Mind Your Step: Navigating Landmines in the Joint Defense LandscapeMarch 2015 – LJN Product Liability Law & Strategy
In the mass tort litigation context, where one plaintiff typically brings similar claims against numerous defendants within a particular industry, the coordination of defense efforts among codefendants can be a very prudent course of action. By banding together to develop a litigation strategy and common defense, competitor companies can pool their knowledge, expertise, and resources to achieve the most beneficial outcome for their respective clients. This practice, however, is fraught with landmines that can have a devastating effect on clients and practitioners alike.
In complex mass tort cases, different lawyers necessarily represent different clients with respect to issues of common concern. While formulating a joint defense is a collaborative effort, the attorneys involved in multi-defendant mass tort litigations must not lose sight of the fact that they may be sharing work product and confidential information with their competitors, which has the potential to leave clients exposed and pave the way for future litigation between codefendants. Additionally, in the absence of establishing preemptive safeguards prior to formulating a joint defense — namely a carefully tailored joint defense agreement — attorneys may run into a host of conflict of interest and waiver issues, unwittingly create an attorney-client relationship with other codefendants, and ultimately expose themselves to malpractice liability.
Accordingly, it is important for all mass tort defense attorneys to: 1) understand what benefits are achieved by engaging in a joint defense; 2) identify when a joint defense agreement may be utilized; 3) be cognizant of why it is crucial to draft a joint defense agreement carefully; and 4) learn how to draft a joint defense agreement that will best protect the interests of both attorney and client.
Four Key Questions
It is axiomatic that the attorney-client privilege traditionally protects confidential communications between a lawyer and a client seeking legal advice. The confidentiality of the communication at issue is of paramount importance, for the privilege only protects communications between attorneys and clients that are intended to remain private. Thus, if any third parties are present, the privilege is necessarily abolished. The "joint defense privilege" (or "common interest privilege"), however, provides an exception to this rule that allows the attorney-client privilege to apply to communications that are part of an ongoing and joint effort to establish a common defense strategy.
Stated differently, the joint defense privilege permits the confidentiality between attorney and client to be extended to communications between any client and any attorney aligned in a joint defense effort. The "joint defense privilege" does not operate as an independent privilege; rather, it allows codefendants and their counsel to exchange information without violating the attorney-client privilege. As a best-practice tip, practitioners should be sure to check how "joint defense privilege" is defined in the jurisdiction where the litigation is pending.
The relaxation of the strictures of the attorney-client privilege in the joint defense landscape can certainly generate tremendous benefits in the mass tort litigation context. For instance, it allows codefendants to assure the consistency of defense positions (while minimizing redundancy), reduce costs, streamline resources, promote the exchange of information, control information flow, develop a uniform discovery strategy, and enhance the overall efficiency of the litigation.
This privilege is often memorialized in a joint defense agreement, in which codefendants set forth parameters for maintaining the confidentiality of communications between them that would otherwise be protected by the attorney-client privilege or work product doctrine. While it is not a requirement to draft a joint defense agreement, it is nonetheless advisable to effectuate such an agreement because a party seeking to assert the privilege has the burden of proving that it exists. Additionally, if properly crafted, a joint defense agreement can serve as a mechanism for establishing consistency and order in complex cases.
It is critical that attorneys are cognizant of when joint defense agreements are permitted, and the scope of information that is protectable.
First, the general rule is that, in order to enter into a joint defense agreement, there must be active or threatened litigation. There are outliers to this general rule, however. Practitioners should consult the laws of the jurisdiction where the case is pending to determine if actual or pending litigation is a prerequisite. For example, the New York Appellate Division, First Department, recently held that the "common interest privilege" attached to pre-closing communications made between merging entities and their lawyers in the absence of any pending or anticipated litigation. (See Ambac Assurance Corp. v. Countrywide Home Loans, Inc., et al., No. 651612/2010 (N.Y. App. Div. 1st Dep't Dec. 4, 2014).)
Next, the parties to a joint defense agreement must share a common litigation-related interest. Merely being a codefendant does not automatically translate into an alignment of interest, and the joint defense privilege only attaches for as long as the common litigation-related interest exists between the codefendants. While the joint defense agreement can be limited to specific issues and may not necessarily need to encompass the entire litigation or shared defense strategy, the shared information between the parties must further the joint defense effort and be related to the common litigation-related interest in order to be protectable.
There must also be an objective agreement among the parties to the joint defense agreement to maintain confidentiality. Because the "joint defense privilege" does not create an independent privilege, attorneys and clients should be mindful that the privilege is delicate and sharing information with third parties may destroy it.
Last, before entering into a joint defense agreement and disclosing confidential information to the joint defense team, attorneys should: 1) carefully consider whether they could effectively represent their client without participating in a joint defense; 2) conduct a careful analysis of all theories of liability against the codefendants as well as their available defenses; and 3) make a determination as to whether the codefendants and their attorneys are trustworthy. This is absolutely critical because, if codefendants in a joint defense group become adverse and develop causes of action against one another during the litigation, it is possible for an attorney to use confidential information against the opposition that was obtained during the course of the joint defense effort.
In sum, if there is a possibility that divergent interests exist or that codefendants or their counsel are not trustworthy, an attorney should either refrain from entering into the agreement altogether or narrow the scope of the agreement to ensure that it only applies to aligned interests.
