Privilege in Corporate Practice. By: Carey Jordan, J.D Partner, McDermott Will & Emery LLP, Houston, TX

Transcription

1 Privilege in Corporate Practice By: Carey Jordan, J.D. 1 1 Partner, McDermott Will & Emery LLP, Houston, TX

2 Types of Privilege: Attorney Client Privilege, Work Product Privilege, and Business vs. Legal Hats in Corporate Environments and Privilege Under U.S. law, there are three primary sources of privilege: attorney-client privilege, attorney work product, and the common interest privilege. The attorney-client privilege derives from federal common law. Attorney work product is found in the Federal Rules of Civil Procedure. The common interest/joint defense protection also is derived from federal common law. Each is discussed below. As to attorney-client privilege, issues with respect to corporate clients, inhouse lawyers, patent agents and foreign patent agents are also discussed. A. Attorney-Client Privilege: The Basics The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. Upjohn v. United States, 449 U.S. 383 (1981). Its purpose is to encourage full and frank communications between lawyers and their clients, thus promoting the broader public interest in the observance of the law and the administration of justice. Id. at 389. The privilege serves the public s interest because a lawyer should know everything that relates to the client s reasons for seeking representation. Trammel v. U.S., 45 U.S. 40, 51 (1980). The purpose of the privilege is to promote full disclosure by the client and to foster a relationship of trust between the attorney and the client. See Commodity Futures Trading Comm n v. Weintraub, 471 U.S. 343, 348 (1985). Thus, the attorney-client privilege protects not only the giving of professional advice to those who can act on it but also the giving of information to the lawyer to enable him to give sound and informed advice. Upjohn, 449 U.S. at 389; Fed. R. Civ. P. 26(b)(3)-(b)(4). The privilege protects information from discovery only if the communication was made for the purpose of securing legal advice. In re Bieter, 16 F.3d 929, 936 (8th Cir. 1994). See also In re Keeper of Records, 348 F.3d 16, 22 (1st Cir. 2003); In re Grand Jury Subpoena 91-1(SJ), 31 F.3d 826, 829 (9th Cir. 1994); U.S. v. El Paso Co., 682 F.2d 530, 538 (5th Cir. 1982); U.S. v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961) (privilege protects communications a client seeking legal advice and a lawyer providing legal advice). A communication is confidential only if it is not intended to be disclosed to third persons, and it is waived if any significant part of the communication is disclosed to a third party who is not a representative of the client or the attorney. See, e.g., Permian Corp. v. U.S., 665 F.2d 1214, 1219 (D.C. Cir. 1981) (when confidential communications voluntarily disclosed to one person, the privilege is waived). Waiver is discussed in more detail below. The privilege belongs to the client, not the attorney. U.S. v. Doe, 429 F.3d 450, 452 (3d Cir. 2005); In re Sarrio, S.A., 119 F.3d 143, 147 (2d 1997). The attorney may claim the privilege, but only on behalf of the client, and may not disclose the confidential, privileged information absent specific circumstances or permission by the client. Haines v. Liggett Grp., 975 F.2d 81, 90 (3d Cir. 1992); In re Sarrio, S.A., 119 F.3d at 147. The privilege survives the client s death. See, e.g., Swindler & Berlin v. U.S., 524 U.S. 399, (1998). It does not terminate at the conclusion of the representation or at the end of the dispute. U.S. v. Kleifgen, 557 F.2d 1293, 1297 (9th Cir. 1977). 1

3 The privilege protects communications between (1) the client or its representative and the attorney or the attorney s representative; (2) the attorney with the attorney s representative; (3) the client or its attorney with an attorney representing another client on a matter of common interest; (4) the client with a representative of the client; (5) communications between the client s representatives and (6) communications between the client s attorneys. In re Bieter, 16 F.3d 929, (8th Cir. 1994). For the privilege to attach to any document or communication, a court will consider four key elements: 1. There must be a communication; 2. It must be between an attorney and a client; 3. The communication must be confidential when made; and 4. The subject matter of the communication must be the seeking of or the rendering of legal advice as opposed to business advice. Epstein and Kristinik, What Corporate Counsel Need to Know to Preserve the Attorney-Client Privilege: Best Practices and Ethical Considerations, Corporate Counsel CLE Seminar (Feb , 2014). The extent of protection under the privilege varies by circuit and by state. Because of these differences, it is important to understand the scope of privilege within the jurisdictions salient to the client. In jurisdictions, such as those outside the U.S. for example, where privilege may not apply to in-house counsel, it is important to educate those in-house counsel to guard against potentially negative written communications by communicating legal advice orally or through other means than writings, which are likely discoverable. a. Corporations