SC Lawyer, July 2004, #2. Beyond the Bar July 2004 Just between us: the common-interest rule.

• Author: By Warren Mo\xEFse

South Carolina Lawyer

2004.

SC Lawyer, July 2004, #2.

Beyond the Bar July 2004 Just between us: the common-interest rule

South Carolina LawyerJuly 2004Beyond the Bar July 2004 Just between us: the common-interest ruleBy Warren MoïseWhen privileged communications or documents are disclosed to third parties such as lawyers for other clients, the privilege usually evaporates. However, many jurisdictions now extend evidentiary privileges to communications between parties sharing a common interest in potential or actual litigation. One or more doctrines may apply, but probably the most significant one is the common-interest rule.

Confusing terminology

Terminology in this area often is confused. The common-interest rule is also sometimes called the joint "defense" privilege; however, the common-interest rule is not limited to use by defendants. The "allied lawyer doctrine," which in a sense may be seen as a corollary of the common-interest rule, applies when parties with separate lawyers consult about matters of common interest. The common-interest rule is different from the common-interest privilege which makes certain communications non-actionable that otherwise would be slanderous. See Berhanu v. New York State Ins. Fund, 1999 WL 813437, 7-8 (S.D.N.Y. 1999). Finally, the joint client doctrine applies where two clients have the same lawyer.

Background into the rule

In 1871 a privilege was recognized between criminal co-defendants whose lawyers traded information in formulation of a common defense strategy. See Chahoon v. Commonwealth, 62 Va. 822 (1871). Neither Wigmore nor any of the earlier evidence codes mentioned the rule. By the early 1970s only about 12 precedents existed for the rule.

When the proposed Federal Rules of Evidence were before Congress, there were several rules dealing with specific privileges, all of which were rejected as Congress was flooded with special interest groups wanting their own special privilege. The result is Rule 501, which is so vague that no one can really object much to it. However, one of the rejected rules, proposed Rule 503(b)(3), extended attorney client privilege to communications between a client "or his lawyer to a lawyer representing another in a matter of common interest." A pet of Advisory Committee member Judge Jack Weinstein, rejected Rule 503(b)(3) sets forth the "allied lawyer rule." The notes following the rule spoke of it as occurring in a "joint defense" or "pooled information situation." Several courts and legislatures have adopted the common-interest rule through the common law, evidentiary rules or statutes. See Young v. Presbyterian Homes, Inc., 50 Pa. D. & C. 4th 190 (Pa. Com. Pl. 2001) (collecting jurisdictions recognizing the rule). United States Supreme Court Standard 503(b) (cited in Cameron v. General Motors Corp., 158 F.R.D. 581, 585 n.3 (D.S.C. 1994)) and Uniform Rule of Evidence 502(b)(3) include versions of the common-interest rule.

Public policy underlying the rule

Some courts justify the common-interest rule by deeming it necessary to protect a free flow of information between attorney and client whenever multiple clients have a common interest in a legal matter so that prosecution or defense of the claims may be done more effectively. See In re Grand Jury Subpoenas, 902 F.2d 244, 249 (4th Cir. 1990). Another justification is the benefit gained when parties pool their resources and coordinate efforts, thus reducing litigation costs. Young, 50 Pa. D. & C. 4th at 198.

How does the common-interest rule work?

The common-interest rule does not create an evidentiary privilege; it simply extends an already existing privilege. Courts focus not on the date that a document is created, but when it is disclosed to a jointly interested third party. Entities sharing the communications may still have some adverse interests under the rule; however, the focus of the rule is on their mutually beneficial common interests. The common-interest rule has been applied to civil co-defendants, businesses individually summoned before a grand jury who shared information before an indictment was returned, potential co-parties to future litigation, plaintiffs pursuing separate actions in different states and civil defendants sued in separate actions. In re TJN, Inc., 1997 WL 33343976 (D.S.C. Bankr. 1997) (Waites, J.). However, the common-interest rule is a growing child, and its skin and viscera are not yet fully developed by the law. With this caveat, a basic test for the rule is as follows:

* documents or communications;

* already protected by a valid privilege, including attorney-client or work-product privilege;

* may be exchanged or disclosed to another party who has a specifically identified common interest in pending or "contemplated" criminal or civil litigation;

* if the privileged information were purposely disclosed during the course of an ongoing common enterprise and intended to further the enterprise protected;

* if the common interest is legitimate and concerns a "legal" matter (commercial concerns or protecting a person's reputation are not legal matters); and

* if the communication were made with reasonable expectations by the attorney and client that it would be maintained in confidence.

