What is a Common Interest Agreement?
A common interest agreement is a legally binding tool that allows parties who face an overlapping or common legal interest to share information without fear that the other party would be able to use that information to their advantage against them in litigation. Parties can commonly find themselves on the same side of an issue without having any other legal agenda in common with each other. A common interest agreement allows those parties to freely share information and insight so they can effectively work towards a positive outcome. To put it more simply, a common interest agreement is simply an agreement between two or more parties that allows them to keep information confidential that may otherwise be discoverable. Normally in litigation, if an individual or entity takes a certain action, such as hiring an attorney or speaking to an expert, the privileged nature of that communication is generally not protected from discovery in litigation as it could be argued that the parties did not enjoy a common interest prior to the creation of a Common Interest Agreement .
There are three types of privilege that may be used in preparation for or during litigation. Attorney-client privilege protects communications between a client and their attorney so long as the communications are solely for the purpose of providing legal advice. Work-product doctrine protects materials that are prepared in anticipation of litigation up until the conclusion of the litigation. Common interest privilege protects confidential communications between multiple parties who are on the same legal team to a certain extent.
In simple terms, common interest agreements are agreements that protect the flow of information between different parties in order to facilitate the sharing of information, including legal and confidential information, that may otherwise be discoverable.
Common interest agreements are useful in a number of different legal settings, including:
A common interest agreement is limited only to participants who have a required common interest in the actual litigation itself as distinct from other litigation, including all of the parties involved in the initial settlement negotiations.
Essential Components of a Common Interest Agreement
An effective common interest agreement template should contain the following key elements:
The Engagement of Common Interest Legal Counsel
When you are retaining common interest legal counsel for the benefit of a community association (e.g., homeowners association, condominium association, etc.), whether as a continuing retainer or on a matter- or case-by-basis, you will need to have a written engagement and fees agreement with such common interest legal counsel that is known as a common interest legal services agreement.
The engagement and fees agreement is essential. It governs the attorney-client relationship between common interest legal counsel and the community association client with respect to legal services rendered (or to be rendered). This agreement sets forth the expectations and understandings between the community association client and counsel, which will be paramount should any disputes or differences arise during the representation regarding the scope of the legal services rendered, the costs and fees, etc.
Additionally, it sets forth any limitations on confidential information contemplated to be maintained in confidence under the rules of professional ethics, as well as who will receive the privileged and confidential documents generated in connection with the representation and how they will be maintained. These issues are also important when considering the impact on possible documents preservation issues arising out of an emergency situation.
The Engagement and Fees Agreement Regarding Common Interest Legal Services
It should not be left to chance that the engagement and fees agreement for common interest legal services accurately reflects the understanding, scope of legal services rendered, and expectations between the parties, and is drafted properly to address all of the issues that may arise. The terms and provisions must be tailored to the particular situation and establish the roles, responsibilities, liabilities, and obligations of the parties that will be involved and sets the stage for any new developments during the representation.
The common interest legal services agreement also typically addresses the manner in which disbursements are to be made while the representation is pending, the amount of fees that can be invoiced for matters and actions requiring immediate attention (i.e., litigation services), and how settlement opportunities are to be presented and approved during the representation.
For example, a representation service agreement may provide for an up front strategies meeting with the board of directors to review the potential actions and legal services to be performed, the costs that could be incurred and amount of fees expected to be billed, the manner in which various communications are to be handled relating to the common interest legal representation, and how settlement discussions, litigation support, etc., are to be conducted.
It also may include an agreement among the board members to inform the residents regarding the status of the representation and how budget costs are to be addressed. For instance, the engagement and fees agreement for common interest legal counsel may provide that the association will send out a letter to all members of the community association advising them of the representation and requesting homeowners to review and provide their input and comments on which legal strategies and options to pursue, before ever proceeding to take any action. It may also set forth how they will be actuarially allocated the costs of the legal representation, as well as the manner in which updates, reports, and communications with regard to the status of the representation will be provided to the residents, etc.
Finally, it may set forth any provisions that will apply in the event that the association decides to terminate the legal representation and how to address the return of documents that will need to be returned following the termination of the representation, as well as who will be responsible for paying any bills for outstanding legal services rendered and disbursements that will need to be paid prior to the termination of the representation. Essentially, the engagement and fees agreement for common interest legal services should provide for a particular protocol to be followed upon a termination of the representation, how costs associated with the representation will be allocated, and who will be allowed to maintain the privileged and confidential documents generated and produced, as well as what to do with regard to any remaining legal services fees and disbursements owed to legal counsel following the termination of the representation.
