Bar leaders and senators unite to preserve attorney-client privilege

A campaign by the ABA and others has helped spur legislation that, if passed, would protect the attorney-client privilege by prohibiting federal prosecutors and other officials from asking companies to waive their privilege.
The U.S. Department of Justice, as initially outlined in the 1999 Holder Memorandum and then revised and reaffirmed in the 2003 Thompson Memorandum, currently takes into account a company's willingness to cooperate by waiving attorney-client privilege when it decides on charges. Many bar leaders and others believe that while it is important to protect shareholders from corporate scandal, encouraging waivers of attorney-client privilege is the wrong way to go about it.
"In the wake of Enron and the many other recent corporate scandals plaguing our nation, the ABA has taken an active role in proposing new corporate governance reforms, including new practices aimed at enhancing the role of lawyers in ensuring the legal compliance of the companies they represent," says ABA President Karen Mathis. "We strongly believe that protecting the attorney-client privilege is a crucial way to help corporations avoid the kinds of misconduct that have contributed to scandals, or to ferret out such problems when they occur and rectify them."
Those joining the ABA in opposing the justice department's policy on attorney-client privilege include the American Civil Liberties Union, the Wall Street Journal editorial page, the U.S. Chamber of Commerce, the National Association of Criminal Defense Lawyers, numerous state and local bars, and high-ranking former justice department officials from both political parties.
Deputy Attorney General Paul J. McNulty defends the waivers as an efficient way to get information. "There are many ways for government investigators to get the facts in a corporate fraud investigation, to find out who did what when," he says. "Some ways are faster and more productive than others. One of the most productive ways to get the facts is for a cooperating corporation to tell the government what it knows."
McNulty also notes that waiving of the attorney-client privilege is just one of nine factors addressed in the Thompson Memorandum.
After hearings in September on Capitol Hill before the Judiciary Committee, McNulty released his own memo, the McNulty Memorandum, in December to address new changes in the department's charging guidelines in corporate fraud prosecutions.

A coercive challenge to fundamental rights?
But many, including Sen. Patrick Leahy (D-Vt.), who currently chairs the Judiciary Committee, believe that the DOJ policies bully companies, and that the McNulty Memorandum is not a real solution.
Sen. Arlen Specter (R-Pa.), who chaired the Judiciary Committee last year, says that the DOJ policies undermine a basic constitutional right. "The right to counsel is just very, very fundamental," he says, adding that if companies don't surrender their rights, they are more likely to be indicted and that an indictment can kill a business. "I think it is coercive," he adds. "It may even rise to the level of being a bludgeon."
McNulty says the Thompson Memorandum was never intended to discourage attorney-client communications and that his memorandum addresses that concern. "My memorandum now amplifies the limited circumstances under which prosecutors may ask for waivers of privilege," he says.
He says the new policy makes it clear that attorney-client communications should only be sought in rare cases and that "legal advice, mental impressions and conclusions, and legal determinations by counsel are protected."
He says that the U.S. attorney must seek approval from him, and that he must personally approve each waiver request, in writing. Further, the request must show a "legitimate need" for the information and that the information cannot be obtained in a timely and complete fashion by using other means that don't require a waiver.
If a request is made and the corporation declines, McNulty says, "prosecutors will not view it negatively in making a charging decision." However, if the corporation does give the information, prosecutors will consider it favorably.
The new guidelines also "prohibit prosecutors from considering whether a corporation is advancing attorneys' fees to employees or agents under investigation or indictment," he notes.
But Mathis says the McNulty Memorandum falls short of preventing further erosion of fundamental attorney-client, work product, and employee protections. Rather than eliminating the justice department practice of requiring companies to waive their privileges in return for cooperation credit, the McNulty Memorandum merely requires high-level department approval, she says.
"More importantly," Mathis says, "by continuing to encourage companies to 'voluntarily' waive their attorney-client privilege and work product protections without being formally requested to do so, in return for cooperation credit and less harsh treatment, the new memorandum all but guarantees the continued erosion of these protections."
Companies will continue to feel "inexorable pressure" to waive in virtually every case under the new memorandum, Mathis says.
In addition, she says, just like the old policy, the new policy will discourage company personnel from consulting with the company's lawyers, and it fails to protect employees from various punitive actions that prosecutors force companies to take.
Support for Sen. Specter's bill
On each point, Sen. Specter, a former prosecutor himself, agrees. With the input of the ABA and others, Sen. Specter drafted corrective legislation that was introduced in the last Congress in December and reintroduced again in the same form in the current 110th Congress as S. 186.
"Although the new McNulty Memorandum, which replaces the memorandum issued by former Deputy Attorney General Larry Thompson, makes some improvements, the revision continues to erode the attorney-client relationship by allowing prosecutors to request privileged information backed by the hammer of prosecution if the request is denied," Specter says. "This bill will hopefully force the Department of Justice to issue a meaningful change to its corporate charging policies beyond the changes in the McNulty Memorandum."
Specter's bill would prohibit any agent or lawyer of the U.S. government from pressuring any company or other organization to disclose confidential information protected by attorney-client privilege or work product doctrine; to refuse to contribute to the legal defense of an employee; to refuse to enter into a joint defense, information sharing, or common interest agreement with an employee; to refuse to share relevant information with employees that they need in order to defend themselves; or to terminate or discipline employees for exercising their constitutional or other legal rights.
Mathis says that the bill preserves the ability of prosecutors and other law enforcement officials to seek information that they believe is not privileged or work product. "Therefore, we believe that the bill strikes the proper balance between the legitimate needs of prosecutors and regulators, and the constitutional and other fundamental legal rights of companies and their employees," she says.
"The only vocal opposition thus far has come from the current political leadership of the justice department," she continues. "The department's opposition seems to be based on its contention that the McNulty Memorandum somehow has 'solved the problem,' a claim that the rest of us strongly reject."

