Third-Party Litigation Investing and Attorney-Client Privilege

A claim-holder's communications with its investors, or potential investors, introduces the risk of privilege waiver and the potential exposure of sensitive information to an adverse party in later litigation. An attractive discovery subject for any defendant may be the materials shared between the plaintiff and its investor. The plaintiff's evaluation of its claims would provide good information for cross-examination. Thus, the issues of privilege and work product protection arise when a plaintiff shares otherwise protected information.

Case law addressing whether these communications destroy the privilege is limited and inconsistent. Courts are divided on whether the claimed commonality in such a relationship ' a financial interest ' is enough to preserve privilege. Still, the claim-holder will need to communicate some information to an investor to obtain investment in the prosecution of its claims. This article considers recent case law addressing privilege challenges and third-party investment relationships, and provides suggestions on how to minimize the risk of destroying any privilege through the provision of sensitive information in such relationships.