Since 1979, Texas legislation has explicitly recognized an accountant-client privilege. A New York state court recently determined that it could order disclosure of any specific information subject to that privilege. The ruling in New York v. PricewaterhouseCoopers, issued October 26, 2016, suggests that judges have complete discretion to disregard the accountant-client privilege.
New York Attorney General’s Investigation of ExxonMobil regarding Climate Change
The issue of accountant-client privilege arose in the context of the high profile investigation by New York’s Attorney General (“AG”) regarding ExxonMobil’s actions and statements relating to climate change. The AG had issued a subpoena to PricewaterhouseCoopers (“PWC”) for certain documents held by PWC relating to PWC’s accounting work for ExxonMobil. PWC refused to provide the documents, based on ExxonMobil’s assertion that the documents were subject to the accountant-client privilege recognized by Texas law. ExxonMobil is headquartered in Texas. The AG sought a court order from a New York state court compelling ExxonMobil to allow production of the documents.
The New York court ordered ExxonMobil to allow production of the documents. The court ruled that the Texas statute recognizing the privilege gave judges the power to order disclosure of any specific information subject to an accountant-client privilege. The court did not indicate any restriction on a judge’s power to order disclosure of accountant-client privileged information. (The court also ruled that the dispute was subject to New York, rather than Texas law, and that New York does not recognize an accountant-client privilege.)
Ruling Suggests that Courts May Disregard Accountant-Client Privilege
The New York court ruling appears to say that a judge in any court, for any reason, may order disclosure of specific information even if subject to an accountant-client privilege. Documents and other information that must be disclosed upon the order of any court would not seem to have much of a privilege, especially if the judge has complete discretion as to what must be disclosed.
A Poorly Drafted Statute?
The pertinent subsection of the Texas statute states that accountants are not prohibited from disclosing information that is required to be disclosed under a court order. All that is required is that the order is signed by a judge and:
- is addressed to the accountant;
- mentions the client by name; and
- requests specific information concerning the client.
Admittedly, the statute appears to put no limit on the discretion of a judge to order disclosure of information subject to the accountant-client privilege.
ExxonMobil argued that this subsection had to be read in the context of the immediately preceding subsection of the statute, which refers to an investigation under the Internal Revenue Code or under the Securities Exchange Act. The New York court rejected this argument, saying that the statute’s terms give no indication that the judge’s discretion to order disclosure was limited by the prior subsection.
Until the Statutory Language Is Improved, Do Not Count on this Privilege
Unless the Texas Legislature, which next meets in 2017, improves the statute, this decision suggests that no person should count on the Texas accountant-client privilege effectively protecting information from disclosure.