as Clients When the client is a corporation as opposed to an individual, the identity of who the client is and therefore the scope of the attorney-client privilege can vary by jurisdiction. For instance, in a minority of jurisdictions (e.g., Illinois) the courts use a control group test whereby a communication is privileged if the employee is a high-level employee authorized to act or make business decisions on the company s behalf. Epstein and Kristinik, What Corporate Counsel Need to Know to Preserve the Attorney-Client Privilege: Best Practices and Ethical Considerations, Corporate Counsel CLE Seminar (Feb , 2014). This is a fairly limited test because the group of people who can make business decisions on behalf of the company may be a relatively small group of people, and not necessarily representative of the true nature of the company s business. The majority of states use a more modern, reasonable subject matter test where communications are privileged if made within the scope of the employee s responsibilities and at his or her supervisor s direction. Id. Federal courts generally follow the test set forth in Upjohn (discussed above) which states that communications are privileged when the employees disclosed information concerning matters within the scope of their duties and disclosed at the direction of their superiors and that the employees were information they were being questioned in order for the corporation to receive legal advice. 2

4 b. In-House vs. Outside Counsel In-house attorneys are treated somewhat differently than outside counsel with respect to attorney-client privilege in the U.S. The role of an in-house attorney has been viewed by courts as being a mixture of a business role and a legal role whereas outside counsel is viewed as having only a legal role brought in for specific legal advice and counsel. Because of their internal role, courts have viewed in-house counsel as less independent and potentially more biased, often acting with more of a business hat than a legal hat. Epstein and Kristinik, What Corporate Counsel Need to Know to Preserve the Attorney-Client Privilege: Best Practices and Ethical Considerations, Corporate Counsel CLE Seminar (Feb , 2014). Privilege with respect to in-house counsel often involves an analysis by the court of whether a particular communication by in-house counsel was done in that counsel s role as a lawyer or a business advisor, i.e., does the in-house counsel have a legal hat on when giving this communication or a business hat. Id. Communications, including communications, from in-house counsel can only be protected if in-house counsel is acting in a legal (not business) capacity and only to the LEGAL advice (not business). Ordinary business communications may not be privileged. Nat l Union Fire Ins. Co. of Pittsburgh, Penn. vs. Transcanada Energy USA, Inc., 119 A.D.3d 492 (1 st Dept. July 31, 2014) (insurance claim investigation documents prepared by attorney not legal advice because they were part of the ordinary business activities of the company). The complication results from when a communications mixes business and legal advice. To unravel mixed communications by in-house counsel as far as privilege, some courts look to a primary purpose test to analyze the communication and determine whether its purpose was primarily legal or primarily business. If it was primarily legal, then the communication will likely be viewed as privileged and vice versa. An example is in In re Vioxx Prods. Liab. Litig., 501 F. Supp. 2d 789 (E.D. La. 2007) where the district court found that a document prepared for simultaneous review by non-legal and legal personnel was not privileged because not prepared primarily to seek legal advice. Copying in-house counsel on an is not enough to render an privileged. See Oracle Am., Inc. v. Google Inc., 2011 WL (N.D. Cal. Oct. 20, 2011). The must be prepared for the purpose of obtaining legal advice and specifically directed to in-house counsel. In some instances, courts have held that internal s from in-house counsel are presumptively business communications not protected by the attorney-client privilege unless they relate to a specific identifiable legal issue. See MLR, LLC v. Dell Inc., Case No. 1:14cv135 (E.D. Va. Oct. 17, 2014). c. Foreign Counsel (Outside the U.S.) Nearly all countries recognize some form of attorney-client privilege, though not always by name and not always for in-house counsel as opposed to outside counsel. The parameters of the privilege for in-house counsel can vary by jurisdiction and the differences can be minor or drastic depending on the particular jurisdiction of interest. In-house counsel operating outside the U.S., or U.S. attorneys working with attorneys abroad, should keep this mind and recognize 3

