Ordinarily, when a communication between an attorney and her client is disclosed to a third party, that communication loses its privileged status. The common interest privilege operates as an exception to that rule that allows the privilege to extend to communications with certain third parties. For the common interest doctrine to apply, the communication must be in furtherance of a legal interest that is shared by the client and the third party. Historically, New York courts additionally required that the communication relate to legal advice regarding pending or prospective litigation. On December 4, 2014, in a landmark decision, a New York appellate court did away with this additional requirement.
Darren Teshima, Co-Leader of Orrick's Complex Litigation and Dispute Resolution practice, helps clients intelligently manage risk and assert their rights through litigation. To safeguard clients from both anticipated and unforeseen dangers, Darren ensures each client’s litigation strategy and insurance coverage align with its business objectives.
Specializing in the technology and finance sectors, Darren litigates high stakes commercial disputes, focusing on insurance coverage disputes. He has successfully handled litigation related to residential mortgage-backed securities (RMBS), directors & officers (D&O) coverage and cyber insurance for some of the largest data breaches in history. For example, he recently defended Credit Suisse at trial in a case brought by monoline insurer MBIA, one of the few post-financial crisis RMBS cases to go to trial.
Darren also helps clients avoid litigation by crafting innovative strategies that address cutting-edge cyber, data and cryptocurrency concerns; as well as D&O and professional liability. Whether assisting a startup focused on rapid growth, or a global corporation expanding into the digital future, Darren tailors his strategy to each client’s unique business model and objectives.
He has been recognized for his work by Legal 500, which lists Darren as a recommended lawyer in the Insurance: Advice to Policyholders category. Darren has been named a Law360 Rising Star, one of the "Best Lawyers Under 40" by the National Asian Pacific American Bar Association (NAPABA), and is a fellow of the American Bar Foundation.
Darren is also passionate about his pro bono work and community involvement. The Legal Services for Children has given him its Pro Bono Advocate Award twice. His pro bono work includes administrative trials and hearings on behalf of asylum seekers and low-income tenants, and litigation advice to nonprofit organizations. He is the Chair of the board of directors of Asian Americans Advancing Justice | Asian Law Caucus, and serves on the boards of the Center for Gender & Refugee Studies and Legal Services for Children.
Posts by: Darren S. Teshima
In 2006, Bear Stearns agreed to a $250 million “neither admit nor deny” settlement with the SEC to settle charges that it facilitated late trading and deceptive market timing by its hedge fund customers. $160 million of that settlement payment was characterized in the SEC’s Order as disgorgement of profits, even though Bear Stearns contended its own profits from the trades were less than $17 million. J.P. Morgan (the successor to Bear Stearns) sought D&O insurance coverage for the portion of the disgorgement payment that was attributable to the profits of its hedge fund customers, rather than revenue it received. The insurers denied the Bank’s claim on the ground that New York public policy prohibits insurance coverage for disgorgement payments. Disgorgement, the reasoning goes, is the return of ill-gotten gains and therefore payment for intentionally caused harm. The insurers also argued that disgorgement does not qualify as a “loss” or “damage” under terms of the insurance policies. The trial court agreed and dismissed Bear Stearns coverage suit against its D&O insurers.
On June 11 the New York Court of Appeal reinstated Bear Stearns’s coverage action. J.P. Morgan Securities Inc., et al. v. Vigilant Ins. Co., et al., 2013 N.Y. LEXIS 1465 (June 11, 2013). The Court of Appeal held that the Court must look beyond the labels of the SEC Order and even beyond its findings that the Bank’s securities law violations were willful. Those findings, the Court held, were not sufficient to conclusively establish that Bear Stearns intentionally caused harm. In short, the Court of Appeal allows the possibility of coverage for disgorgement if the insured can demonstrate that the payment, although labeled “disgorgement”, is actually payment for something else that might otherwise qualify for insurance coverage.
The June 11 ruling is notable for another reason – it came the week before SEC Chairwoman Mary Jo White announced that the SEC would depart in some cases from its long-established practice of “neither admit nor deny” settlements. It is an open question whether the Court of Appeal would have allowed J.P. Morgan/Bear Stearns’ coverage action to proceed if its settlement with the SEC had not included a neither admit nor deny provision. The Court’s willingness to look beyond the disgorgement label further highlights the importance of avoiding binding admissions wherever possible, so as to leave open every possible coverage avenue.