In Re Teleglobe Communications Corp.

OPINION OF THE COURT

TABLE OF CONTENTS

I. Facts and Procedural History...............................................353

A. The Parties and Underlying Causes of Action.............................353

B. The Privilege Dispute..................................................354

II. Jurisdiction...............................................................357

III. Choice of Law.............................................................358

IV. Summary of the Law.......................................................359

A. The Attorney-Client Privilege...........................................359

B. The Disclosure Rule ...................................................361

C. Privileged Information Sharing..........................................362

1. The Co-Client (or Joint-Client) Privilege .............................362

2. The Community-of-Interest (or Common-Interest) Privilege............363

*352 D. The Exception for Adverse Litigation....................................366

E. When Joint Representation Goes Awry: The Eureka Principle..............368

F. Putting It All Together: Parents, Subsidiaries, and the Modern Corporate Counsel’s Office............................................369

1. Intra-group Information Sharing: Parents and Subsidiaries as Joint Clients .........................................................369

2. Keeping Control of the Privilege.....................................372

3 When Conflicts Arise...............................................373

V.Issues on Appeal ..........................................................374

A. Whether the Debtors Are Entitled to Documents Generated in the Course of a BCE/Teleglobe Joint Representation........................374

1. Wfliether BCE’s Concession in the Bankruptcy Court Prevents it from Arguing that the Debtors are not Entitled to the Disputed Documents......................................................374

a. Background...................................................374

b. Merits........................................................376

i. Issue Waiver..............................................376

ii. Judicial Admission.........................................377

iii. Judicial Estoppel..........................................377

iv. Implied Prospective Waiver of the Privilege...................378

2. Whether the Community-of-Interest Privilege Entitles the Debtors to the Documents as a Matter of Law...............................378

3. WTiether Teleglobe’s Waiver of the Privilege for the Debtors’ Benefit in the Canadian Insolvency Proceedings Entitles them to the Documents......................................................379

4. Conclusion and Remand ............................................380

B. The Effect of Funneling Documents Through BCE’s In-House Counsel.....380

VI.Potential Alternate Sustaining Grounds.......................................383

A. The Fiduciary Exception to the Attorney-Client Privilege ..................383

B. Affirming as a Discovery Sanction.......................................386

VII.Conclusion................................................................386

This is a twist on a classic corporate divorce story. It begins much as Judge Richard Cudahy’s “classic corporate love story”: “Company A meets Company B. They are attracted to each other and after a brief courtship, they merge.” GSC Partners CDO Fund v. Washington, 368 F.3d 228, 232 (3d Cir.2004). Sadly, it does not last. Not long after Company A acquires Company B, they start taking risks together, some of which go terribly wrong. After only a year or so, Company B is steeped in debt, and, not surprisingly, Company A begins to “los[e] that lovin’ feelin’.” 1 It leaves Company B, explaining that it simply must do so in order to save itself. Jilted and out of money, Company B promptly turns to that shelter for abandoned corporations, the bankruptcy system.

In bankruptcy, Company B’s children (subsidiaries), also in the shelter of bankruptcy, become indignant, and they sue Company A for all manner of ills relating to the break-up. Here, we deal not with the merits of the action, but with a pretrial dispute over corporate documents. Everyone agrees that the attorney-client privilege protects these documents against third parties. The wrinkle is that they *353 were produced by and in communication with attorneys who represented the entire corporate family back when they all got along.

The question, then, is whether Company A may assert the privilege against its former family members. Because we conclude that the District Court’s factual findings do not support setting aside the parent company’s privilege in this case, we vacate its order compelling production and remand for further proceedings.

