In-house and outside deal lawyers sometimes face this sad love story. Two separate but aligned entities fall in love with a third entity and enter joint-venture negotiations. During the dating period, the aligned entities’ lawyers conduct due diligence, provide their clients with legal advice on the results, and share the privileged information with each other.
Love at First Sight
The Hackensack University Medical Center and Carrier Clinic, Inc., a NJ behavior healthcare provider, wanted to establish a substance abuse and rehabilitation center in Mahwah, NJ, and entered joint-venture negotiations with JNL Management, and its manager, Jonathan Lasko. The parties contemplated that HUMC and Carrier would jointly own a non-profit management entity and JNL would own 100% of a for-profit real-estate entity, and signed a LOI to that effect.
Due Diligence Dating
HUMC and Carrier retained separate counsel, and each oversaw the pre-deal due diligence but shared information and collaborated on the deal. In January 2018, HUMC’s due diligence revealed that Lasko had personal and business ties to Philip Esformes, a Miami healthcare executive who was then under indictment and awaiting trial for Medicare fraud. He was later convicted, as you may read here.
Valentine’s Day Privilege Sharing
On February 14, 2018, HUMC executives, including its General Counsel, participated in a conference call with Carrier’s representatives and outside attorney, who was a former DOJ lawyer. Carrier’s lawyer discussed Lasko’s relationship with Esformes, and the legal risks associated with moving forward with the joint venture. HUMC’s president and Carrier’s outside counsel verified the “legal advice” portion of the conversation in declarations, available here and here, but there was no common–interest agreement between the two.
It’s not a dozen roses, but let’s be honest—sharing privileged information on Valentine’s Day is a cool gift. Except here, where