William F. Johnson
William F. Johnson ()

Defense counsel and their clients often depend on the “common interest” doctrine to protect communications between defense-group counsel during government investigations. Recently, in the high-profile FIFA soccer corruption case in the Eastern District of New York, a judge sustained a government challenge to the invocation of the common interest doctrine on the ground that a target of a government investigation and the victim of the purported illegal conduct cannot have a “common interest.” This ruling serves as a reminder of the protections and the dangers of communications pursuant to a “common interest,” and also generates a broader observation that bears mention.

Common Interest Agreement

On May 27, 2015, a 47-count indictment (First Indictment) was unsealed in the Eastern District of New York, charging 14 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ alleged participation in a 24-year scheme to enrich themselves through the corruption of international soccer. According to the First Indictment, certain international soccer officials took bribes and kickbacks in return for awarding marketing rights associated with various global soccer events.

When the First Indictment was unsealed, Juan Ángel Napout was president of Confederación Sudamericana de Fútbol (CONMEBOL), one of the institutions purportedly victimized by the alleged bribery and honest services fraud ascribed to soccer officials and certain sports marketing executives. Napout hired a personal lawyer, who brought in a second lawyer to represent CONMEBOL. By this time, the government had designated Napout as a “target” of the investigation (defined by the U.S. Attorney’s Manual as a “putative defendant”) and CONMEBOL as a victim of Napout’s (and others’) conduct. Napout alone signed the paperwork retaining CONMEBOL’s counsel.

In June 2015, Napout’s individual counsel and CONMEBOL’s counsel entered into an oral common interest agreement designed to cover discussions between the lawyers regarding “commercial rights or commercial interests,” but not the criminal investigation. The common interest doctrine is an exception to the general rule that disclosure of privileged information to a third party waives the attorney-client privilege. The common interest doctrine specifically provides that otherwise privileged attorney-client communications, exchanged between two separately represented parties or their counsel for the purpose of pursuing a joint legal strategy, are protected from discovery by third parties.

Not long after the common interest agreement between the lawyers, a grand jury in the Eastern District of New York returned a superseding 92-count indictment (Superseding Indictment) charging an additional 16 individuals, including Napout, with committing racketeering conspiracy and wire fraud and money laundering offenses in connection with their alleged participation in corruption. Napout was arrested on Dec. 3, 2015, and, in January 2016, Paraguayan authorities seized documents during a search of CONMEBOL’s headquarters at the request of the U.S. government.

Privilege Litigation

Napout asserted that the common interest doctrine prevented the government from retaining certain material it had seized relating to, among other things, contractual negotiations between CONMEBOL and third parties implicated in the government’s investigation. The government challenged Napout’s common interest claim, arguing that Napout did not sufficiently evidence a common interest agreement between himself and CONMEBOL and that any privilege related to CONMEBOL records belongs to and is controlled by CONMEBOL—not Napout.

Magistrate Judge Robert M. Levy presided over an evidentiary hearing on the matter and later heard oral argument on Jan. 19, 2017, when he announced his ruling. Judge Levy initially noted that allowing Napout to withhold the materials at issue under a common interest agreement between Napout and CONMEBOL would potentially undermine the “long standing rule that the corporation owns the privilege with respect to communications between managers and its counsel.” Noting public policy concerns, the court reasoned that if it “were to find that Mr. Napout could authorize both his own attorneys and an entity that he controlled to enter into an agreement that binds or restricts the ability of that entity to cooperate … that would be breaking new law … .” In the end, Judge Levy concluded that he would not recognize a common interest agreement between a target of a criminal investigation (Napout) and a victim of the criminal conduct (CONMEBOL). A written opinion is forthcoming.

Analysis

The Napout case may be limited to its somewhat distinctive facts, but it serves as a reminder of the risks associated with oral common interest agreements. Such agreements are frequently utilized and are quite valid. However, when common interest agreements are not reduced to writing, the government may be more likely to challenge their scope and terms, leaving defense counsel to prove these items through oral testimony and non-agreement documentary means. Napout may have been the atypical case in which a written agreement would have provided better clarity on terms and scope. Or perhaps not. It appears that Judge Levy was not prepared to recognize a common interest agreement between a target and a victim, whether or not it was reduced to writing.

One final point deserves mention. The government’s broad thematic argument in opposing the common interest agreement—which appeared to be quite persuasive to Judge Levy—was that CONMEBOL was a victim of Napout’s conduct and that common interest agreements cannot be formed between targets and victims. Contrast this scenario with a non-honest services fraud case in which a high-level employee of an entity engages in criminal conduct; there the government usually argues that the individual’s actions establish criminal liability of the entity under the doctrine of respondeat superior, which provides that a corporation may be held criminally liable for the illegal acts of its directors, officers, employees, and agents, if taken within the scope of employment. But here, because the Napout case involves honest services wire fraud, the government is not contending that CONMEBOL is liable. Although the Superseding Indictment alleges that Napout engaged in criminal acts in his role as the president of CONMEBOL, the government contends that he acted for his own benefit and to the detriment of CONMEBOL, thus depriving CONMEBOL of his honest and faithful services. Accordingly, because the government has not pursued liability of CONMEBOL under respondeat superior, it was permitted to challenge the common interest agreement Napout asserted based on the notion that a target of an investigation and the victim cannot have a common interest. It would appear that such an argument is limited to honest services fraud cases. It will be interesting to see whether, in the future, the government would make a similar “target-victim” claim as to a common interest agreement asserted in a non-honest services fraud case involving a corporate entity and an individual alleged to have committed a crime in the scope of employment.

