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Suppose that, in a joint defense in which each defendant is represented separately, an attorney for one defendant receives confidences from his client’s co-defendant in the course of discussing strategy. If the co-defendant leaves the joint defense and testifies against the first defendant, can the first defendant’s attorney be disqualified from continuing to represent that defendant? In United States v. Henke, 222 F.3d 633 (9th Cir. 2000), based largely on an “implied attorney-client relationship” that ran between one co-defendant and the other defendant’s counsel, the 9th U.S. Circuit Court of Appeals found that disqualification was appropriate. This result is surprising and, although it is difficult to tell from the facts described in Henke, perhaps wrong in light of the relevant underlying policies. Nonetheless, counsel to parties participating in a joint defense should carefully consider Henke‘s implications and, to the extent feasible, draft their joint defense agreements to protect against the disqualification risks it creates. THREE ‘HENKE’ DEFENDANTS BEGAN WITH JOINT DEFENSE In Henke, three individuals — Steven Henke, Chan Desaigoudar and Surendra Gupta, who were former officers of a computer supply company, Cal Micro — were indicted on securities fraud and related charges. Each had his own counsel, but they engaged in a joint defense. In the course of the joint defense, Gupta made confidential communications to his co-defendants’ attorneys. Before trial, Gupta entered into a plea agreement and agreed to testify against Henke and Desaigoudar. The attorneys for these two defendants then moved to disqualify themselves, claiming that they had a conflict of interest that prevented them from adequately cross-examining Gupta — namely, their knowledge of Gupta’s privileged communications made during the joint defense relationship. The trial court denied the disqualification motion, and Henke and Desaigoudar were convicted. On appeal, they claimed they were entitled to a new trial because their attorneys “worked under an actual conflict of interest that prohibited them from cross-examining one of the government’s key witnesses, Gupta.” Id. at 636. In a per curiam opinion that, on this issue, only two of the members of the panel joined, the 9th Circuit agreed and reversed. According to the 9th Circuit, a joint defense agreement “establishes an implied attorney-client relationship with the co-defendant, here between Henke’s and Desaigoudar’s attorneys and Gupta.” Id.at 637. Noting that “[t]he government concedes … the existence of this privilege” and relying heavily on a 1977 5th Circuit opinion, the 9th Circuit observed that “[t]his privilege can also create a disqualifying conflict where information gained in confidence by an attorney becomes an issue, as it did in this case.” Id. Specifically, because “what Gupta allegedly said in confidence during pre-trial joint defense meetings about the defendants’ presence at a critical meeting of Cal Micro executives was claimed to be at odds with his trial testimony for the government,” the remaining defendants’ attorneys were in a “difficult position.” Id. And “[h]ad they pursued the material discrepancy in some other way, a discrepancy they learned about in confidence, they could have been charged with using it against their one-time client Gupta.” Id. So, in the 9th Circuit’s view, the remaining defendants’ attorneys’ motion to disqualify should have been granted. PRECEDENT FOR IMPUTING AN ATTORNEY-CLIENT LINK To support its conclusion that the remaining defendants’ attorneys had an attorney-client relationship with Gupta that disqualified them from representing their existing clients, the 9th Circuit relied primarily on Wilson P. Abraham Construction Co. v. Armco Steel Corp., 559 F.2d 250 (5th Cir. 1977) (per curiam). In that case, an attorney had represented a steel company in two grand jury investigations during which the steel company engaged in a joint defense with other steel companies. When a plaintiff in a related private antitrust action to which the attorney’s then-former client was not a party sought to join him as counsel, his former client’s co-defendants moved to disqualify him based on his participation in the joint defense. Although the 5th Circuit ultimately remanded the case for determination of whether confidences actually were shared, the Henkecourt focused on the 5th Circuit’s observation that “[j]ust as an attorney would not be allowed to proceed against his former client in a cause of action substantially related to the matters in which he previously represented that client, an attorney should also not be allowed to proceed against a co-defendant of a former client wherein the subject matter of the present controversy is substantially related to the matters in which the attorney was previously involved, and wherein confidential exchanges of information took place between the various co-defendants in preparation of a joint defense.” Henke, 222 F.3d at 637 (quoting Abraham Construction, 559 F.2d at 253). That an attorney might, as was alleged in Abraham Construction, learn confidences during a joint defense relationship that might prevent representation of outside parties against members of the joint defense is not exceptional. The American Bar Association’s Committee on Ethics and Professional Responsibility recognized that, although an attorney seeking to represent a party outside a joint defense relationship against nonclient members of the joint defense owed them no ethical duty, “the lawyer will almost certainly have undertaken fiduciary obligations to the other parties” that effectively bar the representation. Formal Opinion No. 395 (1995). Yet the situation in Abraham Construction, which involved an attempt to represent a third party that, because it was not part of the joint defense, was not privy to the confidential information, was markedly different from the continuing representations at issue in Henke. Absent an agreement that counsel will not share co-defendants’ confidences with their own