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As former federal prosecutors and current white-collar defense lawyers, we have watched agog the unfolding story of Paul Manafort's criminal lawyers reportedly continuing in a joint defense agreement (JDA) with President Donald Trump after entering into a cooperation agreement with Special Prosecutor Robert Mueller, reportedly to the extent of sharing with Trump's lawyers information gleaned through the debriefings that were occurring as part of his ostensible cooperation. See “Manafort's Lawyer Said to Brief Trump Attorneys on What He Told Mueller,” NY Times (Nov. 27, 2018). The saga provides a salutary reminder that JDAs pose certain risks if not handled properly.

A JDA or “common interest” agreement allows parties with similar legal interests who are involved in an investigation or legal proceeding to share information with each other without waiving the attorney-client privilege or work product protection. Such agreements enable parties to coordinate strategy, pool resources, reduce costs, and enhance access to information. Done right, such agreements are a real boon to defense counsel. Done wrong, such agreements can lead to conflict issues, attorney disqualifications, the admission of damaging admissions by your client, and a host of other problems.

To obtain the benefit of the common interest rule, the parties must demonstrate that: (1) they have a common legal, rather than commercial, interest; and (2) the disclosures are made in the course of formulating a common legal strategy. See generally United States v. Schwimmer, 892 F.2d 237, 244 (2d Cir. 1989); In re Teleglobe Communications, 493 F.3d 345, 364-65 (3d Cir. 2007). The common interest doctrine applies even where there is no litigation in progress. Thus, in most circumstances the doctrine can apply in the context of a corporate entity's internal investigation of potential wrongdoing, whether or not the government is already involved.

The greatest advantage of a JDA is to enable its members to work together towards a common defense, thereby ensuring a greater understanding of the factual context underlying the investigation or prosecution, while gaining the advantages of multiple counsel discussing and pressure-testing potential strategies, factual arguments, legal research, and analysis. Parties are free to apportion resources so that each may specialize in a particular focus of the joint defense. They may agree to retain one investigator or expert witness for the collective defense.

Although “entering into a joint defense agreement is often, indeed generally, beneficial to its participants, like skating on thin ice, dangers lurk below the surface.” United States v. LeCroy, 348 F. Supp. 2d 375, 387 (E.D. Pa. 2004), as amended on reconsideration (Jan. 10, 2005). These dangers are illustrated by court rulings disqualifying counsel based on a JDA, precluding counsel from cross-examining a defector who becomes a cooperating witness, and holding that communications thought to be protected by a JDA were not in fact privileged. See generally United States v. Hatfield, 2009 WL 3806300 (E.D.N.Y 2009). Most of these risks can be mitigated substantially if counsel for the participants consider, discuss, and memorialize in some fashion the parameters of their agreement, including the consequences attendant to a decision by one or more participants to withdraw from the agreement. Unfortunately, far too often the sum total of counsels' “discussion” along these lines can be summarized as “This is a joint defense meeting, right?” Indeed, on more than one occasion when the authors represented individuals in a matter we received a voluminous quantity of documents from our clients' former employers, all Bates-stamped in substance “Produced Pursuant to Joint Defense Agreement,” when there had been no discussion whatever about such an agreement. The tendency of many (if not most) practitioners to prefer informal JDAs with no specific clarity or agreement on the consequences of withdrawal is somewhat puzzling and the consequences can be severe.

Even where a JDA clearly exists, courts have held that conversation amongst parties to a JDA is not privileged where counsel is neither present nor has given specific direction that there be such conversation. See United States v. Krug, 868 F.3d 82 (2d Cir. 2017) (communication among JDA clients with no lawyer present is “not privileged unless made for the purpose of communicating with a privileged person” such as one of the lawyers). It is therefore prudent practice to ensure that counsel is present for all JDA communications, or at least that such communications are expressly directed by counsel.

