The Work

November 5, 2009 6:53 PM

Testing the Scope of BofA's Privilege Waiver

Posted by Zach Lowe

At least one group of plaintiffs lawyers is testing whether Bank of America's waiver of attorney-client privilege in the Merrill Lynch flap might apply to shareholder suits against BofA related to the bank's merger with Merrill last year.

To review: Federal and state officials have been investigating whether BofA violated various disclosure laws in the merger, especially in the bank's alleged failure to disclose that Merrill would be paying up to $5.8 billion in bonuses. (The bank has denied wrongdoing.) The bank initially declined to answer specific questions about its knowledge of Merrill's books, claiming that to do so would violate attorney-client privilege, according to court documents filed by the Securities and Exchange Commission. Federal and state officials pressured BofA to waive attorney-client privilege, and the bank eventually agreed to do so last month. As we've reported, the bank intended the waiver to be limited. It would apply only to the SEC's case against it in federal court in New York and to pending investigations from New York attorney general Andrew Cuomo and a congressional committee. The protective order explaining the waiver explicitly said that plaintiffs lawyers suing BofA would not automatically gain access to whatever privileged documents BofA turned over to the SEC and Cuomo; the privilege waiver didn't extend to other cases, the order said.

But there are serious questions about whether BofA and its counsel at Cleary Gottlieb Steen & Hamilton crafted the waiver correctly, and whether plaintiffs firms would use the opening to go after privileged documents in their cases against BofA. 

And now one group of firms has done so. The firms headlining the massive stockholder derivative lawsuit against BofA in the Chancery Court in Delaware have asked--and received--permission to subpoena documents from Wachtell and Cleary and depose top executives, including John Thain, according to New York state court records. (The firm leading the charge--Horwitz, Horwitz & Paradis--is based in New York and needed to get permission from its home state court--and that of Thain--in order to carry out the depositions and the subpoenas, according to a source familiar with the matter.)

And the firms want everything. The application explaining the scope of the subpoenas states simply that plaintiffs want Wachtell and Cleary to turn over "all documents concerning the merger."

Michael Schwartz, the Horwitz lawyer leading the firm's team on the case, declined to comment about whether he expected Wachtell (and Cleary) to fight the subpoena or whether the plaintiffs lawyers made the sweeping request in part because of BofA's privilege waiver in the government cases. Pamela Tikellis, name partner at Chimicles & Tikellis, another lead plaintiff firm in the Delaware case, did not return messages seeking comment. Lawrence Portnoy, a Davis Polk & Wardwell partner representing BofA in the Chancery Court litigation, also did not return our calls.

But we know this: The plaintiffs lawyers in Delaware have opened a new line of attack on BofA's attorney-client privilege. Whether it succeeds remains to be seen.

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