Parties in a joint attorney-client relationship who give little thought to the discoverability of privileged communications until a conflict emerges may be surprised to learn that a former joint client can compel the disclosure of communications within the scope of the parties' representation. In Newsome v. Lawson, the U.S. District Court for the District of Delaware granted a joint client's motion to compel the production of privileged communications from a joint attorney, despite the objections of the other joint client. The decision reinforces the importance of addressing potential conflicts with clients at the outset of a joint representation, according to leaders in the ABA Section of Litigation.
A Joint Relationship Turns Sour
The plaintiff in Newsome was the liquidating trustee for a reorganized subsidiary company. The subsidiary had previously participated in a joint attorney-client relationship with its parent company and a corporate law firm. After the subsidiary declared bankruptcy, the trustee sued the law firm for breach of fiduciary duty, attorney malpractice, and related claims. During preliminary discovery, the law firm refused to turn over privileged communications relating to the joint representation. The trustee moved to compel production of the documents.
The court began its analysis with a review of In re Teleglobe Communications Corp., which sets out the contours and exceptions to the joint-client privilege when, as in the classic Righteous Brothers' song, former joint clients "lose that lovin' feelin'." As explained in Teleglobe, persons outside the joint representation generally may obtain privileged communications made within the joint representation only if all the joint clients consent to waiving the privilege.
The joint-client privilege is subject to exceptions. Under the adverse-litigation exception, all communications made in the course of the joint representation are discoverable when former joint clients sue one another. The court noted that the application of the adverse-litigation exception to a suit by a joint client against joint-attorneys—as opposed to a suit against another joint client—was a matter of first impression in the Third Circuit.
After reviewing decisions from outside the circuit, the court concluded that the adverse-litigation exception was not limited to lawsuits between former joint clients, and that joint clients reasonably expect access to all privileged information within the scope of the joint representation. "As a result, a joint attorney may not withhold from one joint client privileged communications from the joint representation, even if the other (non-party) joint client refuses to consent to the disclosure."
The court rejected the defendant's argument that privilege protected the disclosure of documents because a conflict of interest had developed between the two joint clients. The court found that even with the development of diverging interests, co-clients have no reasonable expectations of confidentiality with respect to communications relevant to the matter of common interest. Instead, the "touchstone for compelling disclosure is whether the communications are relevant to the matter of common interest that is the subject of the joint representation."
Addressing the Issue at the Outset of a Matter
Attorneys representing multiple parties should "keep their eyes open and acknowledge what is happening" throughout the life of a matter, suggest Bradford S. Babbitt, cochair of the Section of Litigation's Commercial & Business Litigation Committee. Moreover, "it is critically important for attorneys—who should be more attuned to the issue than clients—to provide advice at the outset of a matter regarding how potential future conflicts will be addressed." Although attorneys and joint clients may hesitate to broach the topic early in a case, "that is the precise moment to recognize the potential issue," adds Babbitt.
"Attorneys who represent clients in a joint relationship should be careful to define the scope of the joint representation up front in a common interest agreement if, in fact, one can be used," recommends Merrick L. "Rick" Gross, cochair of the Section's Business Torts & Unfair Competition Committee. "A common interest agreement should manage the clients' expectations of the attorney by explaining the course of action that will be followed upon the development of a conflict between the clients, including: (1) who, among the joint clients, the attorney will continue to represent and (2) how privileged communications pre-dating the conflict will be treated in the event of a subsequent lawsuit among the parties (such as a stipulation that notes that while the privilege is waived among the parties, the parties agree that any such communications will be subject to a confidentiality order in subsequent litigation)."
Although written agreements can help attorneys and clients navigate problems that arise during their relationship, joint clients who seek to limit full disclosure of information within the joint relationship—such as competitors seeking to allow unilateral and undiscoverable communications between individual clients and a joint attorney—might find themselves out of luck. "I am not sure that parties could contractually agree to get around the general rule" of full disclosure outlined in this decision, states Babbitt. "There also could be issues under the applicable state disciplinary rules, as an attorney usually has a duty of full disclosure to his client and to represent the interests of his client to his utmost ability," adds Gross.
Matthew S. Mulqueen is an associate editor for Litigation News.