In United States v. Krug, 868 F.3d 82 (2d Cir. 2017), here, the Second Circuit rejected a claim of joint defense/common interest with respect to hallway communication between two clients to a joint defense agreement ("JDA"). One of the members of the JDA decided to cooperate with the Government. In that cooperation, the cooperating defendant disclosed the contents of a "hallway" discussion between he and one of the other participants in the JDA. Their lawyers were not present for that discussion. The precise content of the discussion is redacted. Based on the common interest privilege, the district court precluded the Government from using the testimony about the contents of the discussion. The Government appealed.
The Court of Appeals reversed, thus permitting the Government to use the evidence. The Court offers a good discussion of the privilege, illustrating the danger of applying the privilege beyond its intended scope. The key discussion is short, so I excerpt it all. Please note that I am using the "cleaned up" technique (see here) to make the excerpt more readable.
The underlying purpose of the attorney-client privilege is to encourage full and frank communication between attorneys and their clients. As a result, the attorney-client privilege creates a rule of confidentiality that recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. To that end, the 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.
In order to balance this protection of confidentiality with the competing value of public disclosure, however, courts apply the privilege only where necessary to achieve its purpose and construe the privilege narrowly because it renders relevant information undiscoverable. The parties asserting the privilege, in this case [Krug and Wendel], bear the burden of establishing its essential elements.
The joint defense privilege, more properly identified as the common-interest rule, is an extension of the attorney-client privilege. It serves to protect the confidentiality of communications passing from one party to the attorney for another party where a joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel.The common-interest rule protects only those communications made in the course of an ongoing common enterprise and intended to further the enterprise. As with all attorney-client privilege claims, a claim of privilege under the common-interest rule requires a showing that the communication in question was given in confidence and that the client reasonably understood it to be so given.
Although the common-interest rule somewhat relaxes the requirement of confidentiality by defining a widened circle of persons to whom clients may disclose privileged communications, a communication directly among the clients is not privileged unless made for the purpose of communicating with a privileged person, the lawyer, agents of the client or of the lawyer who facilitate communications between the client and the lawyer, and agents of the lawyer who facilitate the representation. In this vein, we have stated that it is not necessary for the attorney representing the communicating party to be present when the communication is made to the other party's attorney under a common-interest agreement. Ultimately, what is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer.
The communications at issue in this case did not serve the interests that justify the privilege. The communications occurred outside the presence of any lawyer. Notwithstanding that the lawyers for the defendants were nearby and had recently been in communication with their clients, the excluded statements were not made for the purpose of obtaining legal advice from a lawyer, nor did the excluded statements share among defendants advice given by a lawyer, nor did the excluded statements seek to facilitate a communication with a lawyer. Here, the hallway discussion consisted of one member of the JDA (Wendel) conveying his independent, non-legal research to another member of the JDA (Krug) while noting he had sent the same research to his attorney. No legal advice was mentioned, much less shared or otherwise conveyed, among the co-defendants. The mere fact that the communications were among co-defendants who had joined in a joint defense agreement is, without more, insufficient to bring such statements within the attorney-client privilege. We know of no precedent applying the attorney-client privilege on such facts and we find no circumstances present here that could justify extending the attorney-client privilege to these communications.
CONCLUSION
For the reasons discussed above, we reverse the order of the district court. The government may offer the proffered testimony by Kwiatkowski regarding the hallway discussion at the trial of Krug and Wendel.I picked up Krug from Stephen A. Saltzburg, Limits on the Common Interest Attorney-Client Privilege, 32 Criminal Justice No. 4 64 (Winter 2018) [no link available]. The following are key excerpts from that article:
[After posing 5 examples inspired by Krug] Each of the five hypotheticals should cause one to think "wait a minute, why are we focused only on privilege: what about work product? In a civil case, Federal Rules of Civil Procedure 26(b)(3) indicates that what a party prepares in anticipation of litigation is covered by the equivalent of the work product doctrine. There seems to be no reason in a criminal case why the defendant cannot claim the benefit of work product for an investigation conducted in anticipation of a trial. Attorneys can share work product in a JDA. Can clients? That issue was not discussed in Krug, but it might prove to be important in future cases.
Lessons:
1. Not all communications among joint clients are privileged. That is the principal lesson of Krug.Other comments on Krug may be found:
2. It is not always easy to determine the scope of the common interest/joint defense privilege. Prudent lawyers will therefore urge their clients not to discuss matters with each other without a lawyer present, especially given the reality that one or more joint clients may ultimately withdraw from the JDA and cooperate with the government.
3. It is uncertain what role the work product doctrine might play in Krug-type cases.
Solomon L. Wisenberg, Second Circuit Chills Joint Defense Communications in U.S. v. Krug (White Collar Crime Blog 8/25/17), here.
Other discussions of the JDA generally that might be useful:
- Rachel L. Partain, Protecting Yourself and Your Client in a Joint Defense Arrangement (ABA Tax Section Newsletter Winter 2012), here.
- David Greenwald and Michele L. Slachetka, Protecting Confidential Legal Information: A Handbook for Analyzing Issues Under The Attorney-Client Privilege And The Work Product Doctrine (Jenner & Block Practice Series 2015), here (a tome with 426 pages of discussion and appendices (including cover page and opening items and with a form JDA beginning on p. 203).
- Joseph A. Valenti and Kelly M. Flanagan, Maximizing Efficiency, Minimizing Risk: Understanding the Common Interest Doctrine (K&L Gates 12/5/17), here
- USAM 9-28.730 - Obstructing the Investigation, here (discussing giving credit for cooperation in light of a JDA that might inhibit cooperation).