Advantages of a Common Interest Agreement
A common interest agreement grants the privilege to those who are parties to legal matters. The fact that the privilege exists between the clients does not preclude the privilege from attaching to the common interest agreement or any information exchanged thereunder. See, e.g., Texas Utilities Electric Co. v. Liberty Mut. Ins. Co., 951 S.W.2d 317, 321 (Tex. 1997). Parties, who share the same legal interest may enter into a common interest agreement (also known as common interest or joint defense agreements) without waiving otherwise applicable attorney-client or work product privileges. The common interest privilege protects communications made in furtherance and in the course of the investigation and preparation of the joint defense group. An important aspect of a common-interest agreement is that the parties’ share a common interest in legally significant ways. The privilege attaches to the portion of information or communication between counsel of the client exclusively to the exchange of information which concerns the legal aspects of the matter in which the clients have a common interest. Coal-X, Ltd. v. Leann, 129 N.C. App. 422, 425, 499 S.E. 2d 455, 456 (N.C. Ct. App. 1998); Glover Bottled Gas Corp. v. Trade Union Insurance, Risk Services, Inc., 6 A.D. 3d 786, 787, 775 N.Y.S. 2d 412, 413 (3rd Dept. 2004). A common interest agreement can be useful because it protects both the disclosing and the receiving parties. The common interest privilege applies to advice of counsel, given to a client, on the facts of an ongoing or contemplated litigation. However, courts have extended the privilege to communications among attorneys representing different clients. Also, the common interest agreement may allow parties to cooperate in preparing for trial. The agreed upon litigation strategy need not be identical, but does need to be similar. It allows each party to weigh the costs and benefits of particular legal decisions, and to reach an overall understanding or consensus about tactics and the positions to be taken during trial.
Common Use Cases for a Common Interest Agreement
Common scenarios where a common interest agreement template is used include joint ventures and litigation cooperation among parties to conserve costs and avoid redundancy of working on the same issues in the legal context. Chip manufacturer Rockwell Semiconductor won a case in a costs appeal against rival Broadcom before Singapore’s highest court after signing an agreement to share the cost of defending its intellectual property in multiple lawsuits. So-called "mutual cooperation" agreements are common in the telecommunications sector, where companies often find themselves forced by their own by-laws to fight against others that have sued them, or against whom they have counter-claimed.
In US law, private parties can form a common interest agreement to exchange privileged information without waiving attorney-client privilege, or confidential without waiving the protection for trade secrets. By sharing their respective experts using a common interest agreement, joint venturers can leverage their resources in federal trade secret litigation, like Chip Maker Rockwell Semiconductor v Handy & Harman Ltd. Companies can also use a common interest agreement when sharing discovery in a U.S. patent dispute that creates potential infringement liability, such as in the case of Nested Bean Inc. v Pottery Barn Kids LLC, where the parties agreed to a common interest agreement to protect their respective communications regarding the patent-in-suit.
The Silicon Valley Litigation Group at Barrack, Rodos & Bacine understands the value common interest agreements have for joint venturers who need to retain use of their intellectual property, while litigating a dispute in federal court.
Crafting a Common Interest Agreement Template
A common interest agreement is a useful document to have because it provides parties in litigation with an even greater measure of comfort that their communications are protected if they have a common interest in any aspect of the litigation. The best part about using a common interest agreement is having control over what goes into it. The agreement itself is a great tool to help you determine what you want to be protected as work product and as confidential communications. It is also useful in cultivating a relationship with somebody with whom you have a common interest.
A common interest agreement template is really no different than other deal documents we’ve covered. The agreement can be as long or as short as it needs to be. As noted above, the biggest debated areas seem to be waivers of confidentiality. The next biggest issue seems to be whether the waiver applies to all privileged communications on a general subject or just those regarding a particular issue, like privilege challenges.
We’ll provide a few iterations of the same basic template; however, remember that the ideal agreement will be customized to the parties and the matters at issue in the litigation.
A common interest agreement template might read:
- Counsel shall not be required to disclose any such communication, unless the court orders otherwise.
- If at some point in the future, the receiving party receives a subpoena or other request for production of documents or for testimony which would require disclosure of such information , the prosecuting party shall in good faith attempt to notify the disclosing party so that the disclosing party may take whatever action it deems appropriate, and receiving counsel shall cooperate in such efforts. Nothing in this paragraph shall require the producing party to disclose any information it believes may be protected by attorney/client or work product privilege.
- Privileged documents exchanged between the parties are deemed to have been exchanged under the common interest agreement and not subject to waiver.
- If the receiving party receives a subpoena or other request for production of documents or for testimony, the receiving party shall send a copy to the producing party. The producing party, at its expense, shall resist such demand to the extent it deems necessary.
