Decision Highlights the Risk of “Common Interest” Agreements

September 21, 2005

Most lawyers have read about the recent Fourth Circuit decision that criticized (but upheld the validity of) what it called “watered-down ‘Upjohn warnings'” company lawyers gave an executive being interviewed – which did not explicitly indicate that the company lawyers were not also representing the executive. In re Grand Jury Subpoena, 415 F.3d 333, 340 (4th Cir. 2005). However, news reports about that decision have missed another important point.

In addition to arguing that the company lawyers represented him as well as the company, one executive also argued that he and the company had entered into a “common interest” (sometimes called a “joint defense”) agreement – which would have also given that executive a veto power over the company’s waiver of the privilege. The Fourth Circuit noted that the company was “in the early stages of its internal investigation,” and there was no evidence of such a common interest understanding. Id. at 341. Had the company reflexively entered into a common interest agreement with the executive (as many companies do), the company would have lost the sole power to control the privilege – regardless of the warnings the company lawyers gave the executive during the interview.

Companies and their lawyers should always carefully consider the ramifications before entering into a common interest agreement with company executives.