- Gideon Mark, The Yates Memorandum, 51 U.Cal. (Davis) 1589, 1620-1623 (2018) which says (footnotes omitted):
C. Joint Representation and Joint Defense Agreements
Joint representation by company counsel of the corporation and one or more of its constituent employees during government investigations can yield multiple advantages — greater efficiency, enhanced coordination, less cumbersome development of a common strategy, and negation of the perception of divergent interests. Joint representation also presents multiple disadvantages and complex ethical issues — a reduced ability to focus on interests of the employees, the risk of loss of credibility with the government, the potential for divergent interests, and potential harm to client confidences. Joint representation may be ethical when a disinterested lawyer would conclude that multiple representation is in the interests of both the corporation and the employee and both clients provide informed consent following discussion. The Model Rules suggest that the consent typically should be written. If the employee does agree to joint representation, it is probably wise for the corporation to ensure that the employee had access to independent advice of counsel when the consent was granted.Problems can unfold in a joint representation if one of the clients — typically, but not always, the corporation — desires to waive the attorney-client privilege and the other does not. Such problems can be avoided if the constituents have separate representation, and the corporation and constituents enter into a joint defense agreement (“JDA”).
A JDA is a contract between defendants to extend an existing privilege to confidential communications between outside counsel and defendants. JDAs are commonly used in corporate representations because they offer numerous advantages — they permit multiple parties to pool resources, coordinate strategy, and avoid duplicative work, and, in the context of alleged corporate misconduct, they facilitate internal investigations. JDAs also facilitate the exchange of information during government investigations by permitting the subjects of the investigation and/or their counsel to share such information without waiving an otherwise applicable privilege. Privilege is maintained even if the parties to the JDA later become adverse.
While it is often asserted that JDAs are based on a joint defense or common interest privilege,183 and that such a privilege is widely recognized, there is no such discrete privilege. Rather, a JDA can be used as a tool to extend the umbrella for existing protection — primarily attorney-client privilege or the work product doctrine. Protection normally is lost via waiver when the privileged communication is disclosed to a third party. A JDA can help solve that problem — when there is such an agreement parties may disclose their ] otherwise privileged communications and materials to their joint
defense allies without fear of waiver.
All fifty states and a majority of the federal circuits have recognized the joint defense or common interest doctrine, and no federal circuit has rejected it. Application of the doctrine has been inconsistent but courts generally require satisfaction of three conditions: (1) the subject communications were made in the course of a joint defense effort, (2) the communications were made to further the joint defense effort, and (3) the communications were intended to be kept confidential, and the privilege has not otherwise been waived.The umbrella protection of a JDA applies to both civil and criminal cases. There is no requirement that a JDA be reduced to writing, and many such agreements remain oral, contrary to courts’ stated preference for written agreements.
Prosecutors generally dislike JDAs — the agreements can shield relevant and probative evidence, may serve to obstruct justice, and may permit the continuation of criminal conspiracies. The Holder Memorandum and most of its successors allowed prosecutors to consider a company’s participation in JDAs with employees in determining whether to grant cooperation credit. However, since 2008 — when the Filip Memorandum was issued — the USAM has provided that “the mere participation by a corporation in a joint defense agreement does not render the corporation ineligible to receive cooperation credit, and prosecutors may not request that a corporation refrain from entering into such agreements.” The USAM further specifies that to avoid the prospect of a business organization losing cooperation credit eligibility, the DOJ should not bar the company “from providing some relevant facts to the government . . . .”
The foregoing USAM provision concerning “some relevant facts” appears to conflict with the “all or nothing” policy established by the Yates Memorandum. This conflict is likely to create the following effects. First, while some evidence suggests that requests by employees for JDAs have become more common post-Yates Memorandum, actual agreements are likely to become less frequent. JDAs, like joint representation, could signal to the DOJ that a company is not committed to producing all relevant evidence of employee misconduct and instead prefers to keep its interests synchronized with those of its employees. Post-Yates JDAs could further impede a corporation’s ability to obtain cooperation credit if one or more constituents seek to block the company from unilaterally disclosing joint defense materials to the government. In the years before the Yates Memorandum was issued it was fairly common for companies to include in joint defense agreements language expressly allowing the company to make unilateral disclosures. If companies continue to insist on antiblocking provisions — and it appears that such provisions are being included in post-Yates JDAs — then constituents will have less incentive to join a joint defense agreement as their fears of being sacrificed by the leniency-seeking corporation are magnified. Indeed, the DOJ may seek to leverage the Yates Memorandum to discourage JDAs expressly or impliedly, given prosecutors’ general aversion to such agreements. The government could persuasively argue that a common interest sufficient to support a JDA never existed, if a company decides early in an investigation to cooperate by divulging all facts about individual employee misconduct in order to obtain credit. This cooperation would undercut or destroy an alleged common interest between the company and an individual target.Employees could make the same argument and then freely use against the company confidential or privileged information obtained through the joint defense relationship.
Second, those JDAs which do form post-Yates Memorandum are likely to be more complex than those which previously formed. While constituents will be less likely to enter into JDAs with their companies they will retain their incentives to enter into joint agreements with their fellow constituents, to the exclusion of the company.This is because the Yates Memorandum’s policy concerning eligibility for cooperation credit applies to organizational entities but not to individuals. This could lead to a “web of multiple, overlapping JDAs that would only compound the complexity of tracking common interests and confidentiality obligations.”
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