Successful Ruling Clarifies Joint Attorney-Client Privilege Rules
San Diego – December 14, 2017 – Cooley successfully advised the liquidating trustee of the Mahalo Energy bankruptcy estate on defeating the claim of attorney-client privilege asserted by counsel who previously jointly represented a Canadian energy company and Mahalo, its wholly-owned Delaware subsidiary. Partner Ali Mojdehi led the Cooley team advising the liquidating trustee.
In Newsome v. Lawson, et al., the District of Delaware resolved the open question under Delaware law whether a joint attorney, sued by only one of his joint clients, can withhold communications within the scope of the joint representation from one joint client by asserting the other joint client’s attorney client privilege. This issue was not previously resolved by the Third Circuit in the important precedent, In re Teleglobe Communications, et al. Teleglobe discussed the preservation of attorney-client privilege between members of the same corporate family in a lawsuit between them, holding that one of the joint clients cannot withhold otherwise privileged communications from the other, but did not address the operation of privilege where one of the clients within the joint representation sues the joint attorney.
The court ruled that in Newsome v. Lawson the adverse-litigation exception recognized in Teleglobe applies equally to lawsuits between one joint client and the joint attorney, and, as a result, a joint attorney cannot withhold from one joint client privileged communications within the scope of the common interest involved in the joint representation, even if the other joint client refuses to consent to the disclosure. Additionally, the court found that the breach of duty exception, which does not protect as privileged any communications relevant to an issue of breach of duty by a lawyer to a client, does not protect from disclosure communications created within the scope of the joint representation in a subsequent lawsuit between a joint client and a joint attorney, regardless of whether the communication included that client.
The decision in favor of Cooley’s client represents a significant development of Delaware law concerning the operation of the attorney-client privilege in a joint representation.
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