5 that they cannot expect communications that may be privileged will similarly be privileged in foreign jurisdictions or when involving foreign jurisdictions. As to outside counsel privilege, most countries have some sort of privilege derived from various laws. In common law countries, e.g., United Kingdom, the privilege is normally based on case law. In civil law countries like France, any privilege is typically embodied in the statutes. Even former communist countries are increasingly recognizing confidentiality between attorneys and clients. Altschul, Lewis, and Zaslowsky, Attorney-Client Privilege Around the World, ACC-GNY Ethics Marathon, April 1, Even though some jurisdictions recognize privilege for outside counsel, in-house counsel in those same countries are often treated differently and may not share the same privileges. In the infamous case on the matter, Akzo Nobel, the ECJ confirmed the existing rule that the legal professional privilege under EU competition law extends only to communications between company employees and an external lawyer admitted to a Bar of one of the members of the European Economic Area (the 27 EU Member States plus Iceland, Liechtenstein and Norway). The Decision of the European Court of Justice on the Akzo-Nobel case, ACC Member Briefing on Akzo Decision, Association of Corporate Counsel, September 14, 2010, pgs. 4-5, retrieved from on 10/15/1. See also AM&S Europe Ltd. v. Commission, 1982 E.C.R (Case C-155/79). The EU is particularly interesting when considering privilege and in-house counsel. The EU member states each set out their own privilege laws, much as the individual states in the U.S. do vis-a-vis the federal government. See J. Brady Dugan, Jordan W. Cowman & Allison Walsh Sheedy, Negotiating the Privilege Minefield: Some Differences Between Attorney-Client Privilege in the U.S. and Europe, State Bar of Texas Corporate Counsel Section Newsletter, Vol. 6 No. 2, Spring 2011, at 3. The EU s overarching privilege law applies to cross-border activities within the EU s jurisdiction, such as competition investigations conducted by the Commission as discussed above. Id. Thus, if the subject case does not involve actions by an institution of the EU, a review of the law of the specific member state(s) in which the advice was given is needed. In a U.S. litigation, as to whether U.S. law will apply or the foreign jurisdiction s law will apply to a determination of privilege, a U.S. court will likely apply any number of tests, the most common of which is the touching base test. Under this test, if the communication touched base with the U.S., then U.S. privilege law can be used to determine whether a communication is privileged. If the communication relates to activity outside the U.S. in a foreign jurisdiction, then the law of that foreign jurisdiction will apply. Nonetheless, even in situations where the touching base test might dictate that foreign law should be used in the analysis, some courts will still apply U.S. law. See Astra Aktiebolag v. Andrx Pharmaceuticals, Inc., 208 F.R.D. 92 (S.D.N.Y. 2002) (U.S. privilege law applies despite finding that, under touching bases analysis, Korean law should apply, because Korean law offered no privilege, but did not permit discovery of the documents at issue). When working in a cross-border context, it is important for both outside and in-house counsel to recognize that different privilege laws apply. They should work to understand the applicable law 4

6 and controls their communications, especially those to the client in line with the applicable to best protect those communications from discovery. As a matter of course, they should limit written communications, favoring oral communications, especially when the jurisdiction involved does not have broad privilege protections (e.g., China). Also, in-house counsel should communicate critical advice to their business through outside counsel to best protect these as privileged. d. U.S. Patent Agents As to patent agents in the U.S., courts are divided on whether the attorney-client privilege protects confidential communications between clients and U.S. patent agents. One of the first courts to consider this issue was a New Jersey district court. In Joh. A. Benckiser G.m.b.H., Chemishe Fabrik v. Hygrade Food Products Corp., 253 F. Supp. 999, 1002 (D.N.J. 1966), the court ruled that the attorney-client privilege could not be extended to communications between clients and patent agents who engage in representation short of actual litigation in the courts. The court cited no authority for this new proposition of law, because there was none. Perhaps to ameliorate the harsh effects of the rule from the Joh. A. Benckiser case excluding confidential communications with patent agents from protection, other court chosen to find privilege for patent agents acting at the behest of a supervising attorney, analogizing the position of the patent agent with respect to a supervising attorney as creating subordinate relationship and the subordinate s actions are being directed by the attorney who is a member of the bar. See Congoleum Indus., Inc. v. GAF Corp., 49 F.R.D. 82 (E.D. Pa. 1969), aff d, 478 F.2d 1398 (3d Cir. 1973) (holding that the communications were protected by the attorney-client privilege because the patent agent was employed by and under the direct personal supervision of the attorney, and the patent agent represented the attorney during the communications with the corporation); see also United Shoe, 89 F. Supp. at Other courts have found an independent patent agent privilege, independent meaning separate from the subordinate theory. See, e.g., In re