Federal Agency Policies that Erode the Attorney-Client Privilege

Overview

In recent years, many federal government agencies have adopted policies that erode or undermine the attorney-client privilege and the work product doctrine in the corporate context. Each of these policies—including the Justice Department’s 1999 "Holder Memorandum", 2003 "Thompson Memorandum", and 2006 "McNulty Memorandum"; the U.S. Sentencing Commission’s 2004 amendments to Section 8C2.5 of the Federal Sentencing Guidelines; the Securities and Exchange Commission's 2001 "Seaboard Report"; the Department of Housing and Urban Development’s longstanding "guidance" to public housing authorities, and similar policies by other agencies—pressure companies and other organizations to waive their attorney-client privilege and work product protections as a condition for receiving full cooperation credit during investigations or other benefits from the agency. Other federal agency policies—including the Consumer Financial Protection Bureau’s 2012 "Confidential Treatment of Privileged Information Rule" and similar policies adopted by other bank regulators such as the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency—claim the legal authority to require banks and non-bank supervised entities to disclose privileged information during examinations and other regulatory processes. Furthermore, other agencies like the National Security Agency have adopted “minimization” policies and practices that, while beneficial, may not adequately protect the privileged status of intercepted information.

Status

For years, the ABA worked closely with a broad coalition of business and legal groups—ranging from the U.S. Chamber of Commerce to the American Civil Liberties Union—and with many state and local bar associations in an effort to reverse the Justice Department and other federal agency privilege waiver policies referenced above. The Senate and House Judiciary Committees held four separate hearings on this issue in 2006 and 2007, and the coalition testified and/or submitted written statements at each hearing. The ABA also sent letters to the Justice Department (May 2006), the U.S. Sentencing Commission (March 2006), the Commodity Futures Trading Commission (July 2006), the Department of Housing and Urban Development (December 2006 and February 2011), the Securities and Exchange Commission (February 2007), the General Services Administration/FAR Councils (June 2008), the Treasury Department’s Office of Foreign Assets Control (OFAC) (November 2008), and other agencies urging them to reverse or modify their respective privilege waiver policies.

After considering the concerns raised by congressional leaders, former Justice Department officials, and many in the legal and business communities, the Sentencing Commission and the Commodity Futures Trading Commission voted to reverse their privilege waiver policies in April 2006 and March 2007, respectively. In addition, the Justice Department replaced the Holder, Thompson, and McNulty Memoranda with the so-called "Filip Memorandum" and new revised corporate charging guidelines in August 2008, which stated that while prosecutors may require companies to disclose all relevant facts during investigations in return for cooperation credit, they can no longer require or even ask companies to waive their attorney-client privilege or work product protections or to forego paying their employees’ legal fees. Similarly, the GSA/FAR Councils and the Treasury Department’s OFAC issued final rules in November 2008 and November 2009, respectively, clarifying that parties will not be penalized for declining to produce privileged information. The SEC also issued a series of revised Enforcement Manuals, most recently on June 4, 2015, which instruct agency staff not to request waiver of the privilege without the prior approval of the Director or Deputy Director. Therefore, while the revised SEC manual is a significant improvement over the agency’s original privilege waiver policy outlined in the 2001 Seaboard Repot, it still does not provide adequate protection for the attorney-client privilege or the work product doctrine.

In addition to its efforts to reform these federal agencies’ privilege waiver policies, the ABA submitted comments to the CFPB in April 2012 directly challenging the Bureau’s claims that it had the legal authority to force banks and non-bank supervised entities to provide privileged documents and information during examinations and other regulatory processes. However, because many financial institutions and other supervised entities choose to provide all requested documents, both privileged and nonprivileged, to federal banking regulators as part of the supervisory process, the ABA also worked closely with 13 state and local bar associations and the U.S. Chamber of Commerce to enact legislation during the 112th Congress designed to protect the privileged status of all such documents. H.R. 4014, sponsored by Rep. Bill Huizenga (R-MI), and S. 2099, sponsored by Senator Tim Johnson (D-SD), both provided that when banks or other supervised entities produce privileged information to the CFPB, the privilege would not waived as to any third parties. In February 2012, the ABA sent a letter to House leaders endorsing H.R. 4014, and a similar letter to Senate leaders endorsing S. 2099. Congress subsequently passed the legislation in December 2012, and President Obama signed it into law as P.L 112-215.

Congress also considered, but so far has declined to enact, comprehensive legislation known as the “Attorney-Client Privilege Protection Act” (ACPPA) that would prohibit all federal agencies (except bank regulators) from pressuring companies and other organizations to waive their attorney-client privilege, work product, or employee legal protections during investigations. H.R. 3013, sponsored by Representatives John Conyers (D-MI), Bobby Scott (D-VA), and Lamar Smith (R-TX) during the 110th Congress, was approved overwhelmingly by the House in November 2007, but the Senate companion bill, S. 3217, failed to receive a vote. Similar legislation (S. 445 and H.R. 4326) was subsequently introduced during the 111th Congress, but there was no further action on either bill. While the ABA views the revised Justice Department policy and the other revised federal agency policies described above to be substantial improvements over the agencies’ previous waiver policies, the ABA continues to support comprehensive legislation like the ACPPA—or a similar Presidential executive order applying these reforms to all federal agencies—as the best means to permanently protect the privilege and the work product doctrine from government coerced waiver.

