In the complex realm of corporate litigation, the sanctity of attorney-client privilege is often the backbone of a robust defense strategy. Yet, the scope of this privilege can blur when multiple corporations collaborate with separate legal teams. In such situations, the common interest privilege (CIP) becomes a crucial tool, enabling corporations with distinct legal counsel to share information and strategize jointly without forfeiting confidentiality. This extension is vital in an era where legal alliances are essential for navigating complex legal disputes. However, an examination across the U.S. Courts of Appeals reveals significant differing requirements to invoke CIP, making it crucial for corporations to understand these nuances to avoid the risk of their intended confidential communications being unexpectedly exposed in discovery.
What is Common Interest Privilege?
Common interest privilege, also known as the community of interest or joint defense privilege, extends attorney-client privilege to protect communications between separate parties with shared legal interests but different representation. Waller v. Fin. Corp. of Am., 828 F.2d 579, 583 n.7 (9th Cir.1987); United States v. Bay State Ambulance & Hosp. Rental Serv., 874 F.2d 20, 28 (1st Cir. 1989). Originating from the need for codefendants to protect joint defense efforts in criminal cases, CIP has expanded to cover civil litigation, regulatory matters, and multi-party business disputes.
Unlike joint-client privilege – which covers multiple clients represented by the same attorney – CIP only protects communications between distinct parties represented by separate attorneys. By protecting communications from being discoverable by third parties, CIP ensures that corporations can collaborate and strategize without risking confidentiality.
Defining the "Common Interest": The Heart of the Circuit Split
To invoke common interest privilege, parties must demonstrate that they share a common interest in the communication. However, the Circuits differ on what qualifies as a sufficient interest – specifically, whether the shared interest must be legal rather than business related, and whether the interest needs to be identical or if a substantially similar interest is enough. In re Teleglobe Communications Corp., 493 F.3d 345 (3d Cir. 2007).
Many jurisdictions within Circuits such as the 2nd, 4th, 5th, 6th, 7th, and 10th, follow the majority approach, holding that the shared interest must be both an identical and legal interest, not merely commercial in nature. While some overlap between legal and commercial interests is acceptable, the focus must remain on a shared legal goal; communications driven primarily by business considerations, such as joint marketing strategies or profit-sharing discussions, do not qualify for CIP protection. Johnson Matthey, Inc. v. Rsch. Corp., No. 01 CIV. 8115 (MBM), 2002 WL 1728566 (S.D.N.Y. July 24, 2002); Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146 (D.S.C. 1974); Power Mosfet Techs. v. Siemens AG, 206 F.R.D. 422 (E.D. Tex. 2000); Libbey Glass, Inc. v. Oneida, Ltd., 197 F.R.D. 342 (N.D. Ohio 1999); Pampered Chef v. Alexanian, 737 F. Supp. 2d 958 (N.D. Ill. 2010); Hedquist v. Patterson, 215 F. Supp. 3d 1237 (D. Wyo. 2016).
Other jurisdictions, such as the 1st, 3rd, 9th, and 11th U.S. Circuits, apply a less stringent standard, accepting a nearly identical or substantially similar legal interest as sufficient. F.D.I.C. v. Ogden Corp., 202 F.3d 454 (1st Cir. 2000); United States v. Doe, 429 F.3d 450 (3d Cir. 2005); United States v. Gonzalez, 669 F.3d 974, 979 (9th Cir. 2012); In re Blue Cross Blue Shield Antitrust Litig. MDL 2406, 85 F.4th 1070 (11th Cir. 2023).
The 9th Circuit has even recognized that parties may have some adverse motives, yet still qualify under CIP, as long as their attorneys are "engaged in maintaining substantially the same cause" in the litigation. Gonzalez, 669 F.3d at 979. An example of a substantially similar legal interest may arise when parties are involved in parallel litigation against a common adversary, even if their specific legal positions are not entirely aligned.
The 4th and 9th U.S. Circuits, however, impose an additional requirement, specifying that the shared interest must be linked to an agreement to jointly strategize, which can be in writing or implied through conduct. In re Pac. Pictures Corp., 679 F.3d 1121, 1129 (9th Cir. 2012); Gonzalez, 669 F.3d at 979; Am. Mgmt. Servs., LLC v. Dep't of the Army, 703 F.3d 724 (4th Cir. 2013). Therefore, in jurisdictions with a more stringent interpretation, parties should ensure there is a clear agreement of their joint legal strategy to avoid ambiguity, as even implied agreements may face challenges if not supported by concrete evidence.
Taking the broadest approach, the 8th U.S. Circuit adopts view of the 3rd Restatement, recognizing that the common interest can be legal, factual, or strategic in nature – such as sharing information about pending litigation (legal), coordinating the collection of evidence (factual), or aligning defense strategies against a mutual competitor (strategic). In re Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 922 (8th Cir. 1997); RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS § 76 cmt. e.
Preserving Confidentiality
For common interest privilege to apply, communications between the parties must be made in confidence. United States v. Keplinger, 776 F.2d 678, 701 (7th Cir.1985). The 1st U.S. Circuit clarifies that whether a communication is considered confidential depends on what the client reasonably understood at the time. However, this confidentiality can be broken if a participant in the communication is not necessary or highly relevant to the legal consultation. Kevlik v. Goldstein, 724 F.2d 844, 849 (1st Cir.1984) (quoting McCormick on Evidence, § 91 (1972)). For example, if a third party does not have a genuine interest in receiving legal advice from the attorney, such as an accountant, their involvement can disrupt the common interest and effectively waive the privilege.
