## Facts

- Spectrum Systems International Corp. provided computer software consulting services to Chemical Bank through spring 1987.
- In June 1987, Chemical’s general counsel retained outside counsel to investigate possible fraud involving employees and vendors and to advise on litigation options.
- Outside counsel conducted interviews of bank personnel, a former officer involved with the Spectrum relationship, and Spectrum representatives.
- Counsel prepared a written report (Aug. 20, 1987) addressed to senior legal leadership, containing factual narrative and an evaluation of potential claims against Spectrum, damages, weaknesses, and evidentiary sufficiency.
- In October 1988, Spectrum sued Chemical for $33,600 in unpaid fees; Chemical counterclaimed that Spectrum falsified invoices and overcharged the bank for at least $100,000.
- During discovery, Spectrum sought production of the investigative report and related materials.
- Chemical sought a protective order, asserting attorney–client privilege, attorney work product, and materials prepared in anticipation of litigation.
- The trial court ordered production without in camera review; the intermediate appellate court permitted in camera review but largely found the report nonprivileged as “business” advice and not focused on litigation.
- Chemical appealed to New York’s highest court.

## Issues

1. Whether the portion of outside counsel’s investigative report concerning Spectrum was a confidential attorney–client communication made for the purpose of rendering legal advice and therefore privileged.
2. Whether the report and related materials were protected as attorney work product or as materials prepared in anticipation of litigation under New York discovery rules.

## Decision

- The Court of Appeals held that the portion of the report concerning Spectrum was protected by the attorney–client privilege and was not discoverable.
- The court rejected the characterization of the report as primarily “business” advice where counsel was retained to investigate and provide legal advice, including litigation options.
- The court emphasized that factual recitations within a lawyer’s communication do not defeat privilege when conveyed as part of legal advice.
- The court reiterated that privilege protects communications, not underlying facts; the facts remain obtainable through other discovery methods.
- The court reversed the lower court order to the extent it compelled disclosure of the Spectrum-related portion of the report and answered the certified question in the negative.

## Legal Principles

- Attorney–client privilege protects attorney-to-client communications made to facilitate the rendering of legal advice within a professional legal relationship.
- Privilege can apply to counsel’s investigative report when the investigation and written assessment are undertaken by counsel to advise the client; it does not arise merely because a nonlegal investigative report is later transmitted to a lawyer.
- The absence of pending or imminent litigation does not defeat privilege when legal advice is sought about potential liability, claims, or litigation options.
- Inclusion of factual information in an attorney’s advice does not remove the communication from privilege; however, the underlying facts remain discoverable from nonprivileged sources.
- Attorney work product protection is strong but narrower in scope, generally covering materials reflecting a lawyer’s professional skills (e.g., legal analysis and theory), while purely factual materials may fall outside it; “prepared for litigation” materials may be discoverable upon a showing of substantial need and undue hardship.

## Conclusion

New York’s highest court barred discovery of the Spectrum-related portion of outside counsel’s investigative report because it constituted a confidential attorney–client communication providing legal assessment, even though it included factual narrative gathered during counsel’s investigation.


Spectrum Sys. Int'l Corp. v. Chem. Bank, 581 N.E.2d 1055 (N.Y. 1991)