1. Facts and Procedural History

A. The Parties and Underlying Causes of Action

This action began with a complaint brought in a Chapter 11 bankruptcy case. The debtors (“Debtors”) are the wholly owned United States subsidiaries of a Canadian telecommunications company formerly known as Teleglobe, Inc. (“Tele-globe”). Teleglobe and the Debtors are undergoing reorganization in Ontario in accordance with the Canadian Companies’ Creditors Arrangement Act (the “Arrangement Act”), a form of bankruptcy protection similar to Chapter 11. In addition, the Debtors (but not Teleglobe), all but one 2 of which are Delaware corporations, are simultaneously undergoing Chapter 11 reorganization in the District of Delaware. Until recently, Teleglobe was a wholly owned subsidiary of Bell Canada Enterprises, Inc. (“BCE”), Canada’s largest telecommunications company. 3

In 2000, BCE, which had previously owned a 23% minority stake in Teleglobe, purchased all its remaining shares (directly and indirectly through subsidiaries), thus taking control of the company. According to the Debtors, in late 2000 BCE directed Teleglobe to accelerate the development of a fiberoptic network called Glo-beSystem. BCE pledged its financial support to the project and caused Teleglobe and its subsidiaries (the Debtors) to borrow some $2.4 billion from banks and bondholders. The bond debt was guaranteed by one of the Debtors. Teleglobe exhausted its funding in 2001, and in November of that year BCE approved an additional $850 million equity infusion for Teleglobe and its subsidiaries. These monies were to be disbursed at the sole discretion of Jean Monty, then Chairman and CEO of BCE as well as Chairman and CEO of Teleglobe. BCE announced its intention to continue funding Teleglobe in December 2001.

About this time BCE began working on what personnel referred to as Project X— a comprehensive reassessment of BCE’s plans for Teleglobe. Lurking in the background was BCE’s declining confidence in GlobeSystem’s ultimate potential. 4 In the course of Project X, BCE considered a variety of options, including maintaining its funding in the hope that GlobeSystem *354 would be profitable, restructuring Tele-globe in such a way that it could continue as a viable subsidiary, and simply cutting off funding (which would send Teleglobe and its subsidiaries into a liquidating bankruptcy). In early April 2001, BCE publicly announced that it was reassessing its funding of Teleglobe; just a few weeks later, it ceased its funding, effectively abandoning Teleglobe. GlobeSystem was not operational, and so Teleglobe had no means of paying back its multi-billion dollar debt. Consequently, within weeks Teleglobe and the Debtors filed for Arrangement Act relief in Canada, and the Debtors also filed for Chapter 11 relief in Delaware.

For BCE’s role in funding and then abandoning the GlobeSystem project, the Debtors sued it in this adversary proceeding. 5 They assert several causes of action, including breach of contract, breach of fiduciary duties, estoppel, and misrepresentation (whether fraudulent or negligent). All claims relate to the manner in which BCE ceased funding Teleglobe, the Debtors’ corporate parent. Debtors’ theme is that BCE reneged on binding commitments to fund Teleglobe and fraudulently or negligently induced Teleglobe and the Debtors to continue incurring debt in reliance on those commitments, thus harming, inter alia, Teleglobe, the Debtors, and the Debtors’ creditors. Moreover, they allege that BCE, as the controlling shareholder of Teleglobe and the Debtors while those entities were insolvent, breached its fiduciary duties to the Debtors.

B. The Privilege Dispute

In the District of Delaware Bankruptcy Court, the Debtors and the Creditors Committee began exploring through Rule 2004 6 discovery the possibility of suing BCE for the manner in which it abandoned Teleglobe and the Debtors. In response to discovery requests, BCE marked 98 documents as protected by a “common interest privilege.” 7 When the creditors moved to compel production, BCE responded that the documents were privileged because “BCE attorneys consulted with attorneys, officers, or employees of Teleglobe, Inc. or its subsidiaries to discuss or provide legal advice in matters where BCE and Teleglobe, Inc. (or its subsidiaries) shared a common legal interest.” App. at A01110. BCE further stated that the “privilege will continue to exist until the Debtors file a litigation against BCE.” Id.

At a hearing in the Bankruptcy Court, BCE — in keeping with the theme of its argument — agreed to produce (even without the filing of a suit) the “common interest” documents to the Debtors, seemingly agreeing that they fell within the scope of their shared interest, and the Bankruptcy Court entered an order to that effect. BCE did not specifically admit that it was required to produce the documents; it merely agreed to do so. It continued to maintain, however, that the rest of the documents designated as privileged represented advice provided solely to it and were not part of any joint representation with Teleglobe or the Debtors. It is un *355 clear from the record exactly what the 98 “common interest” documents contained that BCE agreed to produce, but the privilege logs reflect that they primarily consisted of documents created by BCE’s in-house counsel on the subject of Teleglobe’s financing and restructuring. At the same time, the privilege log (exclusive of the 98 “common interest” documents) lists many other documents reflecting legal advice on Project X matters that BCE claimed— then and now — were intended as advice solely to it and not as part of any joint representation. See generally App. at A00967-A01091.

