Joint Clients and the Privilege—A New Wrinkle

The joint-client doctrine, which applies when one lawyer represents two or more clients, holds that the attorney–client privilege protects lawyer–client communications against all others but not when the clients become adverse to each other.  Separately, the at-issue waiver doctrine provides that a client waives the attorney–client privilege when he claims that the attorney breached a Joint Clientduty arising from the attorney–client relationship.

But what happens to the privilege when one, but not the other, of the lawyer’s joint clients sues the lawyer for malpractice—can the nonsuing client assert the privilege to prevent disclosure of attorney–client communications made in the course of joint representation?

In what appears to be a matter of first impression, a California appellate court answered in the negative, ruling that one joint client waives the privilege for all joint clients when he charges the attorney with malpractice.  Anten v. Superior Court, 183 Cal. Rptr. 3d 422 (Ct. App. 2015).  You may read the decision here.

In Anten, Lewis Anten and Arnold and Lillian Rubin retained a law firm to represent them on a matter of common interest.  Anten later sued the law firm for malpractice, but the Rubins did not.  Anten sought discovery of communications between the Rubins and the law firm, but the law firm asserted that the attorney–client privilege protected those communications and the Rubins had not waived it.

The court rejected the privilege and identified two bases for its ruling.  First, the court determined that, because the Anten and the Rubins were joint clients of the law firm, their communications were confidential and privileged as to strangers, but not between themselves.  In other words, the Rubins had no expectation of confidentiality with respect to Anten.  No confidentiality equals no privilege.

Second, the court held that considerations of “fundamental fairness” weighed in favor of vitiating the privilege.  It found unfair the situation where one joint client could prevent a lawyer from introducing communications in a suit to collect his fee.  And conversely, it found unfair the situation where a nonsuing client could prevent disclosure of communications in the other client’s suit against the lawyer.  The court also found “substantial” the risk of collusion between the joint clients in the former situation and the lawyer-nonsuing client in the latter situation.

PoP Analysis.  Given the joint-client doctrine, the court’s ruling on the first-impression issue is not surprising.  Joint clients must know and understand that communications with their lawyer, whether in separate or joint meetings, are not confidential between themselves.  And they must know that it is unlikely that they can raise the privilege to preclude disclosure of their communications in any subsequent suit involving the clients and lawyer as adversaries.

The Anten case provides lawyers with a take-away as well.  Lawyers representing multiple clients should ensure that their clients understand the lack of confidentiality between themselves of lawyer communications—in any situation. A best practice is to include these statements in the engagement agreement or otherwise having the client sign an acknowledgement.

Privilege Protections for Inter–Company Communications

A North Carolina court held that the attorney–client privilege extends to legal-advice communications between a company and one of its minority corporate owners.  And importantly, the court included a good discussion of the interplay between the “joint client” doctrine and the common interest doctrine.  SCR–Tech LLC v. Evonik Energy Servs., LLC, 2013 WL 4134602 (N.C.Super. Ct. Aug. 13, 2013).  You may access the court’s opinion here.

The underlying issue is whether the attorney–client privilege protects communications (involving legal counsel) shared between a company and an affiliated company, such as in a parent–subsidiary relationship.  And if so, at what degrSlide1ee of relationship does the privilege apply.  Does the privilege extend to a wholly owned subsidiary? A minority corporate owner? Two companies with common ownership?

The SCR–Tech case sheds some light on the matter.  Ebinger, a corporation, owned 37% of SCR–Tech GmbH which, in turn, owned 100% of SCR–Tech LLC.  Ebinger, SCR–Tech LLC, and legal counsel engaged in several communications pertaining to negotiations that ultimately led to the sale of SCR–Tech LLC to an unrelated third entity.  In subsequent litigation, the defendant moved to compel these communications, claiming that Ebinger was not SCR–Tech LLC’s parent for purposes of extending the attorney–client privilege.  The court disagreed and invoked concepts of “joint client” and the common interest doctrine to support its decision.