Once an attorney has determined that entering into a joint defense agreement does not pose a risk of substantial harm to his or her client's interests, the next step is to ensure that the joint defense agreement is clearly and carefully drafted in order to preempt conflict of interest, waiver, and imputed attorney-client relationship issues down the line.
Participation in a joint defense amplifies the risk that attorneys will encounter a conflict of interest. By way of example, if an attorney shares privileged communications with the joint defense group and is later determined to have a conflict of interest, that could result in potentially disastrous results for the entire group, up to and including disqualification of all attorneys involved in the joint defense agreement. To that end, it is recommended that practitioners carefully vet the other attorneys and firms involved in the joint defense effort in order to reduce the risk of disqualification and secure a representation from each law firm that it is free of conflicts and will guard against them in the future. It is recommended that the joint defense agreement contain provisions that: 1) specifically address current conflicts of interest and outline their resolution; 2) expressly waive future conflict of interest claims; 3) prohibit the disqualification of attorneys based on the realignment of parties during the course of litigation; and 4) clearly delineate that each party is solely represented by its own counsel.
Next, while the general rule is that a party to a joint defense team may not unilaterally waive the "joint defense privilege" without the consent of the other participants, it is prudent to include a provision in the joint defense agreement that explicitly provides as such. Without this safeguard in place, it is possible for a court to find that a waiver of the privilege has transpired if members of the joint defense team have disclosed confidential information to third parties.
Participating in a joint defense also bolsters the risk that an implied attorney-client relationship may be formed, which could give rise to legal malpractice claims by codefendants. Because some courts evaluate whether an attorney-client relationship exists on the basis of whether the client subjectively believes that he or she is consulting a lawyer intending to seek professional legal advice, the act of sharing confidential information may lead a codefendant to believe that such a relationship has been created. It is therefore recommended for counsel engaged in a joint defense effort to: 1) actively refrain from any conduct that could lead to such a perception; and 2) include a written disclaimer of the attorney-client relationship from the other codefendants in the joint defense agreement.
It is also important to heed the fact that, should parties to a joint defense agreement become adverse in subsequent proceedings, the previous communications between the parties that were made pursuant to the joint defense agreement can lose their privileged status unless the parties explicitly agree otherwise. See Restatement (Third) of Law Governing Lawyers, § 76 cmt. f. It is therefore critical to insert a provision into the joint defense agreement stating that the joint defense privilege is not waived between the signatories to the agreement under any circumstance and that all communications made pursuant to the joint defense agreement will remain privileged in subsequent adverse proceedings. Similarly, with respect to cross-claims, it is recommended that the parties insert a "standstill" provision into the joint defense agreement that defers the assertion of cross-claims until after the suit is brought to a final disposition.
Careful crafting of a joint defense agreement is essential in order to shield both attorneys and their clients from the quagmire of harms that can arise from engaging in a joint defense. Because joint defense agreements may be discoverable, it is advisable both to refrain from including any specifics about the joint defense strategy in the agreement and to insert a provision providing that the agreement itself is confidential. At a minimum, clauses that merit serious consideration for inclusion should contain language to the following effect:
- The parties to the agreement are actual or potential defendants in litigation with common interests and the sharing of joint defense materials is in the parties' common interest and necessary to the establishment a common defense strategy;
- All attorneys have performed thorough conflict checks and are free from existing conflicts of interest;
- The right to disqualify attorney members of the joint defense group based on access to joint defense materials or the realignment of parties during the course of litigation is waived;
- Waiver of the joint defense privilege can only be achieved by the consent of all parties;
- Any attorney client-relationship (including any duty of confidentiality or loyalty) between an attorney and client other than the attorney's pre-existing client is expressly disclaimed, and no such relationship will arise by implication;
- Communications or materials that fall within the applicable privilege may only be disclosed to parties to the agreement and their agents (and the parties may so specify the parameters for using these materials as well);
- All parties are prohibited from using shared information that they otherwise would not have obtained against one another (in an adverse manner or otherwise);
- The agreement remains operative as to all information exchanged pursuant to the agreement if adversity arises between the parties;
- The time for filing any cross-claim will be deferred until after the suit is brought to a final disposition;
- Parties may only withdraw from the agreement upon written notice (a method for returning shared materials should be established as well);
- Communications between parties to the agreement related to the joint defense that occurred prior to the date of the agreement are also subject to the joint defense privilege;
- The joint defense privilege extends beyond the conclusion of the litigation; and
- All parties to the agreement will be notified if any party to the agreement effectuates a settlement.
Even if mass tort defense practitioners are not involved in a multi-party litigation where a joint defense agreement is necessary, there are existing resources — such as the Product Liability Advisory Council's (PLAC) secure, members-only website — where non-confidential deposition transcripts, new case developments, and comments on case strategy are available. (Further information available from Hugh R. Young, Jr., President, at email@example.com.)
While these tools are useful to assist attorneys in understanding what is going on in their respective industries, contributors to these websites should be cautioned that the plaintiff bar has been known to serve subpoenas on companies for e-mails between competitors suggesting conspiracies or as a means to embarrass corporations.
This article was published in the March edition of Law Journal Newsletter's Product Liability Law & Strategy.