Once the Debtors and Creditors’ Committee filed their suit against BCE, the District Court withdrew its automatic reference to the Bankruptcy Court and began handling the suit itself. The District Court held an initial discovery conference at which BCE reasserted that it had produced all of the documents that it thought were generated as a result of a BCE/Teleglobe/Debtors joint representation and that the documents it was withholding reflected advice provided to and intended solely for BCE. App. at A0026465. The Debtors did not press the joint representation/common interest point at that time, nor did they argue for a broader scope of the joint representation/common interest than BCE had admitted; rather, they focused on an extension of the “conflicted fiduciary” line of cases, see Part VI.A, infra. 8 App. at A00262-63.

The District Court ended up referring the discovery dispute to a Special Master—C.J. Seitz, Jr., Esquire. In its initial written response to the Debtors’ motion to compel production before the Special Master, BCE stated that it had, in response to the Bankruptcy Court’s Rule 2004 order, “produced to the Debtors- all the documents that were protected by a common interest.” App. at A0197. BCE further stated that it had reviewed all of the documents on the privilege log and that the only documents that remained designated as privileged were those “reflecting] the provision of legal work solely to BCE.” Id.

The Debtors then expanded their argument by contending that the scope of the joint representation was broader than BCE admitted. Specifically, they claimed that various attorneys- represented all of the entities on the matters of BCE’s decision to cease funding Teleglobe and Tele-globe’s resulting restructuring. BCE, on the other hand, claimed that it retained its own attorneys to advise it on those matters. The Special Master found that the Debtors had not met their burden of proving an exception to the attorney-client privilege. The evidence, he concluded initially, merely showed that BCE’s in-house counsel represented Teleglobe and the Debtors occasionally; it did not show a broad joint representation as to the abandonment of Teleglobe. Recognizing, however, that the Debtors did not trust BCE’s representation that the documents marked as privileged reflected advice provided solely to BCE, the Special Master ordered a 50-document audit by his in camera *356 review to ensure the accuracy of BCE’s representations.

The Special Master also rejected the Debtors’ conflicted fiduciary argument, noting that the Delaware Court of Chancery has refused to adopt it in its broader form. Deutsch v. Cogan, 580 A.2d 100, 105 (Del.Ch.1990) (“Although neither the Garner nor Valente case is binding on this Court, Delaware courts have consistently followed Gamer and declined to broadly apply Valente.”) (citations omitted). More importantly, the Special Master forestalled any further “conflicted fiduciary”-style argument by ruling that neither Teleglobe nor the Debtors’ boards were conflicted in any sense because all of their duties flowed back up to BCE (and not, as the Debtors argued, to their creditors). See Anadarko Petroleum Corp. v. Panhandle Eastern Corp., 545 A.2d 1171, 1174 (Del.1988) (“[I]n a parent and wholly-owned subsidiary context, the directors of the subsidiary are obligated only to manage the affairs of the subsidiary in the best interests of the parent and its shareholders.”). The Special Master, however, did not make an express finding of fact on when the Debtors became insolvent (or entered the amorphous 9 “zone of insolvency”), reasoning instead that there was no way to get from the Debtors’ directors owing fiduciary duties to creditors of the Debtors on one hand to BCE owing a duty to those creditors on the other.

According to the Special Master, “[sjhortly after the Debtors made their selection of documents for in camera review, the wheels started coming off [BCE’s] privilege wagon.” App. at A0030. Before the review, BCE withdrew its privilege assertion for six of the 50 documents that the Debtors selected. Then, the Special Master determined that three of the documents did not involve the provision of legal advice at all, and three lent credence to the Debtors’ argument that BCE attorneys jointly represented BCE and Tele-globe on the issue of BCE’s abandonment. After the initial in camera review, BCE withdrew the privilege assertion for still more documents.