Ampicillin Antitrust Litigation, 81 F.R.D. 377 (D.D.C. 1978) (analyzing the Supreme Court s holding in Sperry to include U.S. patent attorneys and U.S. patent agents stand on equal footing when representing clients in patent proceedings before the Patent Office). In the Ampicillin decision, the court concluded that the attorneyclient privilege should be extended to protection confidential communications between clients and U.S. patent agents to fulfill the congressional intent of allowing clients to choose freely between and patent agent and a patent attorney for representation in a patent proceeding. Id. at 393. Importantly, the court limited the scope of the privilege to include those U.S. patent agents who are registered patent practioners and only to those communications necessary for the patent agent to provide the patent law service. Id. at 394. See also Mold Masters Ltd. v. Husky Injection Molding Sys., Ltd., No. 01 C 1576, 2001 WL (N.D. Ill. Nov. 15, 2001) ( [W]here legal advice is sought from a patent agent in his capacity as such, the communications relating to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the patent agent, except the protection be waived. ). 5

7 e. Foreign Patent Agents Foreign patent agents present a very complicated privilege protection for U.S. courts because they are not registered to practice in the U.S. Patent and Trademark Office and are not U.S. attorneys. Determining whether attorney-client privilege applies to a foreign patent agent is important because in many countries, such as Japan and most European countries, the majority of patent prosecution work and legal advice regarding patent invalidity and infringement is rendered by patent agents, not patent attorneys. This issue of foreign patent agent privilege is an especially important issue for clients who handle global patent portfolios, licensing, and enforcement/defense matters. Since foreign rights are usually a part of a larger family of patent rights, separate determinations of privilege based on the applicable jurisdiction can have an enormous impact on related but separate national patents. In addition to the U.S. s own conflicting holdings regarding privilege as applied to patent agents, choice of law provisions also become part of the equation when dealing with a combination of domestic and foreign attorneys, patent agents and filings. Academics and commentators discussing the U.S. courts application of the attorney-client privilege to foreign legal professionals have generally grouped them into non-choice of law approaches and choice of law approaches. See, e.g., James N. Willi, Proposal for a Uniform Federal Common Law of Attorney-Client Privilege for Communications with U.S. and Foreign Patent Practitioners, 13 Tex. Intell. Prop. L.J. 279 (2005). A minority of courts, (i.e., courts that do not look to a choice of law analysis), use the bright line approach, immediate subordinate approach, or the functional approach. The majority of courts apply a choice of law approach, and use either the touching base standard or most direct and compelling interest standard when determining whether to apply foreign privilege law. Id. The bright line approach, which has lost favor and is rarely used, denies privilege for all communications with foreign patent practitioners under the rationale that foreign patent agents are not attorneys. Id. The standard is more relaxed under the immediate subordinate approach, which extends attorney-client privilege to communications with foreign patent agents that act as the agents or immediate subordinates of an U.S. attorney. Id. Although the exact amount of control required for a foreign agent to be an immediate subordinate varies, communications with a foreign patent agent working under the supervision and direction of a U.S. attorney is generally argued to be privileged. Id. Under the functional approach, whether communications with a foreign patent agent are privileged depends on whether the agent was authorized to perform the functions of a patent agent under foreign law and performed a function equivalent to a legal practitioner in the field of patent law. Id. A majority of courts now apply a choice of law approach to determine when foreign privilege law should apply to communications with foreign patent agents. It has been argued that international law is part of the federal common law, and it should be considered by courts engaging in privilege analysis under Fed. R. Evid Christopher F. Dugan, Foreign Privileges in U.S. Litigation, 5 J. Int l. & Prac., 33, 44 (1996). This touching base approach applies the principle of international comity and looks to whether communications with a foreign agent touches base with the U.S. Id. Touching base has been interpreted to include communications relating to prosecuting U.S. patent applications, issues of U.S. patent law, or U.S. litigation. Situations that do not touch base in the U.S. include communications seeking advice on foreign patent law, foreign filing, or foreign litigation, in which case courts 6

