Friday, November 11, 2011

The Community-of-Interest Privilege

The ABA's Litigation News recently described an opinion from the U.S. District Court for the Eastern District of Pennsylvania refusing to apply the community-of-interest privilege, and provided an overview of the history of the privilege and its application by various federal circuits and courts.

The community-of-interest privilege (in the 3rd Circuit) allows attorneys "representing different clients with similar legal interests to share information without having to disclose it to others."  In re Teleglobe Communc'ns Corp.,  493 F.3d 345, 364 (3d Cir. 2007).  "Alleged members of the community of interest must at least share a 'substantially similar legal interest,' that is not solely commercial.  Id. at 365. 

In King Drug Co. of Florence, Inc. v. Cephalon, Inc., Plaintiffs in a putative class action alleging violations of the Sherman Antitrust Act sought to compel discovery of certain communications between Defendant Barr Laboratories, Inc. ("Barr") and its supplier Chemagis.  (By way of background, Barr and other generic drug manufacturers entered into "reverse payment settlements" with pharmaceutical company Cephalon, Inc. in connection with the purchase of Provigil, and the King Drug Plaintiffs are challenging the reverse payment settlements).

Barr claimed that the 18 documents in question, which related to the settlement between Barr and Cephalon and how the settlement terms would affect Chemagis financially, were protected by the community-of-interest privilege.   Barr argued that the community-of-interest privilege applied because 1) Barr and Chemagis shared a substantially similar legal interest.(their joint development of a generic form of Provigil put them both at risk for an infringement suit by Cephalon); 2) Barr and Chemagis had entered into a "Joint Defense Agreement."

The Court disagreed, concluding that the communications between Barr and Chemagis were not "part of an ongoing, coordinated, legal defense strategy."  Therefore, even though it was not necessary for Chemagis to have been sued (it had not), and even though Barr and Chemagis had executed a "Joint Defense Agreement" that required Chemagis to share Barr's legal costs,  the two companies did not actually "establish an ongoing and coordinated legal defense."  Interestingly, the Court did not reach the issue of whether the joint interests of Barr and Chemagis were "legal" or "commercial," because even assuming those interests were "legal," "there never was a joint, coordinated and ongoing legal strategy."

Two cases from the United States District Court for the District of South Carolina have addressed the community of interest privilege and applied the 4th Circuit's understanding of the privilege:  Duplan Corp. v. Deering Milliken Inc., 497 F.Supp. 1146 (D.S.C. 1974) (cited in King Drug), and Fort v. Leonard, 2006 WL 2708321 (D.S.C. 2006).  Fort emphasizes the flip side of the King Drug rationale, emphasizing that the demonstration of "a common interest" suffcient for the privilege to attach does not require a written or oral joint defense agreement. Duplan expresses the law of the 4th Circuit (a different test from that applied in the 3rd Circuit) that the persons seeking to demonstrate the privilege must have an "identical legal interest with respect to the subject matter of a communication between an attorney and a client concerning legal advice."  497 F.Supp. at 1172.  (Emphasis added).