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Understanding Attorney-client Privilege And Its Application To Banks In Us

The right of the attorney-client privilege is a rule of proof that prohibits the adverse party in a case from having access to such correspondence. If well understood and well maintained, this right provides a valuable mechanism for defending the bank in lawsuits while maintaining successful relationships with regulators. On the other hand, a lack of proper knowledge of the right may have significant adverse effects if a conflict occurs.

A non-lawyer banker reading this article might assume that the luxury of a attorney-client privilage is something that only lawyers need to know about. In addition, some bank attorneys may falsely assume that simply marking all their communications as “privileged attorney-clients” is a fail-safe choice. Unfortunately, an appropriate appreciation of the right on the part of those who may have invoked it or avoided its subsequent waiver is always too late.

The right of the attorney-client is intended to promote full and frank communication between lawyers and their clients and thus promote broader public interests in compliance with the law. This is one of the oldest protections for confidential communications recognized under the law. The right applies to both natural and non-natural corporate persons and extends to correspondence between the legal counsel of the company and persons working at any level of the organization. In this relation, the U.S. The Supreme Court recognized in Upjohn Co. v. United States that: middle-level—and indeed lower-level—employees can, by taking action within the scope of their jobs, involve a company in severe legal difficulties, and it is only reasonable that such employees will have the relevant information required by corporate counsel if they were to provide the client with appropriate advice in respect of such real or actual circumstance.

The right of the attorney-client privilege is an exception to the strict assumption under U.S. law that the facts surrounding any legal conflict can be completely ascertained. In that regard, the Second Circuit Court of Appeals argued that, by way of derogation from the public’s right to every man’s facts, the privilege of the attorney-client was held. It should be strictly limited to the narrowest possible limits consistent with the logic of its principle. Recognition of this conflict between the right of the attorney-client privilege and the public policy in favor of open discovery is necessary because, if there is any basis for concern as to the applicability of the privilege, it is probable that the court would err on the side of inapplicability.

The attorney-client privilege protects against discovery: “(1) a communication between the client and the counsel that (2) was intended to be, and was, in fact, kept confidential, and (3) purpose is obtaining or providing legal advice.

In order to be protected by the right of the attorney-client privilede, contact must have been made between the client and his legal counsel. Consequently, sending the lawyer an after-the-fact notification of sensitive discussions (e.g. by copying them to the minutes of the meeting) would not cause the application of the privilege. Moreover, the mere inclusion of the lawyer in the discussions will also not be appropriate. Instead, in creating a right, the first step is to create a client-law relationship by obtaining legal advice.. As soon as the matter is considered to be legally sensitive, a clear, recorded request for advice from counsel should be made.

The privilege of the attorney-client shall “protect only those communications which are confidential and which are made for the purpose of seeking or receiving legal advice.

As noted above, the right of the attorney-client privilege shall extend to correspondence between the in-house attorney and the employees of the firm. However, it could be difficult to show that the correspondence in question involved a request for legal advice. This is because in-house lawyers routinely offer both legal advice and business advice, and it might be difficult to distinguish the two.

In-house counsel may have certain obligations outside the legal sphere and, as a result, the company may maintain the advice of the attorney only on the basis of a strong proof that the lawyer has given it in a competent legal capacity.

What is important to the privilege of being able to speak with confidence for the purpose of receiving legal advice from a lawyer. If what is requested is not legal advice or if the advice sought is the advice of the accountant or business advice rather than the lawyer, there is no privilege.

In addition, since the correspondence to the lawyer must be made in confidence, it is necessary to restrict the persons with knowledge of such communications to those with a bona fide ‘need to know. In addition, the privilege can be waived if the resulting legal advice is given to ’employees of the company who are not in a position to act or rely on it.’

Subject to narrow exceptions, including the restricted statutory exemption for financial entities listed below, the voluntary disclosure of protected communications by the attorney-client waives the privilege. In addition, the disclosure of any aspect of the correspondence waives the privilege of all communications relating to the same subject matter.


Work Product doctrine

Another closely related rule of proof is the right of a “work product.” This right extends to records that have been prepared in advance of proceedings to provide assistance to counsel. In this regard, it is important for the privilege of the work product to be applied that the documents have been prepared at least in part because of the possibility of imminent litigation, and not just in the ordinary course of business. This privilege will extend even if the privilege of the attorney-client does not exist.


Financial institutions and banks

Finally, as noted above, the legislation handles financial companies differently from other businesses with regard to the waiver of privileged information. In general, the voluntary exchange of such information with the state or federal banking regulator or the Consumer Financial Protection Bureau (CFPB) waives the right only with respect to the regulator to whom the information was provided. Specifically, the relevant federal legislation provides that:

The submission by any person of any information to the Office of Consumer Financial Security, any Federal Banking Agency, State Banking Supervisor or international banking authority for any reason in the course of any supervisory or regulatory procedure of that Office, agency, supervisor or authority shall not be construed as waiving, damaging or otherwise affecting any right that person may assert.

Please notice that interpretations of the above-mentioned statutory language setting out what is defined in law as a “selective waiver” can only be made by legal counsel, including with regard to whether such disclosure will take place in the course of any supervisory or regulatory process.

The right of a financial institution to choose to share privileged information with its regulators encourages continued accountability and becomes highly valuable if regulatory proceedings are threatened. However, this capability also poses some serious potential pitfalls.

However, the CFPB was not able to provide guarantees that it would not exchange information with certain non-banking State Parties. If the CFPB were to do so, the financial institution would lose privilege rights with respect to all parties (i.e. not only government bodies) for both the information exchanged and all relevant communications. Consequently, the essential value of pre-discussing with the legal counsel of any intended voluntary submission of information—whether to the CFPB or to any government agency—cannot be overstated.



In short, if properly understood and implemented, the right of a lawyer-client is a valuable mechanism that allows clients to obtain legal advice by protecting both their messages to counsel and the subsequent advice against disclosure in litigation. In this regard, banks have a special right to exchange details on a voluntary basis with their regulators without forfeiting the relevant rights with respect to other parties. Extreme caution should be taken in trying to navigate the privilege of the attorney-client, and that care should always involve finding the assistance of the qualified legal counsel.