Joint Defense Agreement Explained
A joint defense agreement is a contractual arrangement between two or more parties, often different defendants in the same litigation or investigation, that establishes a legal privilege for the protection of communications, information, and documents that are shared among the members of the group. Such communications may include, for example, strategies, tactics, or theories regarding discovery, depositions, or trial testimony. Although there are various forms of joint defense agreements, they generally operate by virtue of the legal concept of privileged communications . Certain legal privileges protect the communications of a group of defendants, rather than those of any particular individual, thereby preventing communication between members of the group from being discoverable by opposing counsel. The purpose of bringing all parties to a joint defense agreement is to further strengthen the privilege and to ensure full legal protection for communications and information that are shared among the various parties.
Advantages of a Joint Defense Agreement
A joint defense agreement can provide several key benefits to a corporation or other organization facing multiple lawsuits relating to similar causes of action. One of the key benefits is cost savings: having a common defense team allows for economies of scale since legal teams and certain common experts can be reused in multiple matters. A typical D&O claims lawyer will have hundreds of different clients. Multiple D&O claims from a single client can be a rare occurrence and certainly, the number of predicted cases and likely discovery will eclipse the number of cases actually litigated. And, with the increase in technology utilization in the market, it is highly probable that most documents, electronic and hardcopy, will already have been reviewed by the time the last of the cases is tried or settled.
A joint defense agreement also allows firms to share resources, which can include experts, documents, research, and strategy. Shared expert resources have an additional benefit in that they provide a continuity of credibility. Orchestration of the expert’s testimony at trial in the same voice, although more akin to fiction than fact, can lend credence to a consistent theme and may support the overall narrative of the joint defense clients, while hurting the clients’ antagonists. Relatedly, tactical information about the client base, expert resources, or discovery challenges can be shared without fear of waiving any privilege.
The most important benefit of a JDA, however, is the preservation of an effective defense strategy. This means the cooperation between attorneys on the same side of different lawsuits is not simply an Herculean effort to save costs, but instead are both part of a plan to defeat a given lawsuit as a whole.
Contrary to what many believe, these benefits are not exclusive to insureds; uninsured companies also can benefit tremendously from a joint defense agreement.
Regulatory Framework and Laws
Joint Defense Agreements enjoy a wide usage and application in a variety of courts throughout the country. While no federal laws exist specifically for JDA, guidelines regarding attorney-client privilege and work product doctrine are applicable. At the state level, there are a few notable statutes which govern privileged communications and the work product doctrine. However, it is the interpretations of the state courts, rather than the statutes, that shape practical applications.
Section 12.2-542 of the Virginia Code deals with communications made by an accused to one or more licensed attorneys appointed on behalf of the Commonwealth, however, this is not a true joint defense agreement but rather a provision in place to encourage defendants to communicate with the Commonwealth’s Attorney. The statute grants any communications made between defendants and their legal counsel as privileged from discovery. Section 8.01-420 of the Virginia Code also provides that any professional communications made in anticipation of litigation shall be considered privileged and objectionable to discovery.
An excellent example of joint defense agreements being used in the federal court system is found in United States v. Phillip Morris Inc., 2003 U.S. Dist. LEXIS 18579. Here, competitors of the tobacco industry formed a Joint Defense Group which sought to keep the contents of their meetings confidential, even if they included third party experts. The Joint Defense Group filed a motion for protective order, which was granted by the Eastern District of Virginia, despite the general rule that communications to third parties are not protected. The Court explained that a JDA should be presumed valid when the agreement is between the defendants in a formal adversarial proceeding and they anticipate litigation. The court took into account the expectation of privacy in the process of investigation, weighing against the public interest in preventing future harm to the public. The cases of United States v. Phillips (D. Utah 1994) and United States v. Doe (Goodman, S.D. Fla. 1986) are also worth mentioning as they both deal with the legality of joint defense agreements and how they exact privilege. Although these were not civil cases, the courts chose to recognize the intent of a joint defense agreement and ruled favorably for the parties. In regards to the Attorney Work Product Doctrine, the Fourth Circuit holds that while a party may choose to waive attorney client privilege, they cannot choose to waive the protections of the work product doctrine. As seen in Fennell v. TLB Kent Co., 87 F.R.D. 60 (D.R.I. 1980), a party cannot waive work product doctrine through a waiver of the attorney client privilege and vice versa.
Common Provisions in a Joint Defense Agreement
There are several clauses that are generally found within the typical joint defense agreement. Each of these clauses is largely self-explanatory and, for that reason, will receive little elaboration. However, it is important to understand the intent of each one in the context of its relationship to other clauses within the agreement. With that understanding, you are likely to remain cognizant of your options, should one of these clauses become identified as a point of concern in the process of negotiating the agreement.
Confidentiality Clause – this clause identifies how the parties will maintain the confidentiality of the information shared with one another in the context of the joint defense relationship. The confidentiality clauses commonly assigned to joint defense agreements may be quite broad in scope and reach, although they are likely to come with exceptions, such as when one party, upon reasonable notice to the others, is compelled to disclose information (e.g., by court order), or has to disclose certain information to its auditors, officers, directors, attorneys or agents, or in connection with other investigations conducted by, or other inquiries made by, a governmental authority or agency, including the Securities and Exchange Commission.
Scope of Cooperation Clause – this clause usually provides that the parties will reasonably cooperate with one another in connection with the threats and/or the litigation involving the disclosure and/or the discovery of protected information, and that the parties will bear their costs and expenses in connection with that cooperation. Virtually every joint defense agreement contains some form of this clause. Parties usually try to ensure that the stipulation of the scope of their cooperation in the context of the joint defense agreement includes a broad range of activities in connection with the investigation and the defense of the claims for purposes of protecting themselves as much as possible, and avoiding any potential claim that their joint defense relationship may have been compromised at any point in time.
