New England Biz Law Update
A defendant did not waive the attorney-client privilege when its attorney shared documents with a co-defendant’s counsel as part of a joint defense agreement, the Massachusetts Supreme Judicial Court has ruled in a case of first impression.
A trial court judge had ruled the privilege was unavailable for any information divulged by the defendant because Massachusetts doesn’t recognize joint defense agreements.
But the SJC reversed, saying joint defense agreements between parties with a common interest is an exception to waiver of attorney-client privilege (Hanover Ins. Co. v. Rapo & Jepsen Ins. Services, SJC No. 09780).
“The attorney-client privilege not only protects statements made by the client to the attorney in confidence for the purpose of obtaining legal advice in a particular matter, but also protects such statements made to or shared with necessary agents of the attorney or the client,” wrote Justice Francis X. Spina for the court.
“There is no reason to treat confidential client communications differently when shared with an attorney representing a client having a common interest where the purpose for sharing is to provide a free flow of information essential to providing the best available legal services to the client,” Spina added.
The SJC also ruled that:
More explicit use
Laurence A. Schoen of Boston, who represented one of the defendants, Arbella Mutual Insurance Co., said his client felt vindicated by the ruling.
“If [the plaintiff’s] position seeking to overturn the privilege had been upheld, the result would have been unnecessary duplication of efforts, and clients would have paid the price, literally, in the form of higher legal fees,” Schoen said.
He said the SJC’s statement that joint defense agreements need not be in writing validated longstanding practice in the commonwealth.
Additionally, according to Schoen, because the court said the parties’ interests do not need to be identical it “recognized that to impose such a requirement would effectively deprive almost every litigant of the benefits of a joint defense agreement because it is almost never the case that the interests of two clients are identical on all matters.”
Owen Gallagher of Boston, an attorney for the plaintiff, Hanover Insurance Co., predicted the ruling would lead to the more explicit use of joint defense agreements with more formality than before.
“Even though the court said you don’t have to have a written agreement, it would be preferable, and though the client doesn’t have to be apprised [of the agreement], he or she should be,” he said.
John A. Shope of Boston, who submitted an amicus brief on behalf of the Boston Bar Association, said the decision, which adopted all of the BBA’s major points, would clear up existing uncertainty in the bar.
Mark H. Stepakoff, assistant vice president and counsel for the plaintiff said he is glad the court clarified the parameters for joint defense agreements. But he emphasized the case was remanded to the Superior Court to determine whether a valid joint defense agreement actually existed between the co-defendants in this case, and whether any privilege applied to the information at issue in the first place.
“We don’t think [the information at issue] is privileged at all, even if there is a joint defense agreement,” he said.
Disputed documents
In 2002, Hanover Life Insurance Co. sued Arbella Mutual Insurance Co. and Rapo & Jepsen Insurance Services, Inc. in Superior Court. Hanover claimed Arbella, which is a competitor of Hanover, and Rapo & Jensen, an agency assigned to Hanover, engaged in commercially unreasonable trade practices that resulted in the transfer of undesirable high-loss insurance business from Arbella’s books to Hanover’s books.
During the course of litigation, Hanover requested that Arbella produce all documents related to any contracts, agreements or understandings between the defendants and their respective counsel. Hanover also requested that Arbella produce any documents related to payment of its defense costs.
Arbella objected, claiming the documents were protected by attorney-client privilege and the attorney work product doctrine. Arbella claimed that a joint defense agreement between the two parties – which had a common interest in the litigation – preserved the attorney-client privilege.
Recognition of validity
On appeal, the SJC adopted a broad interpretation laid out in the Restatement (Third) of the Law Governing Lawyers. According to the Restatement, parties represented by separate counsel but who share a common interest in either a litigated or non-litigated matter may agree to exchange information without waiving the attorney-client privilege.
“Confidentiality of consultations between parties to business transactions with their respective attorneys is no less essential or less common than in the litigation context,” said Spina.
Meanwhile, the court rejected Hanover’s argument that the trial judge’s order should still be upheld because there was no evidence that counsel for either defendant had informed their client of a joint defense agreement.
“While it is certainly preferable to secure the client’s consent before sharing a privileged communication … we do not think a client’s knowledge or express consent [is] essential,” said Spina. “The attorney-client privilege belongs to the client and can be waived only by the client.”
The court was also unmoved by the plaintiff’s argument that without a written joint defense agreement, the shared communications were not privileged.