Having reviewed 44 documents in camera, the Special Master issued a supplemental decision in which he concluded that BCE’s revised privilege claims and his review of documents in camera “raised serious questions about” the reliability of the privilege log, whether BCE attorneys jointly represented BCE and Teleglobe on the abandonment issue, whether the documents withheld reflected legal advice provided solely to BCE, and whether the documents withheld were in fact privileged. App. at A0031. He ordered BCE to review and revise the privilege log and to submit all purportedly privileged documents to him for in camera review.

BCE culled its privilege log to just over 1,000 documents. Then, between the submission of the revised privilege log and the submission of the actual documents, BCE withdrew the assertion of privilege for over 100 additional documents. BCE still wasn’t finished; while the in camera review proceeded, it withdrew its assertion of privilege in four separate letters to the Special Master, covering well over 100 more documents.

One of the issues raised by the Debtors in supplemental briefing was BCE’s appar *357 ent over-designation of privileged documents. According to the Debtors, this was substantial enough to merit wholesale disclosure of the documents on BCE’s privilege log as a discovery sanction. The Special Master agreed that BCE “failed the audit in multiple ways — -withdrawing documents before in camera review, claiming privilege over documents that did not reflect legal advice, and claiming privilege over documents where it appeared that BCE in-house attorneys and outside counsel jointly represented BCE, Teleglobe, or the Debtors on matters of common interest.”

In his final decision, the Special Master declined to impose disclosure as a discovery sanction. But he nonetheless reversed himself and ordered the production of all of the documents on the privilege log. Having reviewed some 800 documents in camera, he found that they “revealed a broad legal representation of both BCE and Teleglobe by BCE’s in-house attorneys relating to Teleglobe’s restructuring alternatives.” App. at A0047-48. He further found that all of the documents on the privilege log were disclosed to BCE’s in-house counsel, which made them discoverable because those attorneys were jointly representing Teleglobe and could not, therefore, withhold the documents from it. Id. at A0055. He applied this reasoning even to documents produced by outside counsel hired only to work for BCE. 10

The District Court affirmed the Special Master’s decision and ordered BCE to turn over to the Debtors all of the documents. BCE argued that the Special Master’s finding of a broad joint representation between it and Teleglobe was irrelevant because he had not found a joint representation between it and the Debtors. Unless the Debtors were a party to the joint representation, BCE argued, they could not invade its privilege. The Court rejected this argument on three grounds: (1) BCE made a binding agreement to disclose all communications generated as part of a BCE/Teleglobe joint representation, and so finding a joint representation between the two was all that was needed; (2) the Debtors, as wholly owned subsidiaries of Teleglobe, were parties to the joint representation as a matter of law; and (3) even the documents that fell outside of the joint representation (ie., were produced by outside counsel) must be disclosed because they were shared with BCE’s in-house attorneys, who jointly represented Teleglobe.

II. Jurisdiction

This is an appeal from an interlocutory order. Nevertheless, we have jurisdiction under the collateral order doctrine, which provides an exception to the finality requirement of 28 U.S.C. § 1291. Under it, an immediate appeal lies if the following elements are met: “(1) the order from which the appellant appeals conclusively determines the disputed question; (2) the order resolves an important issue that is completely separate from the merits of the dispute; and (3) the order is effectively unreviewable on appeal from a final judgment.” In re Ford Motor Co., 110 F.3d 954, 958 (3d Cir.1997) (citing Rhone-Poulenc Rorer, Inc. v. Home Indem. Co., 32 F.3d 851, 860 (3d Cir.1994)).

Here, the first and third prongs are clearly met, as the District Court ordered the production of some 800 documents currently in dispute. See In re Ford Motor Co., 110 F.3d at 958 (holding that the first *358 prong is met when a district court orders the production of documents). Once documents are disclosed, any dispute over their privileged status is effectively moot and unreviewable, as the very purpose of the privilege is frustrated by compelled disclosure. Id. at 963 (“[T]he limited assurance that the protected material will not be disclosed at trial ‘will not suffice to ensure free and full communication by clients who do not rate highly a privilege that is operative only at the time of trial.’ ” (quoting Chase Manhattan Bank, N.A. v. Turner & Newall, PLC, 964 F.2d 159, 165 (2d Cir. 1992))).