Joint Client Doctrine and Common Interest Doctrine

The court noted that many lawyers and courts improperly interchange the “joint client” doctrine and the common interest doctrine (or joint defense doctrine).  These concepts are distinct and contain “analytical differences.”  The joint client doctrine focuses on client identity and the relationship between two entities.

The common interest doctrine, however, focuses on the common legal interests between two entities regardless of their relationship.  The doctrine is not an independent privilege, but rather a doctrine of non-waiver that allows parties with aligned legal interests to share privileged information without waiving the privilege.

Sufficient Relationship?

Rather than drawing a bright-line rule that a corporation must own a certain percentage of an affiliated corporate entity before the joint client doctrine applies, the court looked at the totality of circumstances to determine whether the entities “are sufficiently united such they may properly be considered joint clients.” If the degree of common ownership is sufficient to evidence control of the subject matter of the putatively privileged communications, then the court will apply the joint client doctrine and consider both entities as one client for privilege purposes.

But if the circumstances reveal that the relationship does not rise to that level, then the court will look more at the common legal interest between the two entities to determine whether the common interest doctrine protects the sharing of privileged information.

PoP Analysis.

The SCR–Tech court followed what is, in effect, a proportional analysis.  The privilege’s application will not depend on whether one corporate entity owns or controls a certain percentage of another.  Rather, the court will look at the identity of legal interest, including the percentage ownership, to determine whether it should consider both entities as one client for privilege purposes.  The greater the ownership interest, the greater likelihood of sustaining the privilege under the joint client doctrine.  The lesser the ownership interest, then the less likelihood that the joint client doctrine applies.

Practitioners should note this proportional analysis and consider entering into a common interest (or joint defense) agreement with an affiliated company.  Even if a court later rules that the joint client doctrine does not apply, then the corporate entities can rely upon the common interest doctrine to protect the sharing of privileged communications.  For an excellent discussion of the contents of a common interest agreement, see the DRI article profiled in an earlier post.

Excellent IADC Article on Joint Defense Agreements and Joint Defense Privilege 1

Lawyers representing multiple defendants in a single lawsuit regularly share information such as witness-interview notes, deposition summaries, client-interview notes, expert-interview notes, legal memoranda, and other confidentiallawyersagreement information relevant to all defendants.  Defendants are not alone in this information-sharing–plaintiffs’ lawyers in multi-plaintiff cases often share documents in which they have a common interest.  Several privilege-related questions arise when parties share confidential information.  Does sharing confidential information waive any applicable evidentiary privilege or the work-product doctrine? Is a joint defense agreement necessary to preserve privilege assertions? What provisions should a joint defense agreement contain? Are there any disadvantages to entering a joint defense agreement?

In their excellent article, In Unity There is Strength: The Advantages (and Disadvantages) of Joint Defense Groups, 80 Def. Counsel J. 29 (Jan. 2013), published in IADC’s reputable Defense Counsel Journal, Chicago trial lawyers Brad Nahrstadt and Brandon Rogers explore all aspects of joint defense agreements, including the scope of the joint defense privilege.  The article discusses the advantages and drawbacks of forming information-sharing groups and what pre-litigation events trigger a joint defense situation necessary to secure the privilege.  The authors identify a very helpful list of 33 provisions that parties should consider including in their joint defense agreement and, importantly, discuss ethical conflict-of-interest issues that may arise.

The authors remind us that the joint defense privilege, also called the common interest privilege, is not actually an independent privilege, but rather a doctrine of non-waiver.  The joint defense privilege precludes waiver of other evidentiary privileges that protect information shared with the defense group as well as communications among lawyers for parties within the group.  You may access the article at this link, and I recommend it as a “must read” for lawyers drafting joint defense agreements and otherwise wanting to share privileged information without waiving the privilege.

My thanks to authors Brad Nahrstadt and Brandon Rogers and the International Association of Defense Counsel (IADC) for permission to link this article in this post.