Surety Today: The Blog

A Primer on the Common Interest Privilege or Joint Defense Privilege

October 17, 2023

By: Michael A. Stover, Esq.

In this issue of the Surety Today Blog, I will discuss an issue that my partner, Cindy Rodgers-Waire, touched on last month when she hosted the Surety Today podcast (see 9/11/23, Surety Case Law Update, C. Rodgers-Waire). The issue I will focus on today is the Common Interest Privilege or Joint Defense Privilege as it is sometimes called, which was discussed in the recent case of United States for Use & Benefit of M. Frank Higgins & Co. v. Dobco Inc., No. 22-CV-9599 (CS) (VR), 2023 WL 5302371, at *1–3 (S.D.N.Y. Aug. 17, 2023).  This will not be a traditional Surety Today “case law note” blog post because the Higgins case didn’t really decide the question, rather the court determined that it required additional information to decide the issue.  Instead, this post will be more in the nature of a primer. This issue may come up when the surety and its principal are fighting against a common claimant – an obligee on a performance bond claim or commercial bond claim, or a subcontractor, supplier or other third party claimant on a payment bond or commercial bond claim.  In those scenarios counsel for the surety and counsel for the principal may wish to coordinate the defense strategy and share information which would otherwise be privileged for the “common interest” of defeating the claim.

Any discussion of this issue must be predicated on the understanding that the law on this topic is a bit of a mess.  See C. Austin, Too Little in Common: Addressing the Inconsistency of the Common Interest Privilege, 90 Miss. L.J. 797, 800–06 (2021). There is confusion created by the many differing ways in which the privilege is defined and enforced in the various jurisdictions.  In addition, sometimes the Common Interest Privilege is confused with the “Co-Client Privilege,” which relates to communications between two clients who share the same attorney, while the Common Interest Privilege relates to communications between two clients who retain separate attorneys. Although the Common Interest Privilege and the Co-Client Privilege have similarities, they are separate and distinct from one another. Id. Moreover, a great deal of confusion regarding the Common Interest Privilege is generated by the fact that courts may use a variety of different names when referring to the privilege. The Common Interest Privilege is sometimes referred to as the “Joint Defense Privilege,” the “Community of Interest Privilege,” the “Joint Litigant Privilege,” the “Pooled Information Privilege,” the “Allied Lawyers Privilege,” or the “Allied Litigant Privilege.” Id. The absence of a uniform name for the Common Interest Privilege has led to the courts believing the terms refer to separate privileges rather than the same one. Id. All this confusion makes it very difficult to definitively state guiding principles that will apply across all jurisdictions.  As is true with most issues in the law, you must check the law in the specific jurisdiction you are dealing with.

One of the first things to know about the Common Interest Privilege is that it is not a stand-alone privilege; rather, it is simply an extension of the attorney-client privilege, and the work-product doctrine. Higgins, supra., citing United States v. Schwimmer, 892 F.2d 237, 243 (2d Cir. 1989); Hanwha Azdel, Inc. v. C & D Zodiac, Inc., 617 Fed. Appx. 227, 243 (4th Cir. 2015)(an extension of the attorney-client privilege); Smith v. Pergola 36 LLC, No. 22-cv-4052, 2022 WL 17832506, at *7 (S.D.N.Y. Dec. 21, 2022); Bitler Inv. Venture II, LLC v. Marathon Ashland Petro. LLC, No. 1:04-cv-477, 2007 WL 465444 *2 (N.D. Ind. Feb.2, 2007)( It is not an independent source of privilege or confidentiality.); In re Processed Egg Products Antitrust Litigation, 278 F.R.D. 112, 115 (E.D. Pa. 2011); U.S. v. Gumbaytay, 276 F.R.D. 671, 673 (M.D. Ala. 2011). The common interest extension does not itself confer privilege status to any of the communications involved. Instead, it merely allows communications which are already privileged to be shared between commonly interested parties without causing waiver.  The communications themselves must still independently satisfy the elements of the privilege. Gulf Islands Leasing, Inc. v. Bombardier Capital, Inc., 215 F.R.D. 466, 470 (S.D.N.Y. 2003); Metro Wastewater Reclamation Dist. v. Cont’l Cas. Co., 142 F.R.D. 471, 478 (D. Colo. 1992). The Common Interest Privilege has been described as essentially a form of selective waiver which allows disclosure to some persons without waiving the privilege toward others.

As noted, any document or communication potentially protected by the Common Interest Privilege must first satisfy the elements of the attorney-client privilege or work-product doctrine. I will not go into the very dense and nuanced topics of the attorney client privilege or work product doctrine in this post, choosing to save those topics for later posts all on their own.  Suffice it to say that generally speaking “[t]he attorney-client privilege protects communications (1) between a client and his or her attorney (2) that are intended to be, and in fact were, kept confidential (3) for the purpose of obtaining or providing legal advice.” United States v. Krug, 868 F.3d 82, 86 (2d Cir. 2017) and the “work-product doctrine” protects materials “prepared in anticipation of litigation or for trial by or for another party or its representative.” Fed. R. Civ. P. 26(b)(3)(A). As with the underlying attorney client privilege and work product protection, while the Common Interest Privilege may apply to some of the communications between the parties, it does not automatically apply to every communication exchanged between them at every point in time and for all purposes. The Common Interest Privilege does not transform an otherwise non-privileged communication, or a document prepared in the ordinary course of business, into a protected one simply because it was exchanged between parties with a common interest. Higgins, supra., citing United States v. Adlman, 134 F.3d 1194, 1202 (2d Cir. 1998).