The only question, then, is whether the privilege issue is sufficiently separate from the merits of the suit. It is, as we have no occasion to consider the issues that lie at the heart of the case: the existence, content, and alleged breach of any contract between BCE, Teleglobe, and/or the Debtors; the content and fraudulent or negligent nature of any representations made by BCE; and the alleged breach by BCE of fiduciary duties it purportedly owed to the Debtors. Rather, we concern ourselves with the extent to which BCE, Tele-globe, and the Debtors were jointly represented by counsel and the effect any joint representation has on BCE’s ability to shield documents from disclosure. In this context, we have little trouble concluding that we have jurisdiction over this appeal.

III. Choice of Law

BCE argues that Canadian law should govern all aspects of this appeal; the Debtors, on the other hand, argue for Delaware law. As a federal court exercising jurisdiction over state-law claims, we apply the choice-of-law rules of Delaware, the forum state. Hammersmith v. TIG Ins. Co., 480 F.3d 220, 226 (3d Cir.2007). “Delaware courts look to the Restatement (Second) of Conflict of Laws for guidance in choice of law disputes.” Gloucester Holding Corp. v. U.S. Tape & Sticky Prods., LLC, 832 A.2d 116, 124 (Del.Ch. 2003). Here, § 139 of the Restatement applies:

(1) Evidence that is not privileged under the local law of the state which has the most significant relationship with the communication will be admitted, even though it would be privileged under the local law of the forum, unless the admission of such evidence would be contrary to the strong public policy of the forum.

(2) Evidence that is privileged under the local law of the state which has the most significant relationship with the communication but which is not privileged under the local law of the forum will be admitted unless there is some special reason why the forum policy favoring admission should not be given effect.

Restatement (Second) of Conflict of Laws § 139 (1971).

These provisions presuppose a conflict between the law of the forum state and the law of the state with the most significant relationship. This is because courts typically wade into choice-of-law determinations when those laws truly conflict. See Huber v. Taylor, 469 F.3d 67, 74 (3d Cir.2006) (citing On Air Entm’t Corp. v. Nat’l Indem. Co., 210 F.3d 146, 149 (3d Cir.2000)). While there are no reported Delaware cases on this point, we predict that Delaware would follow the practice of the federal system and most states, and decide a choice-of-law dispute only when the proffered legal regimes actually conflict on a relevant point.

BCE argues for Canadian law here, but concedes that it has found no relevant conflict of Canadian with Delaware law. 11 *359 This undercuts BCE’s argument, particularly given that the Restatement favors the admission of evidence when the law of the forum state so requires; thus, if applying Canadian law will safeguard the privilege, it is BCE’s responsibility not only to highlight the legal conflict, but also to point to “some special reason” favoring protection. See Restatement (Second) of Conflict of Laws § 139 emts. c & d. As BCE has not informed us of a conflict, cites Delaware law extensively (with comparatively few Canadian decisions noted), and concedes that the law in Canada is not materially different than Delaware, we rely on Delaware authority in reaching our conclusions. See Huber, 469 F.3d at 74.

We recognize that BCE has informed us of a true conflict on an issue the Debtors raise as an alternate sustaining ground— namely, whether the Debtors are entitled to the disputed documents under the fiduciary exception to the attorney-client privilege. Though that exception is well-entrenched in Delaware law, it does not exist in Canada. We deal with this issue more fully in Part VI.A.

IV. Summary of the Law

This appeal raises core questions about the proper operation of a corporate family’s centralized in-house legal department. Because answering those questions requires delving into a variety of concepts related to the co-client (or joint-client) privilege, its exceptions, its scope, and a lawyer’s ethical obligations, a summary of relevant law sets the backdrop.

