Two Companies’ Desire to Comply with the Law Does Not Support a Common Interest Agreement

December 29, 2010

In certain limited circumstances, companies can avoid a waiver when sharing privileged communications by claiming that they had a “common interest.” However, that doctrine is narrower than many clients and lawyers realize.

In FSP Stallion 1, LLC v. Luce, Case No. 2:08-cv-01155-PMP-PAL, 2010 U.S. Dist. LEXIS 110617 (D. Nev. Sept. 30, 2010), two companies claimed a common interest in a business transaction. The court rejected their argument – noting that “the common interest doctrine does not apply simply because the parties are interested in developing a business deal that complies with the law, and a common goal to avoid litigation.” Id. at *67. As the court explained it, “[a] desire to comply with applicable laws and to avoid litigation does not transform their common interest and enterprise into a legal, as opposed to a commercial, matter.” Id. at *67-68. Unfortunately, of course, the companies had already exchanged privileged communications – which meant that the court’s ruling resulted in a waiver that was too late to avoid.

Lawyers and their corporate clients contemplating a common interest agreement should recognize the doctrine’s limitations, and also remember that it will often be too late to avoid a waiver if they guess wrong about a court’s later reaction.

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