Defense counsel and their clients often depend on the “common interest” doctrine to protect communications between defense-group counsel during government investigations. Recently, in the high-profile FIFA soccer corruption case in the Eastern District of New York , a judge sustained a government challenge to the invocation of the common interest doctrine on the ground that a target of a government investigation and the victim of the purported illegal conduct cannot have a “common interest.” This ruling serves as a reminder of the protections and the dangers of communications pursuant to a “common interest,” and also generates a broader observation that bears mention.

Common Interest Agreement

On May 27, 2015, a 47-count indictment (First Indictment) was unsealed in the Eastern District of New York , charging 14 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with the defendants’ alleged participation in a 24-year scheme to enrich themselves through the corruption of international soccer. According to the First Indictment, certain international soccer officials took bribes and kickbacks in return for awarding marketing rights associated with various global soccer events.

When the First Indictment was unsealed, Juan Ángel Napout was president of Confederación Sudamericana de Fútbol (CONMEBOL), one of the institutions purportedly victimized by the alleged bribery and honest services fraud ascribed to soccer officials and certain sports marketing executives. Napout hired a personal lawyer, who brought in a second lawyer to represent CONMEBOL. By this time, the government had designated Napout as a “target” of the investigation (defined by the U.S. Attorney’s Manual as a “putative defendant”) and CONMEBOL as a victim of Napout’s (and others’) conduct. Napout alone signed the paperwork retaining CONMEBOL’s counsel.

In June 2015, Napout’s individual counsel and CONMEBOL’s counsel entered into an oral common interest agreement designed to cover discussions between the lawyers regarding “commercial rights or commercial interests,” but not the criminal investigation. The common interest doctrine is an exception to the general rule that disclosure of privileged information to a third party waives the attorney-client privilege. The common interest doctrine specifically provides that otherwise privileged attorney-client communications, exchanged between two separately represented parties or their counsel for the purpose of pursuing a joint legal strategy, are protected from discovery by third parties.

Not long after the common interest agreement between the lawyers, a grand jury in the Eastern District of New York returned a superseding 92-count indictment (Superseding Indictment) charging an additional 16 individuals, including Napout, with committing racketeering conspiracy and wire fraud and money laundering offenses in connection with their alleged participation in corruption. Napout was arrested on Dec. 3, 2015, and, in January 2016, Paraguayan authorities seized documents during a search of CONMEBOL’s headquarters at the request of the U.S. government.

Privilege Litigation

Napout asserted that the common interest doctrine prevented the government from retaining certain material it had seized relating to, among other things, contractual negotiations between CONMEBOL and third parties implicated in the government’s investigation. The government challenged Napout’s common interest claim, arguing that Napout did not sufficiently evidence a common interest agreement between himself and CONMEBOL and that any privilege related to CONMEBOL records belongs to and is controlled by CONMEBOL—not Napout.

Magistrate Judge Robert M. Levy presided over an evidentiary hearing on the matter and later heard oral argument on Jan. 19, 2017, when he announced his ruling. Judge Levy initially noted that allowing Napout to withhold the materials at issue under a common interest agreement between Napout and CONMEBOL would potentially undermine the “long standing rule that the corporation owns the privilege with respect to communications between managers and its counsel.” Noting public policy concerns, the court reasoned that if it “were to find that Mr. Napout could authorize both his own attorneys and an entity that he controlled to enter into an agreement that binds or restricts the ability of that entity to cooperate … that would be breaking new law … .” In the end, Judge Levy concluded that he would not recognize a common interest agreement between a target of a criminal investigation (Napout) and a victim of the criminal conduct (CONMEBOL). A written opinion is forthcoming.

Analysis

The Napout case may be limited to its somewhat distinctive facts, but it serves as a reminder of the risks associated with oral common interest agreements. Such agreements are frequently utilized and are quite valid. However, when common interest agreements are not reduced to writing, the government may be more likely to challenge their scope and terms, leaving defense counsel to prove these items through oral testimony and non-agreement documentary means. Napout may have been the atypical case in which a written agreement would have provided better clarity on terms and scope. Or perhaps not. It appears that Judge Levy was not prepared to recognize a common interest agreement between a target and a victim, whether or not it was reduced to writing.

One final point deserves mention. The government’s broad thematic argument in opposing the common interest agreement—which appeared to be quite persuasive to Judge Levy—was that CONMEBOL was a victim of Napout’s conduct and that common interest agreements cannot be formed between targets and victims. Contrast this scenario with a non-honest services fraud case in which a high-level employee of an entity engages in criminal conduct; there the government usually argues that the individual’s actions establish criminal liability of the entity under the doctrine of respondeat superior, which provides that a corporation may be held criminally liable for the illegal acts of its directors, officers, employees, and agents, if taken within the scope of employment. But here, because the Napout case involves honest services wire fraud, the government is not contending that CONMEBOL is liable. Although the Superseding Indictment alleges that Napout engaged in criminal acts in his role as the president of CONMEBOL, the government contends that he acted for his own benefit and to the detriment of CONMEBOL, thus depriving CONMEBOL of his honest and faithful services. Accordingly, because the government has not pursued liability of CONMEBOL under respondeat superior, it was permitted to challenge the common interest agreement Napout asserted based on the notion that a target of an investigation and the victim cannot have a common interest. It would appear that such an argument is limited to honest services fraud cases. It will be interesting to see whether, in the future, the government would make a similar “target-victim” claim as to a common interest agreement asserted in a non-honest services fraud case involving a corporate entity and an individual alleged to have committed a crime in the scope of employment.