Termination of Agreement Clause – this clause simply states that either of the parties has the right to terminate the agreement by reasonable notice to the others, for any reason, with or without cause. This clause is self-explanatory.
Challenges and Risks
Joint defense agreements are relatively simple arrangements, but they can create difficult issues in practice and potentially perilous pitfalls in terms of privilege and conflicts. Here are some issues that should be thought about before entering into any agreement.
Conflicts of Interest. As long as the parties that share a common interest don’t have conflicting interests, they can share information without waiving privilege. However, this is not as simple as it sounds. When a client moves to a new attorney, the attorney has an ethical obligation to evaluate whether that move raises a conflict of interest with a current or former client. That is, if the parties’ interests somehow become inconsistent, is the new attorney ethically obligated to withdraw from representation of the new client? According to the ABA Ethics Opinion 92-368, an existing joint defense relationship does not absolve an attorney’s obligation to evaluate the potential conflicts. In fact, it may make it more difficult to do so.
Privilege Issues. When the common interest agreement is entered into by companies or individuals who are suing one another, instead of mutual participants in a single action, it is especially important to define the relationship and terms of the agreement very carefully. If the clients’ story about how their interests converge and diverge is not carefully delineated, it can be difficult to protect privileged material from discovery. Generally , the portions of joint defense communications that are based on attorney-client information will remain privileged, while those based on nonattorney client information may not. Some courts will deny a party that did not enter into the common interest agreement access to otherwise privileged materials based on the entry of the agreement, so care must be taken that nothing unintended is disclosed as a result of the agreement. Another area of difficulty is whether privilege remains when the attorneys and parties change. Sometimes a new lawyer is hired to replace the old lawyer. Or a party may have claims or defenses against others that were not considered in the original agreement because they did not enter into the agreement. When clients in a joint defense agree that they will keep information confidential and later settle, litigation can be filed after settlement based upon information that was exchanged. The settlement agreement must be very clear on whether information received as part of the agreement may be disclosed to a third party as evidence of amounts requested or paid. When co-litigants that appear to be working together settle on terms that conflict, the non-settling party can attempt to use the joint defense information that the settling party agreed would remain confidential.
Joint defense privilege is a very powerful tool. Clients can lose the opportunity to use the potentially very valuable tool if conflicts and privilege issues are not anticipated and treated properly.
Best Practices in Drafting
When considering a joint defense agreement, counsel should keep in mind various best practices to ensure enforceability and effectiveness.
First, should only those communications that are protected by the attorney-client privilege or work-product doctrine be included in the agreement, or should particular groups of communications be protected? Effective joint defense agreements will include provisions that state clearly that only communications that are privileged or work product are covered. Many courts have recognized a joint defense privilege, but this privilege is dependent on the existence of a common interest and—at least some courts—on there being communications that are within the attorney-client privilege. See, e.g., In re Teleglobe Commc’ns, Inc., 493 F.3d 345, 363 (3d Cir. 2007) (assuming "that a joint defense privilege exists … parties may invoke this doctrine only if the information exchanged would otherwise be protected by the attorney-client privilege.") E.g., In recommending adoption of joint defense privilege by the New Zealand Law Reform Commission in its Accord and Release report, the Commission made clear that "the joint defence privilege should extend only to legal advice". The North Carolina Business Court has found that a court cannot determine if "there was an implied common interest privilege because no ‘evidence of the content of any communications allegedly shared among [the parties] in furtherance of a common legal interest has been provided.’" Hyundai Motor Co. v. Tran, 2011 NCBC 14, ¶25 (N.C. Super. Ct. 2011).
Second, what if the joint defense group shares privileged information with an expert? If such a communication is protected, should it be included in the agreement? A number of courts have suggested or assumed that communications between clients in a joint defense group and experts are protected. See, e.g., In re Omnicare, Inc. Sec. Litig., 233 F. Supp. 2d 830, 843 (N.D. Ohio 2002); In re Universal Serv. Fund Tel. Billing Pract. Litig., 232 F. Supp. 2d 302, 306 (D. Kan. 2002).
Third, should the agreement provide for the resolution of issues arising out of a breach of the agreement? To deter breaches, the joint defense group may decide to make the breaching party liable for any expenses incurred, including attorney’s fees and costs incurred, or even to make a finding of a breach admissible against an adversary in a trial of a related matter. Other remedies could be included, depending upon other concerns the group may share.
Case Law and Practical Examples
During a highly-publicized class-action suit against a major tech company, the defendant decided to enter into a joint defense agreement (JDA) with several other companies that were co-defendants in the case. Quickly realizing that certain of the codefendants had potentially damaging information, and not wanting that information to be inadvertently disclosed before irreparable harm was done, the defendant sought a continuance from opposing counsel. Having already engaged in discovery and strategy discussions through the JDA, the defendant was able to convince both the opposing party and the court of the merits of its position.
During a large family law suit that was covered extensively in the media, one of the parties was sued personally for defamation by a group of media outlets . The defendant had engaged in several discussions with codefendants through a JDA before the media lawsuit was filed. When it did arrive in court, the defendant was able to successfully argue that the parties engaged in the discussions in complete confidence, and the court agreed with the defendant. As a result, the defendant was able to avoid having to disclose potentially-disabling information.
In a contract dispute between two large corporations with multiple affiliate claims, a JDA was entered into among all parties in order to avoid having to engage in everything from document production to attorney depositions with each other individually. As a result, the defendant was able to save significant time and cost in defending against the numerous claims. The case was settled after around a month of extensive negotiations, far less than the years promised after the individual case filings.