- Privileged communications, whether written or oral, are deemed to be covered by this agreement and not subject to waiver.
- If the producing party receives a subpoena or other request for production of documents or for testimony, the producing party shall send a copy to the receiving party. The producing party, at its expense, shall resist such demand to the extent it deems necessary.
As noted above, if the agreement has specific language addressing waivers and exceptions, then it may make sense to other portions of the agreement consistent with those sections. For example, if the parties agree they can share protected communications with experts, the provision should be referenced multiple times throughout the agreement.
Legal Issues and Common Pitfalls
In addition to going under- or over-broad, there are many other pitfalls that can arise when a common interest agreement is drafted. Here are a few of the most common:
Dispute over what qualifies as a common interest. While this issue may be less likely to arise if the parties have entered into a written common interest agreement, it is worth noting because failure to appreciate this broad definition can lead to a costly discovery dispute.
Disputes over whether the work product at issue is protected by the common interest agreement. These will be subject to the same general considerations set forth above, but in addition the parties should be aware that either party may be required to produce certain documents even though their general content is subject to the common interest agreement.
Incomplete/unclear scope of services. Some common interest agreements will list specific scope of services that are subject to the common interest agreement, such as environmental remediation. Like any other contract outlining the scope of services, such a listing needs to be sufficiently clear and concise, and while it should include everything that may need to be done, it should also include a carve out for modifications or adjunct services that are not specifically listed.
Failure to account for subtleties in relationship between parties. The parties should take care to ensure that their common interest agreement is inclusive of all necessary entities, including subsidiaries or affiliates.
Not updating an existing common interest agreement. Just like other contracts, a common interest agreement should be updated periodically to account for the new types of litigation, etc.
Deviation from payment models. Common interest agreements will often require that the parties pay their own attorneys’ fees or litigation costs, but not in all situations. Sometimes the parties will share responsibility for payment of costs, or one party will fully fund the litigation. This is an important area for potential legal woes.
How to Properly Use a Common Interest Agreement
Once you have arrived at a common interest agreement template or other common interest agreement, you can get things in motion in a few ways. First, its always a good idea to have something at the top of the agreement that states the purpose of the agreement and how it is to be used (there are also rules in some jurisdictions about what needs to be in the agreement if it is being provided to the authorities). This is usually followed by a statement that explains that the signatories are working together with a common interest in anticipation of litigation. From there, you can follow with the general provisions that you would have in any legal agreement (such as assignment and binding) as well as things specific to the common interest (such as the purpose of the agreement). While not all common interest agreements will or should have these provisions, the following are some specific things that better common interest agreements sometimes contain: Even if your common interest agreement template or other common interest agreement has these provisions, use caution in relying on the agreement to protect your interests and communications. Unless the common interest agreement is in place before confidential communications are made, courts are going to have the ability to review those communications. In other words, courts sometimes look at the communications shared between the parties in the absence of a common interest agreement to determine whether there was privilege that applies, the common interest agreement may be consulted in determining whether a common interest in fact existed as of the date the communications were made, and courts have ordered parties to return privileged materials when a common interest agreement does not specifically include certain provisions. It is also worth noting that when it comes to the confidentiality obligations in a common interest agreement, the parties should broadly state that the protections of the document only apply to "Confidential information," without defining that term. For example, best practices are likely to call for the common interest agreement to require that "[a]ll Confidential information … continue to be treated as confidential" rather than adopting a more narrow definition of the term "confidential." The reason for doing so is that courts are sometimes willing to disregard a privilege related to communications that may not legitimately be considered "confidential."
Updating and Amending Your Common Interest Agreement
It is important to regularly review the common interest agreement to ensure that it continues to reflect any changes in the applicable law or the relationship between or among the different parties. Regardless of the legal issues involved in a matter and the relationships between the parties, courts have held that non-attorney clients giving advice to one another about a matter in which they are jointly invested and cooperating with counsel on the matter may not be exempt from the attorney-client privilege. The sharing of the information that is communicated to counsel (the work product) may not be exempt from discovery.
In addition, any change in controlling authority may require that a common interest agreement be reviewed and updated. For example , when the United States Supreme Court decided in In re Grand Jury Proceedings in 2007 that confidentiality agreements alone do not create a common interest privilege, many practitioners found it desirable to update their common interest agreements. As another example, the California Supreme Court’s decision in Costco Wholesale Corp. v. Superior Court dealing with the scope of the common interest doctrine has caused some practitioners to review and revise insurance industry common interest agreements.
If a common interest agreement is not sufficiently updated, the disclosure of confidential or otherwise privileged communications may be at risk.