Joint Venture Conflict and an Inadvertently Produced Privileged Memo
Harper & Singh LLP represents both Riverstone Holdings and Kestrel Capital in a joint venture, RKV Partners. The engagement letter says the firm represents 'RKV and its members' but does not waive conflicts. In March, Riverstone discovered that Kestrel's nominee director had approved a related-party lease at above-market rent. Riverstone wants to sue Kestrel and asks Harper & Singh to represent it. Kestrel refuses to consent and says the firm has confidential information about Kestrel's financing. The firm's conflicts database lists Kestrel as a former client from 2019, but the billing partner says that matter closed. Meanwhile, an associate at the firm receives an email from opposing counsel in an unrelated matter; the email accidentally includes a privileged litigation strategy memo. The associate forwards it to the partner, who reads it and asks, 'Can we use this?'
1. Can Harper & Singh represent Riverstone against Kestrel? Analyze the conflict under concurrent and former client rules.
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Concurrent conflict. Harper & Singh currently represents both Riverstone and Kestrel (or at least the JV and its members). Suing Kestrel for Riverstone is directly adverse. Under Model Rule 1.7, the firm may not do so unless both clients give informed consent and the firm reasonably believes it can competently and diligently represent each. Kestrel refuses. That ends the concurrent-conflict route.
Former-client conflict. Even if the firm withdraws from Kestrel, Rule 1.9 bars use of Kestrel's confidential information to its disadvantage in a substantially related matter. The JV lease dispute is substantially related to the firm's representation of Kestrel in the JV. The firm likely learned Kestrel's financing and governance positions. The 'hot potato' doctrine prevents dropping Kestrel to take Riverstone.
Entity ambiguity. The engagement letter's phrase 'RKV and its members' is dangerous. If the firm represented only the JV, the members might be non-clients; if it represented the members individually, both are clients. Either way, the firm has confidential information and a conflict. It should not rely on the ambiguity.
Conclusion. The firm must decline Riverstone, and it may need to withdraw from representing Kestrel if continuing would be materially limited by its duty to Riverstone. Court permission may be required.
2. What should the firm do about the inadvertently disclosed privileged memo? What if the partner had already used it in a deposition?
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Immediate response. The associate should stop reading, preserve the email, and notify the partner. The firm should promptly notify opposing counsel, identify the document, and either return or destroy it as directed, without reviewing further. Model Rule 4.4(b) requires notification; the best practice is to seek clarification and not to use the contents. The firm should document the steps and not copy the memo into its own files.
If already used. The partner must disclose the use to opposing counsel and the court, seek a ruling, and cure prejudice. Courts may disqualify counsel, impose sanctions, or find waiver. Using privileged material can also create a disciplinary issue. The firm should not argue that the privilege was waived unless the client instructs and the court decides. The safer course is to withdraw the use and support any protective order.