Common interest agreements allow separate parties pursuing a common legal interest to share information protected by the attorney-client privilege without waiving that privilege.
But a common legal interest requires that both parties be represented by counsel at the time of the communication, according to the U.S. District Court for the Southern District of California. A common business or commercial interest is not sufficient to protect otherwise privileged communication from disclosure.
A Protectable Common Interest Must Be Legal, Not Commercial
It is well-settled that attorney-client privileged communications that are disclosed to third parties are no longer privileged. A narrow exception to that rule is the “common interest” doctrine. But, according to the court in Regents of Univ. of California v. Affymetrix, Inc., a party seeking to protect communications made under a purported common interest agreement must demonstrate that there was “a common legal, as opposed to commercial, interest” between the parties, and the communications were “designed to further that legal effort.”
In Regents, one company’s scientist sent an email seeking legal advice to the company’s in-house attorneys. The scientist copied another scientist, who was employed by a second company, on the email. At the time, the first company was using the second company to design and manufacture products, and the parties were negotiating a license and supply agreement.
A competitor subsequently sued the first company and sought disclosure of this email. The first company argued that the email was protected from disclosure by the common interest exception because the two companies were pursuing a common interest. The competitor argued there was no evidence that the second company was represented by counsel, or that there was a common legal interest between the parties at that time.
Absence of Legal Counsel Precludes the Exception
The Regents court identified no Ninth Circuit precedent explicitly requiring both parties to be represented by counsel for the common interest exception to apply or extending the exception to an unrepresented third party. Nevertheless, the court identified several non-binding authorities, including the Restatement (Third) of Law Governing Lawyers, which suggest that unrepresented parties cannot participate in a common interest agreement.
According to the court, these authorities were persuasive because the whole intent of the common interest exception is “to permit attorneys to develop a joint legal strategy; the development of legal strategy requires the participation of lawyers.” The court refused to apply the exception because there was no evidence that the second company was represented by counsel at the time of the email, or that there was an actual, non-speculative common legal interest between the parties at that time.
Lessons for Invoking a Common Interest
The Regents court correctly refused to recognize a common interest privilege based on the “lack of sufficient proof by the proponent of nondisclosure to show the exception to waiver applies,” says Robert J. Will, St. Louis, MO, a division director in the ABA Section of Litigation and immediate past cochair of the Section of Litigation’s Pretrial Practice & Discovery Committee. “Courts strictly interpret the attorney-client privilege…and the common defense privilege is just an expansion of the privilege to multiple parties, so it generally is strictly construed, too,” says Edna Selan Epstein, Chicago, IL, member of the Section’s Attorney-Client Privilege Task Force and author of the two-volume treatise Attorney-Client Privilege and the Work-Product Doctrine (6th Edition 2017).
This decision may be cause for concern because of its wider impact on how lawyers treat their client privileges. “Courts appear to be eroding the attorney-client privilege in various ways in the discovery process, finding more reasons to disclose what otherwise is clearly an attorney-client communication, which is having a chilling effect on lawyers and clients alike in communicating in candor for fear of later disclosure,” observes Will.
Although the common interest privilege is premised on a communication between a client and an attorney, Epstein hopes that courts might “try to find a way to include a pro se party within the circle of privilege.” It is noteworthy that the Regents court cited as persuasive authority a case finding an email between two parties, without counsel being copied, to be protected by a common interest agreement, which was inconsistent with its holding, notes Epstein.
Clarity and client instruction are important keys to ensuring that appropriate privileges are preserved. “Attorneys must make sure that all privileged communications are clearly and conspicuously marked and train employees and agents that they should never send privileged communications outside of the organization without first clearing such disclosures with counsel,” advises Will. Ultimately, clients should be encouraged to defer to counsel in determining when a communication can and should be shared with a common interest party. “Attorneys should be the only persons deciding whether a privileged communication should be shared with another party pursuant to a common interest agreement, lest an inadvertent waiver arise by sharing communications outside the circle of privilege protection,” suggests Epstein.
Peter J. Murphy is a contributing editor for Litigation News.
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