Bar association efforts
Over the past year, the ABA has urged bars and individual lawyers to express their views to the Department of Justice, local U.S. attorneys, and the media. The issue is being tackled on multiple fronts.
For example, recently, the ABA filed an amicus curae brief developed by its Intellectual Property Law Section in the case of In re Seagate Technology, LLC, before the U.S. Court of Appeals for the Federal Circuit. The brief argues that when a party in litigation asserts as a defense that it took action on advice of counsel, that party does not waive its attorney-client privilege protection of communications with trial counsel in the litigation. Now the ABA is encouraging lawyers to speak with their congressional delegation and urge them to support the Specter bill.
The ABA Presidential Task Force on the Attorney-Client Privilege, chaired by former ABA President Bill Ide, has been in operation since 2004 and has addressed the various DOJ memos and also deals with other aspects of the attorney-client issue.
"Much more remains to be done, but we are turning back the intrusions and building the needed support for the privilege," Ide says, adding that the task force has activated state and local bars to set up task forces of their own.
Task forces, in various stages, have been established in Arkansas, California, Connecticut, Florida, Illinois, Maryland, Massachusetts, and New York.
Some bars are looking at the issue broadly, while others, like the Illinois State Bar Association, have a more narrow focus. "Our task force charge was limited to reviewing and responding to the Thompson Memorandum," says Timothy Eaton, chair of the ISBA's Special Committee on Attorney Client Privilege and past ISBA president. "However, once the McNulty Memo and the pending Specter legislation came about, we weighed in on that, too."
Regarding the Thompson Memorandum, some state officials said they thought the idea of asking for privileged material from a company was repugnant, and the special committee determined that the McNulty Memorandum didn't go far enough.
Attorney-client privilege waivers should not be used as a weapon, Eaton says, and there are other ways, such as Sarbanes-Oxley and other legislation, to protect the public from corporate fraud.
"[Our task force is] concerned that once you start making exceptions to the privilege, that it would be extended to other circumstances, and we don't want to go down that road," he adds.
Marc Jimenez, chair of the task force in Florida, believes there is a limited and useful function for waiver of privilege in certain circumstances, but that it shouldn't become commonplace. "In rare incidences, it could be appropriate," he says. "Corporations should have the right to a waiver, but there should be no threats or pressure on the client to waive the attorney-client privilege."
Jimenez, who is a former U.S. attorney and served on an advisory committee at the time of the Thompson Memorandum, says the McNulty Memorandum is an improvement but there is more to be done-and he's not relying solely on the Specter bill.
"We are going full speed and not slowing down because of the Specter legislation," says Jimenez, who expects to report to the Florida Bar board this summer. "You never know if the Specter legislation will be constitutionally challenged in court, plus the Specter bill is not a cure-all. Although it's helpful, it won't deal with every single issue surrounding attorney-client privilege."
Regardless of what happens on the federal level, he says, there are still a lot of state law matters to examine, particularly whether rules of evidence and rules of ethics need to be changed. The task force, which first met in January, is expected to continue its work until at least mid-2008.
The Arkansas Bar Association has turned its attorney-client privilege task force into a standing committee. The task force did not find any related problems that had arisen in Arkansas, but the members determined that a proactive approach was warranted in light of developments on the national level. The group completed its work as a task force with a 19-page report that recommended resolutions based in large part on resolutions passed by the ABA on the topic.
Two of the recommendations were sent to the Arkansas Supreme Court earlier this year requesting their adoption. One amendment provides that, as a general rule, "inadvertent disclosure of materials protected by the attorney-client privilege and the work product doctrine does not waive these protections." The other amendment says that "disclosure of protected information to a government agency does not constitute waiver for other purposes."
The ABA has reached out to state and local bar associations throughout the country on this issue, which Mathis says should be of concern to everyone, not just lawyers. "Incursion on constitutional, common law, or other legal protections of individuals and corporations is not the 'turf' of the bar," she explains. "The attorney-client privilege is the oldest form of privileged communication recognized in history. Such protected communication is what enables people to assert and exercise their other rights under the Constitution."
Those rights were fought for in the War for Independence and preserved throughout the country's history, she adds. "Simply put, the attorney-client privilege is a keystone of the precious freedoms we enjoy in the United States."
-By Clifton Barnes