34 (2d Cir. 2015)

Rule:

Attorney work product is, of course, protected from discovery. Fed. R. Civ. P. 26(b)(3). The doctrine is intended to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy with an eye toward litigation, free from unnecessary intrusion by his adversaries. Documents prepared in anticipation of litigation are work product, even when they are also intended to assist in business dealings. The United States Court of Appeals for the Second Circuit reviews the district court's ruling on a work-product claim for abuse of discretion. 

Facts:

The Schaeffler Group is an automotive and industrial parts supplier incorporated in Germany. Mr. Schaeffler, a resident of Dallas, Texas, is an 80 percent owner of the ultimate parent of the Schaeffler Group. This appeal arises from an attempt by the Schaeffler Group to acquire a minority interest in a German company, Continental AG, through a tender offer for its stock. German law prohibits tender offers that seek less than all of a company's shares. As a result, a partial offer can be accomplished only by setting an offering price estimated to result in the acquisition of the desired number of shares. To finance the offer, the Schaeffler Group executed an 11 billion Euro loan agreement with a consortium of banks. On September 14, 2008, two days before the end of the acceptance period, Lehman Brothers Holding Inc. announced its bankruptcy, the stock market collapsed, and the economic crisis worsened. The market price of Continental AG shares, already declining, fell accordingly. Because German law prohibited the Schaeffler Group from withdrawing its tender offer, far more shareholders than expected or desired accepted the offer, leaving the Schaeffler Group the owner of nearly 89.9 percent of outstanding Continental AG shares. These circumstances combined to threaten the Schaeffler Group's solvency and ability to meet its payment obligations to the Consortium. As a result, appellants and the Consortium perceived an urgent need to refinance the acquisition debt and to restructure the Schaeffler Group. Given the complex and novel refinancing and restructuring that ensued, appellants anticipated scrutiny by the IRS. As anticipated, the IRS began an audit of appellants that led to the issuance of the summons at issue in this appeal. In denying the petition to quash, the district court held that appellants had waived their attorney-client privilege by sharing the withheld documents with the Consortium.

Issue:

Were the attorney-client privilege--and the coterminous tax practitioner privilege of 26 U.S.C.S. § 7525(a)(1) waived by sharing documents with a consortium of banks having a common interest with appellants?

Answer:

No

Conclusion:

The Court held that the attorney-client privilege--and the coterminous tax practitioner privilege of 26 U.S.C.S. § 7525(a)(1)--was not waived by sharing documents with a consortium of banks having a common interest with appellants of a sufficient legal character to prevent a waiver by the sharing of those communications. The communications regarding tax opinions were made in the course of an ongoing common enterprise and intended to further the enterprise. An IRS summons sought materials protected by the work-product doctrine. A tax memo and related documents contained legal analysis that candidly discussed the attorney's litigation strategies and appraisal of likelihood of success. The advice was specifically aimed at addressing urgent circumstances arising from the need for a refinancing and restructuring and was necessarily geared to an anticipated audit and subsequent litigation.

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