Under the Common Interest Privilege, communications voluntarily made among different parties and their attorneys or documents exchanged, which would ordinarily waive the underlying privilege/protection, are not waived “where a joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel in the course of an ongoing common enterprise and multiple clients share a common interest about a legal matter.” Schaeffler v. United States, 806 F.3d 34, 40 (2d Cir. 2015). In the circumstances where the common interest privilege applies, it protects not only the communications between any of the clients and attorneys regardless of whether the communicating client’s own attorney is present but also the communications between any of the clients’ respective attorneys. Schwimmer, 892 F.2d at 244; In re Monsanto Co., 998 S.W.2d 917, 922 (Tex.App. 1999); Boyd v. Comdata Network, Inc., 88 S.W.3d 203, 214 (Tenn. Ct. App. 2002).

The Purpose of the Common Interest Privilege is to permit a client to share confidential information with the attorney for another who shares a common legal interest. It operates to protect litigants who share unified interests to exchange privileged information to adequately prepare their cases without losing the protection afforded by the attorney client privilege or work product protection and to allow persons with common litigation interests to communicate freely and in confidence when seeking legal advice.  Visual Scene, Inc. v. Pilkington Brothers, PLC., 508 So.2d 437, 440-41 (3d DCA Fla. 1987). Stated differently, the Common Interest Privilege stands as “an exception to the traditional rule that the presence of a third party, not an agent or employee of counsel, at a communication between counsel and a client is sufficient to deprive the communication of the confidentiality which is one of the pillars of the privilege.” People v. Harris, 57 N.Y.2d 335, 343, 456 N.Y.S.2d 694, 442 N.E.2d 1205 (1982). It arises to protect the statements made by codefendants in the presence of their respective counsel when they “are mounting a common defense.” People v. Osorio, 75 N.Y.2d 80, 85, 550 N.Y.S.2d 612, 549 N.E.2d 1183 (1989).

In New York, to assert the Common Interest Privilege, the party must show: (1) an agreement to cooperate through a common enterprise towards an identical legal strategy; (2) the communications were given in confidence, and the client reasonably understood this; and (3) the joint strategy was more than merely the impression of one side. See Denny v. Jenkins & Gilchrist, 362 F. Supp. 2d 407, 415 (S.D.N.Y. 2004). The Florida courts define the applicability of the Common Interest Privilege as: (1) whether the original disclosures were necessary to obtain informed legal advice and might not have been made absent the attorney-client privilege; (2) whether the communication was such that disclosure to third parties was not intended, and (3) whether the information was exchanged between the parties for the limited purpose of assisting in their common cause. Developers Surety & Indemnity Co. v. Harding Village, Ltd., 2007 WL 2021939 (S.D. Fla. 2007). Most courts in other jurisdictions have similar elements for application of the Common Interest Privilege.  In some states the privilege is defined by statute.

Typically, members of the “community of interest” must share at least a “substantially similar legal interest” in order to give rise to a joint defense privilege. See Robert Bosch LLC v. Pylon Mfg. Corp., 263 F.R.D. 142, 146 (D. Del. 2009) (quoting In re Teleglobe Commc’ns Corp, 493 F.3d 345, 365 (3rd Cir. 2007)). However, some courts in other jurisdictions have stated that “[t]he key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial.” North River Ins. Co. v. Columbia Cas. Co., No. 90 Civ. 2518, 1995 WL 5792, at *3 (S.D.N.Y. January 5, 1995); Bank Brussels Lambert v. Credit Lyonnais, 160 F.R.D. 437, 447 (S. D.N.Y. 1995). Thus, there is a split in the jurisdictions across the Country as to whether the interests must be identical or substantially similar for the privilege to apply. The principal/surety relationship should generally be considered to be sufficiently aligned to permit application of the Common Interest Privilege in most circumstances where claims are being submitted against a bond. See Higgins, supra.; Durham Indus., Inc. v. N. River Ins. Co., No. 79 CIV. 1705 (RWS), 1980 WL 112701, at *3 (S.D.N.Y. Nov. 21, 1980)(common interest between surety and its re-insurers); Levingston v. Allis-Chalmers Corp., 109 F.R.D. 546, 551 (S.D. Miss. 1985)(The Court found that the privilege extended to communications among the attorneys for co-parties including surety where the communications are designed to further a joint or common interest.).