8 look to the foreign country s privilege law as long as the law is not contrary to the public policy of the United States. The touching base approach has been criticized for being results-driven and producing conflicting results when foreign patentees use their foreign patent practitioners to communicate with U.S. attorneys regarding obtaining U.S. patent protection, where even if such communications are clearly privileged under foreign law, the privilege may not be recognized in subsequent U.S. litigation. See, e.g., James N. Willi, Proposal for a Uniform Federal Common Law of Attorney-Client Privilege for Communications with U.S. and Foreign Patent Practitioners, 13 Tex. Intell. Prop. L.J. 279, 315 (2005). Determining whether U.S. or foreign privilege law applies is only the first step of the analysis, for further complications may arise depending on the circumstances of a case. Even if the communication is found to touch base in the U.S., as discussed above, there is a divide in patent law as to whether attorney client privilege applies to U.S. patent agents, as discussed above. B. Attorney Work Product Predicting whether a communication or document is protected under the attorney-client privilege or work product doctrine can be challenging generally. But the privileges are different, and are subject to different standards. The work-product doctrine is not a bright-line test that can easily be applied and depends upon the facts and circumstances surrounding the preparation of the requested documents. The party claiming work product has the burden of proof and will be required to produce the documents unless it can carry that burden and convince the court that the documents were prepared in anticipation of litigation, and not in the ordinary course of business. The fact that an attorney engages the consultant or accountant that prepares the subject documents does not automatically shield the materials from discovery. Litigants in disputes often use the work product doctrine to protect certain materials from discovery. While the attorney-client privilege shields communications between attorney and client (and in some circumstances third parties), the work product doctrine protects an attorney s written materials and mental impressions. Comm r of Revenue v. Comcast Corp., 901 N.E.2d 1185, 1200 (2009) (citing Hickman v. Taylor, 329 U.S. 495, 510 (1947)). Work product immunity was intended to protect the integrity of the adversarial process by creating a zone of privacy and protection for the attorney s preparatory work on a case. Royal Surplus Lines Ins. Co. v. Sofamor Danek Grp., 190 F.R.D. 463, 473 (W.D. Tenn. 1999) (citing Hickman v. Taylor, 329 U.S. 495, 510 (1947)). Work product is properly asserted when the communications are made in anticipation of litigation, not just in the general course of a representation of the client. See Cummins, Inc. v. Pac. Indem. Co., No. 1:09-CV JMS, 2001 WL , at *6 n. 6 (S.D. Ind. May 2, 2011). The point at which a party anticipates litigation is an issue that can vary by jurisdiction and cause confusion amongst practioners. In fact, the circuit courts are split over what in anticipation of litigation really means. See, e.g., United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998). Different courts have adopted a function of the document test. If the reason the adverse party seeks the documents is to help the adverse party understand the legal arguments of the party that prepared the documents, then the doctrine will protect the documents even if the party did not 7

9 prepare them in anticipation of a specific or potential claim. See, e.g., Delaney, Migdail & Young v. I.R.S., 826 F.2d 124, 127 (D.C. Cir. 1987). Under a third test the primary motivation test a document is protected by the work product doctrine if the primary motivation of the party preparing the document is to assist in possible future litigation, or because of the prospect of future litigation. See, e.g., United States v. El Paso Co., 682 F.2d 530, 543 (5th Cir. 1982), cert. denied, 466 U.S. 944, 104 S. Ct (1984); contra see, e.g., United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998). Federal courts are divided on the appropriate standard to apply under the primary motivation test. Some courts, such as the U.S. Court of Appeals for the Second Circuit, rule that if the document was prepared or obtained because of the prospect of litigation, then the document is protected from disclosure. See Adlman, 134 F.3d at Still other courts, including the U.S. Court of Appeals for the Fifth Circuit, require that a document have been prepared primarily to assist in litigation for it to be protected. Thus, they rule that so long as the primary motivating purpose behind the creation of the document was to aid in possible future litigation, then the document is protected by the doctrine. See United States v. El Paso Co., 682 F.2d 530, 543 (5th Cir. 1982) (quoting United States v. Davis, 636 F.2d 1028, 1040 (5th Cir.), cert. denied, 454 U.S. 862, 102 S. Ct. 320 (1981)); see also Collins v. International Dairy Queen (In re Kidder Peabody Sec. Litig.), 168 F.R.D. 4549, 462, 466 (S.D.N.Y. 1996). Because one of the most important aspects of the doctrine is whether these documents were prepared in anticipation of litigation, it is important for litigants to focus on the applicable standard. Information protected by the work