Commercial Litigation and Arbitration

Corporate Attorney-Client Privilege — Sale of Company — No Joint Defense for Seller and Bidder

Plaintiff sues defendant corporation for patent infringement, and defendant counterclaims for invalidity. Defendant corporation is then put up for bid by its shareholders. Bidders need to know about the litigation, which is material to the defendant’s financial position. Defendant’s litigation counsel make disclosures concerning the litigation to bidders. Plaintiff then subpoenas a bidder to obtain those communications. The defendant asserts that they are protected joint defense communications. Held, there is no common legal interest to support joint defense protection — the bidder was not anticipating becoming a co-litigant, merely becoming the majority shareholder of a litigant. Moreover, the communications were not made in the course of formulating a common legal strategy or otherwise furthering the parties’ joint interest in the litigation. That, however, was not the end of the story in Nidec Corp. v. Victor Co. of Japan, 2007 U.S. Dist. LEXIS 48841 (N.D. Cal. July 3, 2007). Magistrate Judge Edward Chen aptly noted that, while the absence of joint defense protection waived any applicable attorney-client privilege pertaining to the communications, it did not necessarily effect a waiver of work product protection. Work product is not generally waived by disclosure unless the disclosure facilitates an adversary’s access to the information (thus, disclosure to a party aligned in interest ordinarily effects no work product waiver). Parties ordered to meet and confer before presenting the Court with further waiver arguments.

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