Richard H.C. Clay
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Provisions of Joint-Defense Agreements Can Have Significant Impact

October 4, 2012Articles
Bar Briefs, Louisville Bar Association

As seen in Bar Briefs published by the Louisville Bar Association.

A joint-defense agreement is a useful tool, allowing counsel of co-defendants to share information and present a coordinated defense. However, these agreements must be carefully drafted to ensure that each individual client is protected. In particular, a provision that waives the right of members of the joint-defense to move to disqualify lawyers must be clear and precise. This helps ensure the client is protected while still allowing the attorneys involved some flexibility.

The joint-defense privilege extends the protection of confi¬dential information found in the attorney-client privilege to communications that are part of a coordinated defense among co-defendants and their respective counsel. To qualify for the privilege, a party must show that the communications were made as part of a joint defense and were designed to further that effort. The party must also show that the privilege has not been waived.

Federal courts in the Sixth Circuit have endorsed joint-defense agreements in recent years. For example, in Broessel v. Triad Guar. Ins. Corp., the court recognized that: “More and more, to protect the joint defense privilege, parties enter into written joint defense agreements in an effort to assure that information shared among the attorneys for each of the defendants will remain privileged despite the sharing.”

Another example comes from City of Columbus v. Hotels. com: “When parties have a common interest in litigation and/ or are conducting a joint defense, they have traditionally [been] capable of sharing work product without waiving the protec¬tion of the privilege.”

A number of other relevant cases and statutes have provided substantive points and information regarding joint-defense agreements:

1. A joint-defense agreement is useful because it allows counsel for co-defendants to exchange confidential information while maintaining its privileged status.

  • From City of Kalamazoo v. Michigan Disposal Serv. Corp.: “the confidential information may be conveyed by the attorney for the co-defendant, rather than the client itself … it is not required that confidential infor¬mation pass directly from the client’s mouth to the at¬torney’s ears before the law will accord the information protected status.” 
  • From Ky. SCR 1.6: “The confidentiality rule, for example, applies not only to matters communicated in confidence by the client but also to all information relating to the representation, whatever its source.”

2. In order to invoke the joint-defense privilege, there must be evidence of a joint-defense agreement.

    • From N. Am. Rescue Prods. v. Bound Tree Med.: “The joint defense exception requires some evidence of an agreement to share information for the specific purpose of coordinating a common legal defense.”

3. The joint-defense agreement does not need to be sophisti¬cated in order to invoke the joint-defense privilege. Note however, that for reasons discussed later in the article, it is best for the joint-defense agreement to be as clear and precise as possible.

  • From John B. v. Goetz: “an oral joint defense agree¬ment may be valid…and [a] person need not be a named party to join the agreement.”

4. There is a possibility that an attorney-client relationship will result from the existence of a joint-defense agreement.

  • From Ky. SCR 3.130 Preamble: A Lawyer’s Responsi¬bilities: “Whether a client-lawyer relationship exists for any specific purpose can depend on the circumstances and may be a question of fact.” 
  • From City of Kalamazoo v. Michigan Disposal Serv. Corp.: “even without acting as common counsel, an attorney in a joint defense situation may find an attorney-client relationship arise with co-defendants as the result of sharing confidential information.” In addi¬tion, Kalamazoo also concludes that the federal courts will examine the provisions of a written joint-defense agreement to determine whether an attorney-client relationship has been created.

5. The existence of an attorney-client relationship between counsel in a joint-defense agreement and a co-defendant can create issues involving the confidentiality of information and conflicts of interest with former clients. If the relationship does exist, disqualification may be necessary when realignment of parties occurs during the course of litigation.

From Umphenour v. Mathias:

a. “In cases on disqualification based on former clients, the Sixth Circuit, following circuits nationwide, uses a three part test developed in Dana Corp. v. Blue Cross & Blue Shield….”
b. “The Dana Corp. test analyzes: (1) whether a past attorney/client relationship existed between the party seeking disqualification and the attorney it seeks to disqualify; (2) whether the subject matter of those relationships is substantially related; and (3) whether the attorney acquired confidential information from the party seeking disqualification.”

To deal with the issues involving confidentiality, conflicts of interest and disqualification, many joint-defense agreements include a provision negating the possibility of an attorney-client relationship as to co-defendants. The agreements can also include a provision that waives the rights of members of the joint-defense agreement to move to disqualify other lawyers in the agreement. These provisions need to be carefully written in order to be effective.

The utility of a joint-defense agreement can be seen in the result of United States v. Henke. In this particular case, one defendant accepted a plea agreement and began to cooperate with the government. The court found “an implied attorney-client relationship with the co-defendant” arising out of a joint-defense agreement. The counsel for co-defendants had confidential information that could have been used to impeach this new witness. Concerned with this, the court disqualified all counsel for the co-defendants. This extreme result could have been avoided with a carefully drafted joint-defense agreement.