product doctrine is generally categorized into fact and opinion work product. An attorney or other representative s mental impressions, conclusions, opinions, or legal theories are afforded greater protection as opinion work product than fact work product, which includes everything else that is eligible for protection as work product. In re Grand Jury Subpoena, 220 F.R.D. 130, 145 (D. Mass. 2004); see also United States v. Nobles, 422 U.S. 225, 238 (1975) (although its protection extends to all documents prepared in anticipation of litigation, [a]t its core, the work-product doctrine shelters the mental processes of the attorney, providing a privileged area within which he can analyze and prepare his client s case ). Opinion work product includes the impressions or opinions of a lawyer or other client representative. Opinion work product communicated to a client might also deserve attorneyclient privilege protection, and it usually is worth asserting both protections -- the attorney-client privilege can provide absolute assurance of confidentiality, but the work product doctrine protection is less susceptible to waiver and therefore may survive the sharing of information with third parties. Examples of opinion work product include: a lawyer s memoranda reflecting legal strategy or analysis (Restatement (Third) of Law Governing Lawyers 89 cmt. b (2000); Baker v. Gen. Motors Corp., 209 F.3d 1051, 1054 (8th Cir. 2000)). However, in circumstances where the opinion work product relates to business issues, e.g., from an in-house counsel, that opinion work product will not be protected. See MLR, LLC v. Dell Inc., Case No. 1:14cv135 (E.D. Va. Oct. 17, 2014). Fact work product includes tangible materials and intangible equivalents prepared, collected, or assembled by a lawyer. Tangible materials include documents, photographs, diagrams, sketches, questionnaires and surveys, financial and economic analyses, hand-written notes, and material in electronic and other technologically advanced forms, such as stenographic, mechanical, or electronic recordings or transmissions, computer data bases, tapes, and printouts. Restatement (Third) of Law Governing Lawyers 87 cmt. f (2000). The work product doctrine generally does not protect from disclosure underlying historical facts. White v. Kenneth Warren & Son, Ltd., 203 F.R.D. 369, 373 (N.D. II ). If a document contains both 8

10 fact and opinion work product, courts sometimes require that parts of it be produced while other parts remain protected. Restatement (Third) of Law Governing Lawyers 89 cmt. c (2000). Another tough issue is presented by dual-purpose documents documents created for both a business reason and in anticipation of litigation. Work-product protection will not be afforded the document if it would have been prepared in substantially similar form or content irrespective of the expected or anticipated litigation. The pertinent question is what would have happened had there been no litigation threat that is, would the party seeking work product protection have generated the document if it were acting solely for a business-related purpose? Allied Irish Banks v. Bank of Am., N.A., 240 F.R.D. 96, 106 (S.D.N.Y. 2007). To answer this inquiry, courts focus on the form, or content of the document and ask whether the document would have been prepared in substantially similar form but for the prospect of litigation. If this showing can be made, the privilege applies, but if the document would have been prepared in the same form regardless of the threat of litigation, the document goes unprotected. See Adlman, 134 F.3d at Work product protection can overcome by a challenger if the challenger can show a substantial need of the materials in case preparation and undue hardship in obtaining the substantial equivalent of the materials by other means. In In re OM Group Securities Litigation, 226 F.R.D. 579, 584 (N.D. Ohio 2005), the court explained (as do most courts) that (1) the party seeking an adversary s work product must establish relevance; (2) the burden then shifts to the party withholding the work product to show that it meets the work product standards; (3) the burden then shifts back to the requesting party to show that it has substantial need of the materials and is unable to obtain the substantial equivalent without undue hardship ; and (4) if the requesting party carries this burden, the court must nevertheless protect the protecting party lawyers and other representatives opinions. C. Common Interest or Joint Defense Privilege The common interest/joint defense protection also is derived from federal common law. The privilege is typically applied to overcome what otherwise would have been a waiver of confidentiality because a communication was shared with another party. In re Regents of Univ. of Cal., 101 F.3d 1386, 1389 (Fed. Cir. 1996) (citations omitted). It applies if (1) the subject communications are made in the course of a joint defense effort or common interest; (2) the parties share a common interest; and (3) the communications were made in the furtherance of that effort. In re Regents of Univ. of Cal., 101 F.3d 1386, 1389 (Fed. Cir. 1996) (citations omitted); Smithkline Beecham Corp. v. Apotex Corp., 193 F.R.D. 530, 539 on reconsideration in part, 194 F.R.D. 624 (N.D. Ill. 2000). A common interest need not only be present as joint defendants in a litigation, but may also arise in the context of a merger or acquisition or other transaction negotiation/discussion. For example, a common interest may be asserted relating to the infringement of a common patent, for example, in a merger and acquisition context: The legal interests of AFI and Medtronic in evaluating these legal interests were aligned as both parties were committed to the transaction and working towards its successful completion.... AFI and Medtronic shared common legal interests in whether the products that AFI and Medtronic would market infringed third party IP, 9