We begin with a basic review of the attorney-client privilege — and how it has been adapted to accommodate the corporate client. We continue with a discussion of how disclosing otherwise privileged communications to third parties waives the privilege. Next, we explore two oft-confused privileges: (1) the co-client (or joint-client) privilege, which applies when multiple clients hire the same counsel to represent them on a matter of common interest, 12 and (2) the community-of-interest (or common-interest) privilege, which comes into play when clients with separate attorneys share otherwise privileged information in order to coordinate their legal activities. Neither the co-client nor community-of-interest privilege is effective in adverse litigation between the former clients, so we next discuss the contours of the adverse-litigation exception. Then, we explore how courts deal with joint representations that go wrong because of impermissible attorney conflicts of interest. Finally, we put all of these doctrines together to address how they interact in the modern corporate in-house counsel’s office.

A. The Attorney-Client Privilege

The attorney-client privilege protects communications between attorneys and clients from compelled disclosure. It applies to any communication that satisfies the following elements: it must be “(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.” Restatement (Third) of the Law Governing Lawyers § 68 (2000). “Privileged persons” include the client, the attorney(s), and any of their agents that help facilitate attorney-client communications or the legal representation. Id. § 70.

The attorney-client privilege is the oldest of the common-law privileges. Klitzman, Klitzman & Gallagher v. Krut, 744 F.2d 955, 960 (3d Cir.1984). Like all privileges, it is an exception to the common-law maxim that the public has a right to “ ‘ev *360 ery man’s evidence.’ ” United States v. Bryan, 339 U.S. 323, 331, 70 S.Ct. 724, 94 L.Ed. 884 (1950) (quoting 8 J. Wigmore, Evidence § 2192 (3d ed.1940)). Though initially confined to communications made in anticipation of litigation, American courts rejected that limitation at the outset. Paul R. Rice, Attorney-Client Privilege in the United States § 1:12 (2d ed.1999) (hereinafter “Rice”) (citing, e.g., Parker v. Carter, 18 Va. 273, 4 Munf. 273, 1814 WL 667, at *9 (1814) (“The court is also of [the] opinion[ ] that [the privilege] is not confined to facts disclosed, in relation to suits actually depending at the time, but extends to all cases in which a client applies ... to his counsel or attorney ... for his aid in the line of his profession.”)). This is because so confining the privilege would discourage clients from seeking the advice of counsel before problems arise. Parker, 1814 WL 667, at *9.

As the Supreme Court has noted more recently, the purpose of the attorney-client privilege

is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound,legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer’s being fully informed by the client.

Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981); accord The Queen v. McClure, [2001] 1 S.C.R. 445, at ¶¶ 32-33 (Can.2001); Deutsch v. Cogan, 580 A.2d at 104. Because the privilege carries through policy purposes — encouraging attorney-client communication to enhance compliance -with the law and facilitating the administration of justice, the Supreme Court has not applied it mechanically. Upjohn, 449 U.S. at 392, 101 S.Ct. 677. It is essential that parties be able to determine in advance with a high degree of certainty whether communications will be protected by the privilege. Id. at 393, 101 S.Ct. 677; see also Deutsch, 580 A.2d at 106.

As common-law courts developed the privilege in an age in which clients were almost exclusively natural persons, more modern courts sought to adapt it to the now ubiquitous corporate client. For more than a century, common-law courts have recognized that communications between corporate clients and their attorneys are indeed privileged. See Radiant Burners, Inc. v. Am. Gas Ass’n, 320 F.2d 314, 319 & n. 7 (7th Cir.1963) (citing English cases dated as early as 1833, and American cases as early as 1885, for the proposition that corporations can assert the attorney-client privilege).

Because corporations act through human agents, the question of whose communications with the corporation’s attorneys are entitled to protection comes up often. Rice § 4:11. In Upjohn the Supreme Court rejected the so-called “control group theory” — that only communications between high-level managers and corporate attorneys merit protection. 449 U.S. at 392, 101 S.Ct. 677. Instead, it held that when a corporation’s managers require its employees to give information to its attorneys in the course of providing legal advice, those communications also are protected. Id. at 396, 101 S.Ct. 677. This serves the policy goals of the privilege — to enhance compliance with the law and facilitate the administration of justice — by encouraging open communication between attorneys and clients. Id. at 389, 394, 101 S.Ct. 677.