clients, each client in a joint defense either knows or can compel his counsel to disclose other defendants’ confidences. Therefore, disqualifying their counsel does not protect the confidences. Thus, although the Henkecourt’s concern appears to have been protecting a former joint defendant’s confidences, disqualifying the remaining defendants’ counsel probably did little to achieve that end. JOINT REPRESENTATION AS DISTINCT FROM JOINT DEFENSE Moreover, in finding an “implied attorney-client relationship” between Gupta and the other defendants’ attorneys, the Henkecourt ignored a basic difference between a joint representation and a joint defense. Joint clients expect their attorneys to represent each of them, which is one reason careful analysis of actual and potential conflicts should precede any representation of multiple parties. See Model Code of Professional Responsibility, EC 5-14, 5-15; DR 5-105 (1980). In contrast, separately represented parties in a joint defense relationship generally recognize that, although they have common legal interests, they have or may develop divergent interests and retain separate counsel in part to avoid disqualifying conflicts. See 1 Successful Partnering Between Inside and Outside Counsel, � 9.39-40 (R. Haig ed. 2000). There was, of course, an underlying tension in Henke. Under well-settled rules of privilege, confidential communications shared in the course of a joint defense relationship relating to common legal interests remain privileged or protected even after the joint defense terminates unless all holders of the privilege agree to waive the privilege. John Morrell & Co. v. Local Union, 913 F.2d 544, 556 (8th Cir. 1990), cert. denied, 500 U.S. 905 (1991); In re Grand Jury Subpoenas, 89-3 and 89-4, 902 F.2d 244, 248 (4th Cir. 1990). Thus, the continued privileged status of Gupta’s communications with the other defendants’ attorneys that, according to their allegations on appeal, were inconsistent with his trial testimony, certainly placed them, as the 9th Circuit found, in a “difficult position.” 222 F.3d at 637. Yet that tension may well be the price paid for entering into a joint defense. And there may have been other ways to resolve that tension short of creating a cross-defendant attorney-client relationship. Gupta’s purportedly conflicting accounts may have amounted to perjury or fraud, which might have permitted the attorneys to disclose his confidences. Also, in a situation in which former parties to a joint defense become litigation adversaries, “[t]he law is well-settled that a joint defense privilege is waived in a subsequent controversy between the joint defendants.” Ageloff v. Noranda Inc., 936 F. Supp. 72, 76 (D.R.I. 1996) (citations omitted). In Henke, however, the remaining defendants probably lacked sufficient adversity with Gupta to waive the joint defense privilege because Gupta was an adverse witness in a criminal prosecution, not an adverse party. See In re Grand Jury Subpoena Duces Tecum Dated Nov. 16, 1974, 406 F. Supp. 381, 394 (S.D.N.Y. 1975) (although joint defendants had become adverse, a third party was not entitled to joint defense communications). A number of other courts that have confronted attempts to disqualify counsel for one co-defendant due to co-defendants’ confidences shared during a joint defense relationship have refused to grant disqualification. See, e.g., Essex Chemical Corp. v. Hartford Accident & Indemnity Co., 993 F. Supp. 241 (D.N.J. 1998); Ageloff, 936 F. Supp. 72. For example, in Ageloff, a corporation and its former executives entered into a joint defense agreement in connection with defending separate actions — one against the corporation (Suit A) and one against the executives (Suit B) — that had been brought by a third party. After the two actions were settled, the former executives sued the corporation (Suit C). The former executives opposed the pro hac vice admission of the corporation’s attorneys from Suit A in Suit C based on a claim that, because of the attorney-client relationship created by, and the confidences shared pursuant to, the joint defense agreement, they were disqualified. The magistrate judge agreed and denied the motion. The district court reversed, concluding that no attorney-client relationship had been created by the joint defense agreement and that the joint defense privilege had been waived due to the parties’ adversity in Suit C. Ageloff, 936 F. Supp. at 76. ADDRESSING ‘HENKE’ IN JOINT DEFENSE AGREEMENTS The disqualification risk created by Henkecan be addressed in whole or in large part by including a provision in the joint defense agreement expressly disclaiming an attorney-client relationship between and among the different defendants and their co-defendants’ counsel. Although more difficult to draft and of less clear effect, joint defense agreements also can be crafted to provide that each member of the joint defense waives representational “conflicts” created by disclosures of confidential information to the other defendants’ counsel, including in future matters in which, although the defendants are not adverse parties, one defendant’s counsel seeks to cross-examine another defendant. Few parties enter into a joint defense relationship with the expectation that, in so doing, their counsel might be disqualified from representing them. Indeed, many parties retain separate counsel and enter into joint defense relationships in large part to avoid the disqualification risks that joint representations present. Yet the 9th Circuit’s decision in Henkearguably supports cross-defendant disqualification in a joint defense. Accordingly, parties participating in joint defense relationships should consider the cross-defendant representation issue up-front and, to the extent possible, craft a joint defense agreement that reflects their understanding. Simply ignoring the issue may lead to unintended, unexpected and unhappy consequences. Mr. Alden is a litigation partner in the Cleveland office of Jones, Day, Reavis & Pogue. He can be reached at [email protected].

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