Vol. 82, No. 12, December 2009
Often during litigation, parties discover that they have similar interests on various issues. Parties with common interests may caucus and strategize together to further their mutual goals. The common interest privilege protects discussions between these similarly aligned parties. This privilege is an extension of the attorney-client privilege and protects the exchange of information among parties who share common legal interests. The privilege does not create a new privilege but is an exception to the general rule that a privilege is waived on the voluntary disclosure of otherwise protected information to a third party.
Parties often will memorialize the common interest privilege through a joint litigation agreement. This agreement is sometimes referred to as a common interest agreement. Although a formal agreement is not always necessary to use the common interest privilege (see below), it is recommended.
The common interest privilege encourages and promotes efficiency in litigation. It allows parties with aligned interests to disclose to each other information without waiving the attorney-client privilege. Such aggregation may result in faster, more efficient litigation because at least two parties are sharing resources and information, obtaining results at a faster rate and for a lower cost.1 It also may lead to the discovery of otherwise undiscoverable information that might benefit one of the parties to the agreement.2 This article provides an overview of the common interest privilege, the privilege’s effects on the attorney-client relationship, and the practical and strategic issues to be considered before entering into a joint litigation agreement with other parties.
History of the Common Interest Privilege
The common interest privilege originated more than 120 years ago and initially was referred to as the joint defense privilege. The Virginia Supreme Court was the first court to recognize the privilege, in Chahoon v. Commonwealth. The Chahoon court protected communications made among multiple defense counsel and defendants who faced conspiracy charges.3 The court summarized the common interest privilege as follows:
“The parties were jointly indicted for a conspiracy. … They might have employed the same counsel, or they might have employed different counsel, as they did. But whether they did the one thing or the other, the effect is the same, as to their right of communication to each and all of the counsel, and as to the privilege of such communication. They had the same defense to make, the act of one if furtherance of the conspiracy, being the act of all, and the counsel of each was in effect the counsel of all. … They had a right, all the accused and their counsel, to consult together about the case and the defense, and it follows as a necessary consequence, that all the information, derived by any of the counsel from such consultation, is privileged.…”4
Since Chahoon, courts and legislators have expanded the scope of the common interest privilege. It has been applied in a variety of situations, including to a contractor and a subcontractor defending a construction defect claim; a manufacturer and a distributor in a product liability case; a parent corporation and its affiliates defending corporate conduct; an employer and an employee defending allegations of misconduct; and a driver and a passenger involved in a car accident.5
Eugene M. LaFlamme, Marquette 2002, is a senior associate and Matthew R. Rosek, Marquette 2004, is an associate at McCoy & Hofbauer S.C., Waukesha. They defend corporations and insurance companies nationwide in catastrophic injury and death cases and handle construction disputes and commercial and business litigation in Wisconsin.
The authors thank summer law clerk Amy Kieffer for her assistance with the article. She is a second-year law student at the University of St. Thomas, St. Paul.
In response to the expansion of the privilege, the U.S. Supreme Court attempted to achieve uniformity by including the privilege in its 1971 proposed codification of the federal common law of privileges in the Federal Rules of Evidence.6 Congress believed that the proposal did not adequately restate the common law of privileges and, therefore, enacted a single, general rule of privilege, leaving the common interest privilege to evolve as common law.7 Federal Rule of Evidence 501 states in part:
“The privilege of a witness, person, government, State or political subdivision thereof shall be governed by the principles of the common law as they may be interpreted by the courts of the United States. … However, in civil actions and proceedings, with respect to an element of a claim of defense as to which State law supplies the rule of decision, the privilege … shall be determined in accordance with State law.”8
Therefore, the common interest privilege is now generally governed by state law. In Wisconsin, the privilege is codified at Wis. Stat. section 905.03(2) and is part of the attorney-client privilege. The Wisconsin statute reads as follows:
“A client has a privilege to refuse to disclose … confidential communication made for the purpose of facilitating the rendition of professional legal services to the client: between the client or the client’s representative, and the client’s lawyer and the lawyer’s representative; or by the client or client’s lawyer to a lawyer representing another in a matter of common interest;…”9
Many other states have adopted a similar privilege, but the scope of the laws varies. If a party in another state desires to exchange information with a similarly aligned party, it should review the applicable state law to determine the scope and availability of the privilege within that state.
Wisconsin Case Law
There is little Wisconsin case law discussing the common interest privilege. Zinda v. Louisiana Pacific Corp., a 1989 Wisconsin Supreme Court case, is the leading Wisconsin authority on the common interest privilege.10
Zinda brought a defamation and invasion of privacy suit against his former employer, Louisiana Pacific, based on a statement addressing his discharge that was published in the company’s internal newsletter.11 In response to Zinda’s complaint, Louisiana Pacific raised conditional privilege as a defense. The supreme court held that the newsletter was conditionally privileged as a communication of common interest concerning the employer-employee relationship.12 The court endorsed the language of the Restatement of Torts, which recognizes the existence of a conditional privilege in a variety of situations, one being statements made between two or more parties who have a legitimate common interest. The privilege is based on the policy that a person is entitled to learn from his or her associates what is being done in a matter in which they have an interest in common.13 The court stated that employees have a legitimate interest in knowing the reasons why a fellow employee was discharged, while employers have an interest in maintaining morale and quieting rumors that may disrupt business.14
Common Interest Agreements
Practical and strategic issues to consider before entering into a common interest agreement include the following:
- who will participate;
- whether the attorneys and information will be pooled together;
- how discovery will be conducted;
- what the common legal interests are;
- how confidential information should be defined;
- the rules for exchanging information;
- the scope of the common interest privilege; and
- the remedies for a breach of the agreement.