The lesson for us is that it is important not to confuse these overarching policy goals with the means of achieving them. Communication between counsel and client *361 is not, in and of itself, the purpose of the privilege; rather, it only protects the free flow of information because it promotes compliance with law and aids administration of the judicial system. Cf. United States v. Zolin, 491 U.S. 554, 563, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989) (explaining that attorney-client communication facilitating fraud is not privileged because that sort of communication impedes the administration of justice). Thus, following Upjohn’s lead in not applying the privilege mechanically does not counsel in favor of applying the privilege anytime it might increase the flow of information; rather, Upjohn counsels a more nuanced inquiry into whether according a type of communication protection is likely to encourage compliance-enhancing communication that makes our system for resolving disputes more operable.

B. The Disclosure Rule

A communication is only privileged if it is made “in confidence.” Restatement (Third) of the Law Governing Lawyers § 68. In other words, if persons other than the client, its attorney, or their agents are present, the communication is not made in confidence, and the privilege does not attach. The disclosure rule operates as a corollary to this principle: if a client subsequently shares a privileged communication with a third party, then it is no longer confidential, and the privilege ceases to protect it. See Del. R. Evid. 510. This is because the act of disclosing signals that the client does not intend to keep the communication secret. Rice § 9:28. In addition, it prevents clients from engaging in strategic selective disclosure. United States v. Bernard, 877 F.2d 1463, 1465 (10th Cir.1989). The privilege does, after all, hinder the truth-seeking process, and so we carefully police its use. United States v. Doe, 429 F.3d 450, 453 (3d Cir. 2005). 13

Disclosing a communication to a third party unquestionably waives the privilege. A harder question is whether the waiver also ends the privilege as to any related but not disclosed communications. In answering this question, our touchstone is fairness. See Tackett v. State Farm Fire & Cas. Ins. Co., 653 A.2d 254, 259 (Del.1995); see also Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414, 1426 n. 12 (3d Cir.1991). When one party takes advantage of another by selectively disclosing otherwise privileged communications, courts broaden the waiver as necessary to eliminate the advantage. Zirn v. VLI Corp., 621 A.2d 773, 781-82 (Del.1993) (“The purpose underlying the rule of partial disclosure is one of fairness to discourage the use of the privilege as a litigation weapon.”); see also Rice § 9:31. Extending the waiver, however, is not a punitive measure, so courts do not imply a broader waiver than necessary to ensure that all parties are treated fairly. 14 See Rice 9:31. Moreover, when the disclosure does not create an unfair advantage, courts typically limit the waiver to the communications actually disclosed. See In re Keeper of Records (Grand Jury Subpoena Addressed to XYZ Corp.), 348 F.3d 16, 24-25 (1st Cir.2003); cf. Westinghouse, 951 F.2d at 1427 n. 14.

*362 C. Privileged Information Sharing

1. The Co-Client (or Joint-Client) Privilege

It is often expedient for two or more people to consult a single attorney. The rules of professional conduct allow a lawyer to serve multiple clients on the same matter so long as all clients consent, and there is no substantial risk of the lawyer being unable to fulfill her duties to them all. Restatement (Third) of the Law Governing Lawyers §§ 128-31. Just as in single-client representation, the lawyer and co-clients 15 begin their relationship when the co-clients convey their desire for representation, and the lawyer consents. Id. § 14. Like single-client representation, nothing prevents joint representation from arising by implication, but, as a District Court in Maryland recently noted, courts must be careful not to imply joint representations too readily:

What the Court takes exception to is [the plaintiffs] effort to ... argue, in effect, that a joint representation of Party A and Party B may somehow arise through the expectations of Party B alone, despite Party A’s views to the contrary. This position is untenable, because it would ... allow the mistaken (albeit reasonable) belief by one party that it was represented by an attorney ... to serve to infiltrate the protections and privileges afforded to another client.

Neighborhood Dev. Collaborative v. Murphy, 233 F.R.D. 436, 441-42 (D.Md.2005) (internal citations and quotation marks deleted). Moreover, as the Restatement details, it is important to remember that

clients of the same lawyer who share a common interest are not necessarily co-clients. Whether individuals have jointly consulted a lawyer or have merely entered concurrent but separate representations is determined by the understanding of the parties and the lawyer in light of the circumstances.

Co-client representations must also be distinguished from situations in which a lawyer represents a single client, but another person with allied interests cooperates with the client and the client’s l