Do Indemnitees And Indemnitors Always Share A Common Interest?

February 19, 2020

Last week’s Privilege Point described a court’s somewhat surprisingly narrow view of when counterparties reasonably anticipate litigation. Lawson v. Spirit AeroSystems, Inc., Case No. 18-1100-EFM-ADM, 2019 U.S. Dist. LEXIS 176497 (D. Kan. Oct. 8, 2019). A few pages later, the same court issued a somewhat surprisingly narrow common interest doctrine analysis.

In Lawson, Spirit’s retired CEO began working as a consultant for an investor in Spirit’s competitor. Spirit claimed that the arrangement violated the retired CEO’s retirement non-compete. The arrangement required the investor to indemnify the retired CEO “for losses and expenses,” but gave the investor “the option whether to assume [the retired CEO’s] defense.” Id. at *28. The court held that the arrangement’s option provision meant that the investor “therefore had only a commercial or financial interest with respect to litigation with Spirit over” the retired CEO’s non-compete. Id. The court ultimately concluded that the common interest doctrine began to apply only “[w]hen [the investor] actually assumed [the retired CEO’s] defense” — because only at that point did “their legal interests bec[o]me truly aligned.” Id. at *29.

Because the court had found work product protection as of the date Spirit’s retired CEO and the investor executed their consulting arrangement, the work product doctrine’s availability presumably made the common interest doctrine (necessary to preserve the fragile privilege) less important. But both holdings from the Lawson case highlight courts’ differing applications of some work product and common interest doctrine nuances.