Written agreement documents should include the following terms:
- The parties share a common legal interest.
- The information being exchanged falls within the attorney-client privilege.
- The information being exchanged is solely to further the common interests of the parties.
- The information cannot be exchanged with or produced to a third party without the written consent of all parties to the common interest agreement.
- If any party to the common interest agreement receives a subpoena or a legal demand for materials provided under the agreement, the party must notify the other parties, and the parties will cooperate in defending the production of information.
- No party is required to share all its information with the other parties.
- Nothing in the common interest agreement precludes the independent and separate representation of the best interests of individual clients.
The Common Interest Privilege in Other States
Wisconsin is one of many states to recognize the common interest privilege. Since Congress left the privilege to evolve as common law, it is up to each state to determine the scope of the common interest privilege in its jurisdiction. While some states have codified the common interest privilege, others have allowed it to develop in case law or have not addressed the privilege. Texas is one state that has codified the common interest privilege. Texas Rule of Evidence
“A client has a privilege to refuse to disclose … confidential communications made for the purpose of facilitating the rendition of professional legal service to a client … (c) by the client or a representative of the client, or the client’s lawyer or a representative of the lawyer, to a lawyer or a representative of a lawyer representing another party in a pending litigation and concerning a matter of common interest therein.…”15
The Texas statute restricts the privilege to communications made in pending actions that concern a matter of common interest. The requirement that litigation be pending or anticipated is a deviation from the attorney-client privilege, which historically applies regardless of whether litigation has begun or is anticipated. An unpublished case, Betas Realty Group v. Tandy Corp., exemplifies how a federal trial court, applying Texas Rule 503, may deny the common interest privilege for communications exchanged before the onset of litigation. In this case, the plaintiff requested documents exchanged between codefendants Tandy and Tandycrafts before formal litigation began.16 The court denied the common-interest-privilege protection to the documents, stating:
“Tandy failed to demonstrate that its communications with Tandycrafts and Tandycraft’s counsel before March 1998 were made in the context of pending litigation. Although Tandy and Tandycraft may have acted in cooperation before March 1998 because it was in their mutual commercial interest to do so, that alone does not establish the existence of confidential communications which are protected by the privilege.”17
Unlike Texas and Wisconsin, California does not have a statutory common interest privilege. It does, however, have a statutorily recognized “joint client” and “common interest” exception to the attorney-client privilege, for situations in which “two or more clients have retained or consulted a lawyer upon a matter of common interest.”18 Since the common interest privilege has not been recognized by statute in California, the California Appeals Court in OXY Resources California LLC v. Superior Court referred to the common interest privilege as the “common interest doctrine,” to avoid suggesting that communications between parties with common interests are protected from disclosure by a privilege separate from the attorney-client privilege.19 The court characterized the common interest doctrine as a nonwaiver doctrine, to be analyzed under the same principles applicable to the attorney-client privilege.20
The Common Interest Privilege and Relationships with Clients
The common interest privilege is a useful tool to streamline litigation. Before a party agrees to enter into a common interest agreement with another party, both parties need to fully understand the ramifications of entering into such a relationship. A common interest agreement is an attractive tool for litigants. Its advantages include the ability to share information with a party who has a common legal interest without waiving the attorney-client privilege, the pooling of resources, establishment of a uniform front against opponents, and the potential discovery of otherwise undiscoverable information.
When two or more parties consent to a common interest agreement, the attorneys involved provide services to other members of the group.21 The obligation each attorney may now owe to other group members is an aspect of the privilege that is not clearly defined. The law has not firmly established whether the attorney has entered into a second attorney-client relationship or has assumed an additional fiduciary obligation. It is fair to say, however, that an attorney owes some duty to the other group members. The same courts that have recognized the creation of a second attorney-client relationship among common interest group members agree that such relationships carry the same ethical obligations as the original attorney-client relationship. The courts that have not recognized a second attorney-client relationship view the common interest group as individual third parties and believe attorneys owe only a fiduciary responsibility to other members of the group.
When a client agrees to enter into a common interest agreement, the client effectively consents to accept something less than what the Model Rules of Professional Responsibility require an attorney to provide to a client. Confidentiality, loyalty, and diligence are all implicated by the agreement. By entering into an agreement, a client sacrifices some of his or her rights under the attorney-client relationship to obtain the benefits of the agreement. A repercussion of a common interest agreement is that in the future, if conflict arises between group members, an attorney may be required to withdraw from representing a client, thereby depriving the client of his or her choice of counsel.22 An attorney may need to withdraw from representation in later dealings because the duties to the client conflict with the attorney’s obligations to the other group members. An additional risk posed by entering into an agreement is that the client may be precluded from asserting the attorney-client privilege against a group member should the two become involved in litigation adverse to each other. Thus, an attorney should fully explain to a client both the advantages and the risks posed by the common interest agreement so that the client is aware of the possible outcomes.
Waiver of the Common Interest Privilege
Once invoked, the common interest privilege is difficult to waive. If a party enters into a common interest agreement and discloses confidential information to another, similarly aligned party, there is the potential that a party could discover information adverse to its position. One protection afforded to the parties in the agreement is that waiver of the privilege requires consent of all group members and cannot be waived unilaterally. A simple majority of the members cannot waive the privilege. A party may waive the privilege if it discloses the confidential information to persons outside the group or if communications are made in the presence of parties not participating in the common interest agreement.
The common interest privilege is an effective, yet relatively unknown, litigation tool. If utilized properly, the agreement may save time and resources throughout the litigation process. It is important to understand both the benefits and the risks associated with a common interest agreement so as to properly inform the client. Given the increasing complexity of litigation, it is anticipated that the common interest privilege will continue to grow in popularity and acceptance within the legal community.