The “common interest” privilege protects privileged information that is exchanged by two parties represented by counsel concerning a legal matter in which they share a common interest. The privilege has often been asserted to protect communications between buyers & sellers during the course of a acquisition. This Morris James blog discusses the Delaware Superior Court’s recent decision in American Bottling Co. v. Repole, (Del. Super.; 5/20), in which the Court declined to apply the privilege to communications that it determined were predominantly commercial, not legal, in nature.
The case involved a dispute over whether a merger involving the plaintiff had terminated a distribution contract. The plaintiff inadvertently produced materials relating to the contract that it had shared with a third party that subsequently merged with the plaintiff’s parent, and sought to claw them back based on a claim that the common interest privilege applied. This excerpt reviews the Court’s analysis of the privilege claim:
The documents were a series of charts and other work product that described the nature of the distribution agreement between Plaintiff and Defendant and described how best to “capitalize on” it in the context of the merger. The documents were drafted and shared by the Third Party Entity’s counsel with Plaintiff’s parent after the merger agreement was executed but before the merger closed. For the documents to remain privileged, Plaintiff needed to show that a common interest applied to protect the shared documents.
The Court found that the Plaintiff and the Third Party Entity did not share a common legal interest sufficient to protect the documents from production on the basis of privilege. Following an in camera review, the Court found that the documents were shared with the Plaintiff for predominantly commercial purposes rather than to facilitate rendering legal advice.
Applicable Delaware precedent established that if the primary focus of the interest was commercial, “[i]t is of no moment that the parties may have been developing a business deal that included as a component the desire to avoid litigation,” regardless of whether legal counsel provided input on the documents. Accordingly, the Court concluded that the common interest privilege did not apply.
– John Jenkins