Source And Choice Of Privilege Law In Diversity Cases — Part II

June 12, 2019

Last week's Privilege Point explained that federal courts handling diversity cases must find the source or sources of the appropriate state's privilege law – sometimes a mixture of statute, common law and court rules. In determining which state's privilege law applies, federal courts should apply their host state's choice of law rule. That analysis often results in the host state's privilege law applying, but not always.

Unfortunately, federal courts sometimes seem to reflexively apply their host state's privilege law – rather than applying their host state's choice of law principles. For instance, in Aerojet Rocketdyne, Inc. v. Global Aerospace, Inc. , the court properly held that "[t]he law of the forum state governs claims of attorney-client privilege in diversity cases." No. 2:17-cv-01515 KJM AC, 2019 U.S. Dist. LEXIS 40911, at *10 (E.D. Cal. Mar. 13, 2019). That governing "law" includes the forum state's choice of law principles -- which may lead the court to apply some other state's privilege law. But the court immediately followed that correct statement with this blunt conclusion: "[a]ccordingly, California law controls here" – meaning its privilege law. Id. A couple weeks later, another court undertook the proper analysis. In Argos Holdings Inc. v. Wilmington N.A., No. 18cv5773 (DLC), 2019 U.S. Dist. LEXIS 53104, at *5-6 (S.D.N.Y. Mar. 28, 2019), the court applied its host state's privilege law, but explained its reasoning: "because this is a diversity action regarding a claim for which New York law supplies the rule of decision."

Federal courts usually apply their host state's privilege law in diversity cases, but it can be difficult to tell if they have: (1) erroneously done so by short-circuiting the proper approach; or (2) correctly applied their host state's choice of law rules. Next week's Privilege Point will address another choice of law issue.

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