Of course, the parties asserting the Common Interest Privilege bear the burden of establishing its applicability and showing how the attorney-client and work-product privileges would otherwise apply. Am. Oversight v. U.S Dep’t of Just., 45 F.4th 579, 593 (2d Cir. 2022); Adelman v. BSA, 276 F.R.D. 681, 689-90 (S.D. Fla. 2011); In re Air Crash Near Cali, Colombia, 959 F. Supp. 1529, 1532 (S.D. Fla. 1997) (quoting In re Air Crash Disaster at Sioux City, Iowa, 133 F.R.D. 515, 518 (N.D. Ill. 1990)); United States v. LeCroy, 348 F. Supp. 2d 375, 381 (E.D. Pa. 2004); LaForest v. Honeywell Int’l Inc., No. 03-CV-6248T, 2004 WL 1498916, at *3 (W.D.N.Y. July 1, 2004).

One issue that varies across jurisdictions is whether litigation must be on-going or whether it may only be potential for the Common Interest Privilege to apply.  Most courts hold that the Common Interest must “relate to litigation” for the privilege to apply, but that actual litigation need not be ongoing. Schwimmer, 892 F.2d at 244; Mariposa Assocs., Ltd. v. Regions Bank, No. 13-23838-CV, 2014 WL 12837635, at *2–4 (S.D. Fla. Oct. 9, 2014); Infinite Energy, Inc. v. Econnergy Energy Co., No. 1:06CV124-SPM/AK, 2008 WL 2856719, at *2 (N.D. Fla. July 23, 2008); United States v. AT&T, 642 F.2d 1285, 1299-1300 (D.C. Cir. 1980) (parties have strong enough common interests to share trial preparation materials where the parties in the common defense arrangement anticipate litigation against a common adversary on the same issues). A common interest in a joint business strategy that happens to include a concern about litigation is generally not sufficient. See Bank Brussels Lambert, supra. Similarly, merely sharing a desire to succeed in an action does not typically create a sufficient common interest. Shamis v. Ambassador Factors Corp., 34 F.Supp.2d 879, 893 (S.D.N.Y. 1999); In re: Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 922 (8^th Cir.), cert. denied, 521 U.S. 1105 (1997).

Some courts hold that the privilege may apply when even antagonistic parties share a common interest that relates to litigation. Infinite Energy, 2008 WL 2856719, at *2 (citing Developers Surety & Indemnity Co., 2007 WL 2021939, at *3 (S.D. Fla. 2007)); Cadillac Ins. Co. v. Am. Nat’l Bank, Nos. 89 C 3267 & 91 C 1188, 1992 WL 58786 (N.D. Ill. Mar. 12, 1992)(privilege is not limited to parties who are perfectly aligned on the same side of a single litigation); Hewlett Packard Co. v. Bausch & Lomb, Inc., 115 F.R.D. 308, 309-12 (N.D. Cal. 1987); Visual Scene, Inc., 508 So. 2d at 442-43 (matters of common interest are protected notwithstanding that in some other respect the parties are adversaries and on opposite sides of the litigation); Restatement (Third) of the Law Governing Lawyers § 76, cmt. E (2000)(The interests of the separately represented clients need not be entirely congruent.).  However, some courts hold the opposite. See LaForest v. Honeywell Int’l Inc., No. 03-CV-6248T, 2004 WL 1498916, at *3 (W.D.N.Y. July 1, 2004)(holding that parties with adverse interests lacked common interest to support privilege); SR Int’l Bus. Ins. Co. Ltd. v. World Trade Ctr. Props. LLC, No. 01 CIV. 9291 (JSM), 2002 WL 1334821, at *3-4 (S.D.N.Y. June 19, 2002); Bank of Am., N.A. v. Terra Nova Ins. Co. Ltd., 211 F. Supp. 2d 493, 496 (S.D.N.Y. Jul 18, 2002) (holding that interests must be identical and legal, not merely similar or commercial, and rejecting claim of common interest privilege); Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146, 1172 (D.S.C. 1975) (“The key consideration is that the nature of the interest be identical, not similar, and be legal, not solely commercial. The fact that there may be an overlap of a commercial and legal interest for a third party does not negate the effect of the legal interest in establishing a community of interest.”).

Another issue that frequently arises is whether a written agreement is necessary for the Common Interest Privilege to apply.  While a written agreement is the best evidence of intent to create a joint defense arrangement, an oral agreement is generally held to be sufficient to invoke the Common Interest Privilege. Minebea Co. v. Papst, 228 F.R.D. 13, 15-17 (D.D.C. 2005); Ludwig v. Pilkington N. Am. Inc., No. 03 C 1086, 2004 U.S. Dist. LEXIS 16049, at *11 (N.D. Ill. Aug. 13, 2004); Restatement (Third) of the Law Governing Lawyers § 76, cmt. C (2000)(“Exchanging communications may be predicated on an express agreement, but formality is not required.”).  Of course, the best practice is to put such an agreement in writing or at least confirm the existence of the agreement in a written communication.

If you have questions regarding the issues discussed in this post, please do not hesitate to contact Michael A. Stover, Esq. (410-659-1321/mstover@wcslaw.com) or any member of the Surety and Fidelity Practice Group.