In addition to opposing these and other federal agency policies that compel companies to waive the privilege or to otherwise produce privileged materials, the ABA also submitted comment letters to other federal agencies in an effort to strengthen those agencies’ existing privilege protection policies. For example, in response to press allegations in February 2012 that confidential communications between a U.S. law firm and its overseas client were intercepted by a foreign intelligence agency and shared with the National Security Agency (NSA) and other federal agencies, the ABA sent a letter to, and met with, senior representatives of those agencies to ensure that the proper policies and procedures are in place to preserve fundamental attorney-client privilege protections for all clients. In its response letter, the NSA expressed its commitment to protecting the attorney-client privilege and explained its various policies and procedures designed to minimize the acquisition, retention, and dissemination of privileged information.

The ABA also submitted a comment letter to the Legal Services Corporation (LSC) in June 2014 expressing concerns over its proposal to limit the scope of attorney-client privilege protections in the new Grant Assurances form that grantees would be required to follow starting in FY 2015 to just those protections covered by the “federal attorney-client privilege.” LSC later decided not to adopt the proposed language, and in its July 2, 2014 announcement explaining its decision, the agency specifically referenced the ABA’s written comments as a key factor.

The ABA continues to engage in a constructive dialogue with NSA and other intelligence and law enforcement agencies in an effort to strengthen their existing “minimization” policies to better protect the privileged status of confidential material obtained through governmental surveillance. In addition, the ABA continues to engage the CFPB, LSC, Treasury Department, and other agencies to ensure that their policies and practices do not erode or undermine the privilege or parties’ fundamental rights to effective counsel.

Key Points

Federal agencies should adopt policies and procedures that recognize and fully protect the privilege and work product, and avoid measures that would erode or undermine these fundamental legal rights, because:

  • The attorney-client privilege is a bedrock legal principle of our free society that is important in both the civil and criminal contexts. The privilege enables both individual and organizational clients to communicate with their lawyers in confidence, which is essential to preserving all clients’ fundamental rights to effective counsel. The privilege also encourages clients to seek out and obtain guidance to conform their conduct to the law, facilitates self-investigation into past conduct to identify shortcomings and remedy problems, and enables lawyers to fulfill their ethical duties to their clients, all of which benefit society at large.
  • The work product doctrine, which protects materials prepared by or for an attorney in connection with litigation that is pending or reasonably anticipated, underpins our adversarial justice system and must be preserved. The work product doctrine allows attorneys to prepare for litigation or trial without fear that their work product, legal theories, and mental impressions will be revealed to adversaries, to the detriment of their clients. The protection accorded to work product is premised on the same basic policy rationale as that underlying the attorney-client privilege—that an attorney cannot provide full and adequate legal representation unless certain confidential client-related information is shielded from adversaries.
  • Federal agency policies that compel parties to disclose privileged or work product protected information violate longstanding common law principles and undermine both the confidential lawyer-client relationship and the fundamental right to counsel. The U.S. Supreme Court has long held that the privilege and work product apply to both individuals and companies. See Upjohn v. United States, 449 U.S. 383 (1981). The Supreme Court has also noted that effective legal representation requires that the privilege be clear and consistently applied, as “an uncertain privilege…is little better than no privilege at all.” Upjohn at 393. Therefore, federal agency policies that force parties to disclose privileged information—either routinely or in select cases—violate these fundamental legal protections established by the courts, undermine the confidential lawyer-client relationship and the right to counsel, and hinder the administration of justice.

ABA Policy

The ABA supports the preservation of the attorney-client privilege and work product doctrine and opposes governmental policies, practices, and procedures that erode these protections, including the practice by government officials of seeking to obtain a waiver of the attorney-client privilege or work product doctrine through the granting or denial of any benefit or advantage. The ABA also favors governmental policies, practices, and procedures that recognize the value of the attorney-client privilege and the work product doctrine. In addition, the ABA opposes governmental policies that have the effect of eroding the constitutional and other legal rights of employees by encouraging law enforcement officials to pressure companies and other organizations to take certain punitive actions against the employees in return for cooperation credit. The ABA's views on the need for federal government agencies to preserve the privilege are summarized in its recent Fact Sheet. In addition, the complete text of the ABA's privilege waiver and employee rights policies, letters to Congress and various federal agencies, and other related materials are available at ABA Attorney-Client Privilege Materials.

Updated as of:

June 2015

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