A recent case out of the Federal Circuit demonstrates the other end of the spectrum. In In re Shared Memory Graphics LLC, a lawyer who was a member of a joint-defense agreement moved to a firm representing the plaintiff in a substantially related case, and the lawyer was not properly screened on the matter at his new firm. The court upheld the broad waiver provision in the joint-defense agreement that allowed this move. The co-defendants were then forced to face opposing counsel who possessed confidential information about their case.

Henke and In re Shared Memory Graphics represent two extreme results that should be avoided. A clear and precise joint-defense agreement can avoid a situation where all counsel for co-defendants are disqualified, while also protecting clients from having to face an adversary possessing their confidential information. Lawyers need to consider the issues surround¬ing confidential information and confidentiality when drafting these agreements.

The Model Rules of Professional Conduct (hereafter referred to as “Model Rules”), codified in Ky. SCR 3.130, provide guidance for dealing with these sensitive issues.

Model Rule 1.6 discusses the duty of confidentiality: “A lawyer must act competently to safeguard information relating to the representation of a client against inadvertent or unauthorized disclosure by the lawyer or other persons who are participat¬ing in the representation of the client or who are subject to the lawyer’s supervision.”

Model Rule 1.9 describes a lawyer’s duty to a former client: “After termination of a client-lawyer relationship, a lawyer has certain continuing duties with respect to confidential¬ity and conflicts of interest…” In situations where lawyers move firms, Model Rule 1.9 should not be read to preclude a person from having a reasonable choice of legal counsel nor to “unreasonably hamper lawyers from forming new associations and taking on new clients after having left a previous association.”

Model Rule 1.9 also describes the appropriate analysis for determining whether disqualification is appropriate: “The underlying question is whether the lawyer was so involved in the matter that the subsequent representation can be justly regarded as a changing of sides in the matter in question.”

However, Kentucky courts may also look for the “appearance of impropriety”—which comes from Lowell v. Winchester— to determine whether a lawyer should be disqualified. There¬fore, a lawyer in Kentucky must be particularly careful when changing positions during litigation.

The preamble to the Model Rules discusses the competing interests at issue in joint-defense agreements. For example, Ky. SCR 3.130 Preamble: A Lawyer’s Responsibilities says, “Virtu¬ally all difficult ethical problems arise from a conflict between a lawyer’s responsibilities to clients, to the legal system, and to the lawyer’s own interest in remaining an ethical person while earning a satisfactory living.” By drafting a clear and precise joint-defense agreement that accounts for the concerns of the Model Rules, a lawyer can balance the need to protect a client’s confidential information while still allowing the attorney the mobility that is essential in today’s legal profession.
A lawyer can effectively work under a joint-defense agreement by following a few simple steps.

First, when drafting a joint-defense agreement, any provisions negating an attorney-client privilege or waiving a right to move to disqualify should be clear and precise.

It is imperative that the client is aware of the implications of the provisions in a joint-defense agreement. Ky. SCR 3.130(1.6) states: “A fundamental principle in the client-lawyer relation¬ship is that, in the absence of the client’s informed consent, the lawyer must not reveal information relating to the represen¬tation.” (Emphasis added). And Ky. SCR 3.130(1.4) tells us a lawyer must consult with the client about the means by which the client’s objectives will be accomplished and inform the cli¬ent so that the client can make informed decisions.

It is particularly important that the client is informed of the consequences of a waiver provision.

Ky. SCR 3.130(1.9) states that, “Disqualification from sub¬sequent representations is for the protection of clients and can be waived by them. A waiver is effective only if there is disclosure of the circumstances…” And from Formal Opinion 372 of the ABA Committee on Ethics and Professional Re¬sponsibility, we learned that the closer a prospective waiver can get to identifying a potential future dispute, “the more likely it will be…consistent with the requirement of the Model Rules that consent be attended by a consultation that com¬municates information reasonably sufficient to permit the client to appreciate the significance of the matter in question.” (Emphasis added).

Finally, if one attorney in a joint-defense agreement will be switching to an adverse firm, he or she should be properly screened according to the Model Rules. For example, Ky. SCR 3.130(1.0) tells us that, “The purpose of screening is to assure the affected parties that confidential information known by the personally disqualified lawyer remains protected.” A proper screening will also ensure that the adverse firm is not disquali¬fied from representing the adverse client based on imputation.

A joint-defense agreement is a useful tool, allowing counsel for co-defendants to prepare a coordinated defense. However, these agreements must be carefully drafted and employed in order to protect the client, while still allowing an attorney to en¬gage in the mobility that is prevalent in today’s legal profession.