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Applying The Right Of A Joint Client To Similar Corporate Entities

In-house attorneys counsel similar corporate bodies regularly. Given that businesses have common priorities and strategic strategies within the same corporate family, the use of centralized in-house counsel may be both beneficial and economical. Counsel should carefully consider the intricacies of the shared client privilege in order to protect the attorney-client privilege in the representation of similar corporate entities.


What’s the benefit of a mutual client?

The joint client privilege, also referred to as the privilege of a co-client, is an exception to the rule that when confidential information is exchanged with a third party, the attorney-client privilege is waived. If properly enforced, the joint client privilege will protect against correspondence being released between employees of associated firms and a centralized in-house legal team.

The most detailed study of shared consumer privilege in the corporate sense was given by the US Third Circuit. Recognizing that “parent companies often centralize the provision of legal services to the entire corporate group in one in-house legal department,” the court clarified that when both the parent and a subsidiary or subsidiaries are served by the in-house legal department of a corporation on a matter of mutual interest, the corporate entities are in a joint client arrangement with the legal department. Therefore, confidential correspondence on a legal matter of mutual concern between employees of corporate affiliates and centralized in-house counsel should usually be shielded from disclosure.


What is not the privilege of the joint client

It is necessary to note that the privilege of the joint client is different from other privileges of exchanging information-the privilege of shared interest and the privilege of joint protection. The privileged doctrines of knowledge sharing are frequently confused, since they are identical, but have some distinct features.

The right of mutual interest allows independent lawyers representing different clients with common legal interests to exchange knowledge while maintaining the privilege between the attorneys. For communications between different clients, the privilege does not apply. As noted in In re Teleglobe, the right of common interest “applies only when clients are represented by separate counsel. It is therefore largely inapplicable to disputes concerning the use of common lawyers by corporate family members” (namely, centralized in-house counsel).

The joint defense privilege “protects communications between parties who share a common interest in litigation.” The privilege of joint defense is narrower than the privilege of common interest since it only applies to real litigation, although many courts interchangeably use the terms “common interest” and “joint defense”


How does the joint client privilege function?

The party seeking to claim the privilege must establish that the communication: (1) is protected by the attorney-client privilege and that (2) the clients have or have a mutual legal interest in order for the joint client privilege to extend to members of the corporate family.


Communication by attorney-client

In order for a communication to be protected by the privilege of the attorney-client, it must be (1) a communication between an attorney and client, (2) made between an attorney and client, (3) in confidence, and (4) for the purpose of obtaining or offering legal assistance to the client. Because the application of the privilege of the attorney-client withholds specific information from the fact finder, the privilege is narrowly construed.


Common legal interest

A common legal interest must be expressed by the consumers. Since there is no bright-line law identifying what constitutes a “common legal interest,” this issue is often challenged in discovery disputes.

In order to show a mutual legal interest, common ownership or control between the consumers should be used. The greater the degree of control or ownership between the parties, the more likely it is to create a common legal interest. However, in asserting a common interest, parties should not simply “rely blindly and boldly on the ‘affiliation of the various entities'”

Where the entity delivering the legal advice is not wholly owned by the entity receiving the legal advice, the courts may require that the parties share in the subject-matter of the correspondence an equal and not merely similar legal interest.

In cases where joint clients work together to conclude a transaction, to discourage litigation and/or to protect against lawsuits, the courts have found that there is a mutual legal interest. Particular examples include:

In protection of a product liability suit, correspondence between sister divisions of a single parent company about concerns posed in a case against one of the sister subsidiaries had an equal mutual interest.

Communications involving disclosures for a transaction made by the vice president of a wholly owned subsidiary to the parent’s general counsel represented communications of common legal interest.

Documents and correspondence relating to intellectual property concerns or disputes with third parties between a subsidiary employee and a parent company attorney have shown ample common legal interest and have been shielded from disclosure.

The joint client privilege was covered by correspondence from the in-house counsel of the defendant’s international affiliate to in-house lawyers and employees of organizations within the corporate family concerning the claims in the lawsuit.

Although the examples above are useful tips, in order to decide how best to shield privileged information from disclosure, each separate litigation or transaction involving several corporate family members should be examined.


Joint client privilege limits

The extent of the legal matter of shared interest limits the reach of the joint customer relationship. When the legal interests of the customers have diverged, the joint customer relationship terminates. If the legal interests of the customers diverge, the companies should retain separate counsel.

Although otherwise privileged communications are privileged from disclosure to a third party, in a dispute between the co-clients, the communications are not privileged.

Courts which extend increased scrutiny to communications to and from in-house counsel on the grounds that in-house counsel consult on business rather than legal matters on a regular basis. Some courts have applied a presumption that the input of the in-house attorneys is business in nature when in-house counsel is involved in a communication.

If the contact is exchanged with an individual or organization outside the joint client attorney partnership, the privilege would be waived. Usually, renouncing the joint client privilege requires all joint clients’ consent.

Recently, in Ambac Assur. Corp. v. Countrywide Home Loans, Inc., New York’s highest court, reviewing the common interest (but not the privilege of the joint customer), held that the privilege of common interest did not extend to a transaction and only applies to pending or expected litigation. While there does not appear to be a restriction on the privilege of the joint customer, parties may attempt to string