Perhaps the greatest danger lies where a member to a JDA subsequently withdraws and becomes a cooperating witness for the government. In those instances, questions arise as to whether information obtained from the defector prior to withdrawal may be used in the cross-examination of the cooperating witness by counsel for the remaining parties to the JDA. Courts have also found that JDAs can create implied attorney-client relationships, which would extend ethical obligations to all participants to the agreement—precluding the ability to cross-examine the defector and forcing disqualification. See, e.g., United States v. Henke, 222 F.3d 633, 637 (9th Cir. 2000). One court, anticipating this conflict issue, required a waiver provision in each JDA that permitted every participant to cross-examine any cooperating former participant. United States v. Stepney, 246 F. Supp. 2d 1069, 1083, 1086 (N.D. Cal. 2003). Another conflict situation may arise when the attorney is called to testify as a witness based on something she heard or saw as a result of a JDA. In this context, the court may disqualify counsel from representing a defendant if the attorney is potentially necessary as a defense witness as a result of a JDA. See United States v. Stein, No. 05-888 (S.D.N.Y. Oct. 18, 2007) (disqualifying counsel from representing defendant because the client would not waive his right to call the attorney as a witness to rebut expected cooperator testimony, from a former member of JDA). This leaves a defendant between a rock and a hard place: forego the useful testimony or have to replace counsel late in the game.

In some jurisdictions (including the Southern District of New York), practitioners often prefer to use verbal JDAs. While the agreement need not be memorialized in writing, there are numerous advantages to doing so. Although courts may find the existence of a verbal joint defense agreement, the existence of a writing obviates this inquiry. In a December 2018 decision, Judge Castel held that a former employee failed to establish a common interest agreement with his former employer—notwithstanding the fact that the individual's lawyer e-mailed company counsel a draft document in an e-mail with the subject line “Common Interest Privilege Document,” specifically noting that the d raft document was being shared “pursuant to our common interest,” without any objection or clarification from company counsel. SEC v. Rashid, 17-cv-8223 (PKC) (S.D.N.Y. Dec. 13, 2018).

The ability to stipulate to the precise terms of the JDA is an additional advantage to writing it down. Parties are free to determine which documents and communications will be covered, define the rights of the respective parties to the agreement, set forth consequences for a party that defects from the agreement, as well as include language waiving any conflict issues otherwise requiring the disqualification of counsel—nearly all of these are up for grabs absent agreement ab initio and a concise writing is the best way to foreclose litigation on these (and many other) issues.

Any joint defense agreement should identify all the persons or entities engaged in the common effort. Confidentiality issues should also be addressed, and the drafters should include a statement that the communications and materials shared between the identified parties will be kept confidential. In this regard, the agreement should create a procedure for sharing materials with third parties necessary to the common defense effort, such as investigators or expert witnesses. The parties should expressly:

• acknowledge that they are represented by their own attorneys and not by counsel for any other party to the agreement;

• agree that counsel can cross-examine a defector;

• waive any conflict of interest claim or their right to disqualify an attorney who receives confidential information pursuant to the terms of the agreement;

• emphasize a withdrawing party's continuing obligation to maintain confidentiality; and

• require notice be provided to the other parties should a participant enter cooperation discussions with the government.

Companies under investigation will at times enter into a joint defense agreement with employees or, more commonly, former employees. We have seen such agreements which state that information disclosed to the company will not be disclosed to the government or third parties. This practice is problematic where a company would prefer to disclose illegal or wrongful conduct to the government and minimize its exposure by obtaining cooperation credit, or where the company operates in a regulated industry that imposes a legal obligation on the company to disclose wrongdoing.

As a result, counsel for a corporation should include language in the joint defense agreement that explicitly authorizes the corporation to disclose joint defense materials at its sole discretion. This strategy however has several negative implications. It obviously undermines the incentive an employee has to cooperate with a corporation. More to the point, it could be argued that the inclusion of such a provision negates the central premise of a valid joint defense agreement—that the parties actually have a common interest—and this might render the putative JDA a nullity. This kind of JDA is little more than a glorified Upjohn warning. As a practical matter, however, an individual may have little choice but to agree so as to obtain information (including documents) necessary to present his or her defense.

The potential benefits of a JDA in most criminal investigations are self-evident. Oftentimes, the risks are less apparent. Considering and addressing these pitfalls at inception is something all prudent defense counsel should do.

John M. Hillebrecht is a partner at DLA Piper in New York and co-chair of the white-collar, corporate crime and investigations practice. Jessica Masella is a partner at the firm.