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Congress Versus Bank of America’s Attorney-Client Privilege

           The House Committee on Oversight and Government Reform has been conducting an investigation of Bank of America’s acquisition of Merrill Lynch, including the question of whether BOA learned information prior to the closing of that transaction which fell within the “material adverse change” provision of the merger agreement and whether BOA was required to make disclosures of this information to its shareholders.  As part of this investigation, Chairman Edolphus Towns sent a letter dated August 6, 2009 to BOA CEO Ken Lewis requesting the production of documents, including records of legal advice BOA received relating to the material adverse change provision and its disclosure obligations. 

            On September 9, 2009, BOA responded to Chairman Towns by letter from its attorneys at WilmerHale.   Not surprisingly, BOA argues that many of the documents responsive to the Committee’s request “are documents that fall into the core of the common law privilege for attorney-client communications.”  BOA points out that if it were to produce these documents voluntarily in response to the Chairman’s letter, it would likely waive the attorney-client privilege with respect to other investigators (such as the SEC or DOJ) and third parties.  Accordingly, BOA “respectfully request[s] that the Committee withdraw its request for voluntary production of [these] privileged materials.” 

            The Committee is not disputing that the documents withheld by BOA, at least by and large, are in fact attorney-client privileged.  One might wonder, therefore, why BOA simply does not refuse to produce the documents.  Apart from the political incentives that BOA has to cooperate with the Committee, the answer is found in the Chairman Towns’s response of September 18, 2009, in which he states that BOA’s attorneys acknowledge that “Congress has the right to refuse to recognize an assertion of the attorney-client privilege.” 

            Actually, this is not quite accurate.  WilmerHale only acknowledged that “Congress has long asserted the right of each chamber to make its own independent determination as to whether to recognize the attorney-client privilege.”  Acknowledging the assertion is not the same thing as acknowledging the right.  Nonetheless, it is the fact of this asserted congressional authority to disregard the attorney-client privilege that creates the dilemma for BOA. 

            The basis of Congress’s claimed authority to trump the privilege is simple.  Congress’s power to compel the production of information is a constitutional power.  Although not expressly granted by the Constitution, this power has been found by the Supreme Court to inhere in Article I’s grant of legislative authority.  In contrast, the attorney-client privilege (at least outside the criminal context) is not a constitutional right, but merely a common-law privilege which is generally recognized in state and federal judicial and administrative proceedings.  Because the congressional investigatory power is constitutionally based, it seems to follow logically (although many lawyers and judges will be sorely tempted to resist this logic) that it cannot be limited by a non-constitutional privilege created by the courts. 

            Though the argument is simple, the matter at hand is not.  Even if one accepts that Congress has the power to disregard the attorney-client privilege, it does not follow that it should or will do so.  As Mort Rosenberg notes in his most recent work on congressional investigations, a committee “can deny a witness’ request to invoke privilege when the committee concludes that it needs the information sought to accomplish its legislative functions . . . [but] [i]n practice . . . congressional committees have followed the courts’ guidance in assessing the validity of a common law privilege claim.” 

            While Chairman Towns may be inclined to overrule BOA’s privilege claim based on legislative need, he is not the final authority on the issue.  In order to hold BOA in contempt for withholding documents, his ruling would have to be upheld by the committee and by the full House.  As WilmerHale points out in its letter, there is reason to doubt that a majority of the House would be willing to hold a witness in contempt for withholding information that is truly privileged under the attorney-client doctrine. 

            Moreover, at this point BOA has not been subpoenaed, but has merely received a request for documents.  As a legal matter, BOA would be foolish to produce privileged documents now, as it would surely waive the privilege for the documents produced and risk an even broader waiver of the privilege with regard to the subject matter in question.  Even if BOA decides that it would prefer to produce the documents rather than face contempt of Congress, it can avoid a waiver only if it uses its best efforts to resist any subpoena for their production.  Exactly how far down the contempt road BOA must go is not entirely clear, but it must at least do everything it can short of being held in contempt in order to avoid a third party waiver.  

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