11 and the communications addressing the scope of the IP certainly were designed to further that interest. The Court finds that this mutual interest in valid and enforceable patents fits within the confines of the common legal interests doctrine. Morvil Tech., LLC v. Ablation Frontiers, Inc., 2012 WL (S.D. Cal. Mar. 8, 2012) (citations omitted). However, if a communication is challenged, if the communication is ancillary to the common interest, the communication may not be covered under this doctrine. For instance, the court in Libbey Glass, Inc. v. Oneida, Ltd., held: I find in the alternative that the communications were ancillary to the principal acitivity in which Oneida, Ullman and Pasabahce were engaged: namely, the negotiation of an agreement for Pasabehace to make for Oneida tobuy and distribute glassware to compete with Libbey. All parties apprehended that their venture involved some legal risk, but that apprehension was merely part of their larger endevour. Responding to those concerns on the part of the other parties, Oneida sought commercial gain, not legal advantage, through disclosure of tis lawyer s advice to Ullman and Pasabahce. The parties were formulating not a common legal strategy, but a joint commercial venture. 197 F.R.D. 342, 349 (N.D. Ohio 1999). In another example, in the case Corning Inc. v. SRU Biosystems, LLC, 223 F.R.D. 189, 190 (D. Del. 2004), the court concluded that the common interest doctrine does not preclude the production of the BD Documents. The Court concludes that SRU has not provided proof sufficient to establish that, at the time of their negotiations, BD and SRU shared identical legal interests in the subject opinions of counsel. Instead, the Court views the negotiations between these two corporations to reveal that SRU s disclosures to BD were made not in an effort to formulate a joint defense but rather to persad BD to invest in SRU. Accordingly, the Court concludes that SRU has failed to demonstrate that the parties had agreed to a joint defense strategy or that the opinions were a precaution against anticipated joint litigation. To have the best odds on successfully relying on this common interest privilege, the parties should have a formal common interest agreement or a joint defense agreement. Further, each circumstance needs to be weighed in view of its salient facts to determine the success of the privilege assertion. It should not be assumed that it will exist as courts often get behind the facts to determine the true common interest. How Privilege Can be Lost Through Waiver or Inadvertently by In-House Counsel s Actions A. Waiver of Attorney-Client Privilege Privilege can be lost through express or implied waiver by disclosure to a third party. Attorneys and clients should always be on the look-out for potential waiver issues because in many jurisdictions, courts interpret the scope of the waiver to reach all other privileged communications relating to the same subject matter. See, e.g., Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1349 (Fed. Cir. 2005). Express waiver often occurs through disclosure to a third party who is either internal to the organization or external to the organization. As to express waiver by disclosure to a third party, as to internal employees, courts have found express waivers when communications are relayed to employees who do not need to know the content of the privileged communications in order to do 10

12 their jobs within the client under the need to know standard. See, e.g., Scholtisek v. Eldre Corp., 441 F. Supp. 2d 459, 464 (W.D.N.Y. 2006); Ideal v. Bank of America, N.A., 227 F.R.D. 456, 460 (W.D. Va. 2005); Wrench LLC v. Taco Bell Corp., 212 F.R.D. 514, 517 (W.D. Mich. 2002). Similarly, at to disclosures to parties outside the client, some courts have held that the disclosure outside of the organization be necessary, or at least highly useful, for the effective consultation between the client and the lawyer in order to maintain privilege. United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961). As to implied waiver, a party may impliedly waive the attorney-client privilege by placing the party s privileged communications at issue in a litigation. See, e.g., Boston Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 545 N.E.2d 1156, 1160 (Mass. 1989). Most courts agree that when a litigant asserts advice of counsel as part of a claim, counterclaim, or affirmative defense, the asserting party has placed the privileged