Delaware Courts Address Common Interest Doctrine Issue: Part II

July 29, 2020

Last week’s Privilege Point described a favorable Delaware state court decision finding that a post-reorganization trust and its largest stakeholder could rely on the common interest doctrine to protect their communications – because they shared a common legal rather than just a common financial interest. Highlighting the unpredictability of the common interest doctrine, another Delaware state court took a much narrower view just a few months later.

In American Bottling Co. v. Repole, C.A. No. N19C-03-048 AML CCLD, 2020 Del. Super. LEXIS 225 (Del. Super. Ct. May 12, 2020), plaintiff sued defendant for terminating its sports drink distributorship after plaintiff’s parent merged with defendant’s competitor Keurig. Keurig had retained Skadden, Arps to represent it in that merger transaction. Defendants sought privileged documents Skadden sent to plaintiff’s parent after the companies had signed their merger agreement, but before the closing. Plaintiff claimed that its parent and the acquiring company Keurig shared a common legal interest in “evaluating their rights” and “taking any available steps to protect those rights” under the plaintiffs’ distribution agreement with defendant. Id. at *9 (internal citations omitted). Surprisingly, the court found a waiver – concluding that “the primary focus of the interest plainly was commercial” – even if the parties “may well have shared an interest in positioning the post-merger entity so as to capitalize on the distribution agreements.” Id. at *13. Reaching this narrow conclusion, the court necessarily rejected a Skadden’s lawyer’s affidavit – which stated that Keurig had directed Skadden to conduct “legal analysis, including analyzing what payments, if any, would be payable pursuant to various termination provisions . . . if those termination provisions were triggered by the Merger.” Id. at *8-9 (internal citation omitted).

These two Delaware state court decisions issued less than two months apart demonstrate the common interest doctrine’s unreliability.