Purpose of the Communication: When Legal Advice is Essential
Even when parties share a common legal interest, not all communications will qualify for common interest privilege. Most Circuits require that the communication be made specifically for the purpose of obtaining legal advice or advancing a legal strategy. The 2nd U.S. Circuit's landmark decision in United States v. Kovel and the 1st U.S. Circuit's ruling in Cavallaro v. United States make it clear that CIP does not cover communications primarily focused on business or accounting advice. 296 F.2d 918, 922 (2d Cir. 1961); 284 F.3d 236, 250 (1st Cir. 2002). The 7th U.S. Circuit further clarifies that CIP only applies to communications that directly reflect an attorney's legal analysis or are intended to elicit professional legal counsel. United States v. BDO Seidman, LLP, 492 F.3d 806 (7th Cir. 2007). Hence, to avoid challenges, communications should be carefully framed to emphasize their legal purpose even when the discussions involve business purposes.
Defining the Community of Interest: Who Qualifies for CIP Protection?
One critical issue in invoking common interest privilege is determining which parties fall within its protection. While most Circuits agree that CIP applies only when at least one attorney is involved in the communication—some even requiring attorneys on both sides—its scope can vary significantly depending on the jurisdiction.
The 5th U.S. Circuit, for instance, restricts CIP to communications between co-defendants or potential co-defendants and their counsel. It further clarifies that a "potential co-defendant" must be facing a palpable threat of litigation at the time of the communication, rather than merely being aware that their conduct could eventually lead to legal issues. In re Santa Fe Int'l Corp., 272 F.3d 705, 710–11 (5th Cir. 2001). In contrast, the 4th U.S. Circuit adopts a broader approach, extending CIP to any parties – plaintiffs or defendants – with a shared legal interest in ongoing or anticipated litigation, whether civil or criminal. In re Grand Jury Subpoenas, 89-3 & 89-4, John Doe 89-129, 902 F.2d 244 (4th Cir. 1990).
Meanwhile, in the context of patent disputes, the Federal Circuit has clarified that CIP protects all communications between a patent applicant or patentee and the attorneys of its licensee or optionee, as long as the parties share an identical legal interest. In re Regents of Univ. of Cal., 101 F.3d 1386, 1391 (Fed. Cir. 1996). Expanding on this principle, in MobileMedia Ideas LLC v. Apple Inc., the privilege was extended to communications between licensees and a limited liability company formed to enforce their patents, as the parties shared a common legal strategy and a vested interest in the patents' validity. 890 F. Supp. 2d 508 (D. Del. 2012).
However, some courts have drawn different lines depending on the alignment of parties' interests. In Power Mosfet, a case in the Eastern District of Texas, CIP did not apply to communications between defendants accused of independent infringement of the same patent because their legal interests diverged – what benefited one defendant in claim construction could undermine the position of the other. However, this ruling was limited to infringement issues, while defendants had no common legal interest in claim construction issues related to infringement, the decision does not preclude a common legal interest in claim construction issues related to invalidity. 206 F.R.D. 422.
Demonstrating Privilege: Navigating the Burden of Proof
The burden of establishing common interest privilege lies on the party asserting it, which requires presenting clear evidence that "(1) the communications were made in the course of a joint defense effort, (2) that the statements were designed to further that effort, and (3) the privilege has not been waived." In re Bevill, Bresler & Schulman Asset Management Corp., 805 F.2d 120, 126 (3d Cir.1986). As previously noted, a communication made in the context of a joint defense effort is that of one involving a shared legal interest between the parties—whether identical or substantially similar. Demonstrating that the statements were made to further the defense aligns with the requirement that the communication's primary purpose must be to obtain legal advice. Finally, to prove that the privilege has not been waived, the asserting party must establish that neither side has engaged in conduct that triggered a waiver (see Section VII).
Exceptions to CIP: When Privilege Can Be Pierced
Even where CIP is successfully established, certain exceptions may pierce the privilege. Because CIP is designed to protect confidential communications from being disclosed to parties outside the community of interest, this protection can be lost under certain circumstances.
The adverse litigation exception breaks the privilege when members of the same community of interest become adversaries in the same case. For instance, in Autobytel, Inc. v. Dealix Corp., the court extended the CIP to communications between an alleged infringer and its acquirer regarding shared legal issues in an anticipated patent infringement suit. However, the privilege was waived when the alleged infringer relied on an advice-of-counsel defense – claiming it acted based on its attorney's guidance regarding potential patent infringement – thus making related communications discoverable. 455 F. Supp. 2d 569 (E.D. Tex. 2006).
Additionally, CIP is lost if all parties consent to the disclosure, as no single party can unilaterally waive the privilege. In re Megan-Racine Assocs., Inc., 189 B.R. 562 (Bankr. N.D.N.Y. 1995). Lastly, CIP is not preserved when a party agrees to testify or cooperate with the government for a reduced sentence, as the underlying shared interest is disrupted, and courts generally view the privilege as incompatible with such a shift in allegiance. United States v. Almeida, 341 F.3d 1318 (11th Cir. 2003).
Protecting Corporate Interests Amidst a Complex Circuit Split
Given the varied standards across Circuits – ranging from demonstrating a shared legal interest to proving a joint defense agreement– corporate litigants must be diligent in structuring communications to clearly reflect a legal purpose, ensuring that all parties are represented by separate legal counsel and that at least one attorney is present in each exchange. Courts are more likely to protect discussions focused exclusively on legal analysis rather than mixing business and legal advice in the same chain of correspondences. Additionally, it is crucial to include only necessary parties in these communications to avoid inadvertently breaking the privilege. Understanding and navigating these nuances will enable corporate litigants to leverage common interest privilege effectively, ensuring that joint legal strategies remain confidential in high-stakes litigation.
Originally Published by Corporate Counsel
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