When the foregoing are met, the original privilege is still valid, see U.S. v. Aramony, 88 F.3d 1369 (4th Cir. 1996); Sheet Metal Workers Int'l Ass'n v. Sweeney, 29 F.3d 120 (4th Cir. 1994), and

The privilege may not be disclosed to other parties without the consent of all parties who share the privilege.

Uncertainties about the common-interest rule

Some courts require an actual agreement between the people claiming the privilege, although not necessarily a written one. The Fourth Circuit has not addressed this issue. However, some federal courts in the Fourth Circuit have required such an agreement, see U.S. v. Duke Energy Corp., 214 F.R.D. 383 (M.D.N.C. 2003); King v. Netherland, 1997 WL 461906 (W.D. Va. 1997), and one court equated "contemplated" or a "palpable threat of litigation" with the "anticipation of litigation" standard found the Federal Rules in Civil Procedure Rule 26(b)(3), see Duke Energy Corp., 214 F.R.D. at 388-89. Because an adversary might try to use a written agreement to show bias or as an admission, care should be taken in its drafting. Spontaneous or gratuitous sharing of information might not be within the rule's protection; the common-interest rule has been held inapplicable when a party did not consult with his attorney and/or try to identify parties with a common interest before disclosing privileged information. See Baltimore Scrap Corp. v. David J. Joseph Co., 1996 WL 720785 (D. Md. 1996).

Another uncertainty is whether the privilege applies to protect exchanges of information directly between parties or just between lawyers; in the Fourth Circuit disclosures arguably are not limited to just those between lawyers. Baltimore Scrap Corp., 1996 WL 720785, 7 at n.9 (quoting In re Grand Jury Subpoenas, 902 F.2d at 249 "Persons [sharing] a common interest . . . should be able to communicate with . . . attorneys and . . . each other . . ."

The rule in South Carolina

South Carolina courts have never addressed the common-interest rule in a reported opinion. South Carolina Rule of Evidence 501 dealing with privileges is materially identical to Federal Rules of Evid- ence 501. Unlike with the Federal Rule 501, there is no record in the state Rule 501's history of the common-interest rule being mentioned by the Bar, Supreme Court or General Assembly. Rule 501's sparse, vague wording, history and specific reference to the common law arguably indicate a preference for development of evidentiary privileges through the courts.

Recently the South Carolina Court of Appeals was confronted with a potential common-interest rule scenario in an underinsured-motorist (UIM) case when the insurer's UIM defense attorney invoked attorney-client privilege regarding his communications with the defendant driver. In UIM cases, the insured's insurance carrier steps into the shoes of the adverse driver and may defend the lawsuit in the driver's name. Although the adverse driver is not the defense lawyer's client, they share a common interest in receiving a defense verdict or keeping the verdict low. In Crawford v. Henderson, 356 S.C. 389, 589 S.E.2d 204 (S.C. Ct. App. 2003) the South Carolina Court of Appeals held that: (a) there is no attorney-client privilege between a UIM lawyer and the named defendant, (b) the UIM lawyer should inform the defendant that he represents the carrier only and (c) the defense lawyer should treat the named defendant as a witness. A review of the appellate briefs in Crawford shows no mention of the common-interest rule, and the rule was not addressed in the Court of Appeals' written opinion either. Finally, there was no indication in Crawford of an agreement between the UIM attorney and the defendant driver to share information.

South Carolina does recognize the joint client doctrine that applies when two clients have the same lawyer. Chief Justice Gary wrote in Raleigh & C.R. Co. v. Jones, 104 S.C. 332, 88 S.E. 896 (1916) that:

An attorney, employed by two or more persons . . . can, on litigation subsequently arising between such persons or their representatives, be examined . . . as to communications made when he was acting as attorney for all. But he cannot disclose such communications in a controversy between his client or either of them and third persons. Id. 104 S.C. at 337-38.

The future of the common-interest rule

The common-interest rule is firmly established in Fourth Circuit common law.

South Carolina has yet to speak on the issue. It was not put before the Court of Appeals in briefs filed in Crawford, even if it was applicable to the facts of the case, nor was Crawford appealed to the South Carolina Supreme Court.

For the policy reasons discussed above, there does seem to be merit in recognizing the common-interest rule in South Carolina, especially when done by express written or oral agreement. No new privileges excluding the truth from the fact finder would be created. Instead the reach of existing privileges would simply be extended under the common law.

Our state courts' unknown position on the common-interest rule is problematic for the Bar because lawyers must speculate about whether pre-litigation communications are privileged under the common-interest rule. At the least, before disclosing privileged information, lawyers should take care to specifically identify other parties' mutual interests, then agree with them that any shared privileged communications will be done pursuant to the common-interest rule.

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