communications at issue in the litigation and they, therefore, are no longer protected by privilege. See, e.g., Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975) (holding that the defendants invoked the attorney client privilege in further ance of the affirmative defense, and therefore, the privileged communications because at issue in the litigation and were not privileged); State Farm Mutual Auto Ins. Co. v. Superior Court, 279 Cal. Rptr. 116 (Cal. Ct. App. 1991) ( The defense of advice of counsel generally waives the attorney-client privilege as to communications and documents relating to that advice. ) Inadvertent waiver can occur sometimes in litigation, for example, through the accidental production of privileged documents during discovery. Many jurisdictions allow the disclosing party to pull back those documents and retain the privilege if certain metrics are met under the applicable claw back laws. B. Waiver of Attorney Work Product Privilege Although the attorney-client privilege is so fragile that any disclosure outside the attorney-client relationship generally waives the protection, most courts find that disclosing work product to third parties does not automatically waive that protection. See Viacom, Inc. v. Sumitomo Corp. (In re Copper Mkt. Antitrust L, 200 F.R.D. 213, 221 n.6 (S.D.N.Y. 2001). This difference in waiver principles between the attorney-client privilege and the work product doctrine sometimes means that sharing materials protected by both the attorney-client privilege and the work product doctrine might waive the former but not the latter. See, e.g., Calvin Klein Trademark Trust v. Wachner, 198 F.R.D. 53 (S.D.N.Y. 2000) (sharing information with a public relations firm); Chase v. City of Portsmouth, Civ. No. 2:05cv446, 2006 U.S. Dist. LEXIS 29294, at *20 (E.D. Va. Apr. 20, 2006) (holding that a City Attorney's letter to the City Council and others deserved privilege protection; but finding that the City had lost the privilege protection by not treating the letter carefully enough; also finding that the letter deserved work product protection, which can survive [I]imited disclosure to third parties and therefore continued to protect the letter). As an example, in a celebrated case, Martha Stewart was found to have waived the attorney-client privilege protection covering one of her s by sharing it with her daughter, but was found not to have waived the work product protection covering the . United States v. Stewart, 287 F. Supp. 2d 461 (S.D.N.Y. 2003). Of course, disclosing work product to an adversary generally waives the work product protection. 11

13 Because inadvertently produced documents disclosed during litigation generally fall into the adversary's hands, most courts apply the same tests (strict, liberal or fact-intensive) in determining waiver of the work product protection that they use in assessing waiver of the attorney-client privilege. Carter v. Gibbs, 909 F.2d 1450, 1451 (Fed. Cir.), cert. denied, 498 U.S. 811 (1990). Disclosing work product to a third party other than an adversary generally causes a waiver only if the disclosure makes it likely that the work product will fall into enemy hands -- ending up with the adversary. Bowman v. Brush Wellman, Inc., No. 00 C 50264, 2001 U.S. Dist. LEXIS 14088, at *7 (N.D. III. Sept. 13, 2001); In re Doe, 662 F.2d 1073, 1081, 1082 (4th Cir. 1981), cert. denied, 455 U.S (1982). Most courts apply the implied waiver doctrine to work product, meaning that taking certain positions can waive the work product protection. C. Bell et al, A Guide to the Attorney-Client Privilege and Work Product Doctrine for Tax Practioners, at 140 (2007). Examples include: relying on advice of counsel (Brennan v. Western Nat'l Mut. Ins. Co., 199 F.R.D. 660 (D.S.D. 2001)); putting a lawyer's advice at issue (Cooney v. Booth, 198 F.R.D. 62 (E.D. Pa. 2000)); placing a lawyer's agent's mental state at issue (Tribune Co. v. Purcigliotti, No. 93CIV.7222 LAP THK, 1997 WL 10924, at *7-8 (S.D.N.Y. Jan. 10, 1997)); relying on the fact of an investigation of a sexual harassment charge as a defense to the allegations (Harding v. Dana Transp., Inc., 914 F. Supp (D.N.J. 1996)); listing a lawyer as a factual or expert witness (Sorenson v. H&R Block, Inc., 197 F.R.D. 206 (D. Mass. 2000)); asserting a qualified immunity affirmative defense (Mitzner v. Sobol, 136 F.R.D. 359, (S.D.N.Y. 1991)); taking positions in a bad faith insurance case that implicate a lawyer's activities (Charlotte Motor Speedway, Inc. v. Int'l Ins. Co., 125 F.R.D. 127 (M.D.N.C. 1989)); asserting a defense based on the adequacy of an investigation (Jones v. Scientific Colors, Inc., Nos. 99 C 1959 & 00 C 1071, 2001 U.S. Dist. LEXIS (N.D. II1. July 9, 2001)); arguing ignorance of a claim that would start the statute of limitations running (Axler v. Scientific Ecology Group, Inc., 196 F.R.D. 210 (D. Mass. 2000)); suing a former lawyer for malpractice (thus waiving the opinion work product that would otherwise cover successor counsel's work) (Rutgard v. Haynes, 185 F.R.D. 596, 601 (S.D. Cal. 1999)); seeking attorney fees. Tonti Props. v. Sherwin-Williams Co., No Section E (2), 2000 U.S. Dist. LEXIS 5748, at *6-7 (E.D. La. Apr. 26, 2000). 12