As just about every lawyer in the country knows by now, Bank of America has waived attorney-client privilege with regard to its communications in the Merrill Lynch merger. Some are questioning the wisdom of that decision, or at least its implementation.
The AmLaw Daily posed the question in a piece last week and noted that at least one expert believes the bank's waiver could lead to "more lawyers getting access to privileged documents than the bank intended."
As the Securities Lawyer Blog has reported, the Securities and Exchange Commission (SEC) sued BofA for allegedly violating required shareholder disclosures in the merger with Merrill Lynch late last year. The case has been the subject of significant media attention as Judge Rakoff refused to approve the settlement between the SEC and BofA after extensive briefing and argument.
Once this occurred, the attention turned to the bank's lawyers at Wachtell, Lipton, Rosen & Katz who had represented and provided advice to the bank on the merger. BofA was under a great deal of pressure to "waive" attorney-client privilege in its communications with its lawyers as BofA had focused on its reliance on the advice of counsel in the alleged failure to follow disclosure requirements.
Last week, BofA agreed to "waive" attorney-client privilege in the SEC matter. Relying on Federal Rule of Evidence 502, BofA's counsel in the pending matter, drafted a waiver order that was presented to and signed by Judge Rakoff. The waiver also applies to the New York attorney general's investigation.
Rule 502 is intended to allow a limited disclosure of what would otherwise be privileged, so that investigation targets can disclose privileged documents to investigators without providing a broad waiver that might apply to other pending litigations.
However, Gregory Joseph who was involved in the drafting of Rule 502, believes that BofA and its lawyers did not properly word the waiver and as a result, 58 cases (including a class action) that it intended would not be subject to the disclosure, might in fact be exposed to a waiver argument.
That could hurt a great deal. Joseph's conclusion is that the order "does not operate to preserve the privilege as it is phrased because it is not authorized by Federal Rule of Evidence 502." The potential error in the drafting of the order is that according to Joseph, Rule 502 does not in fact deal with waivers, but rather allows corporations a limited disclosure, not a waiver.
Only time will tell whether other parties will attempt to use the disclosure order and its reliance on Rule 502, as a blanket waiver in the cases BofA (and the SEC which co-drafted the order) intended to protect.
