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[House Report 110-445]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-445

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            ATTORNEY-CLIENT PRIVILEGE PROTECTION ACT OF 2007

                                _______
                                

 November 13, 2007.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Conyers, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3013]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 3013) to provide appropriate protection to attorney-
client privileged communications and attorney work product, 
having considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for the Legislation..........................     2
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
New Budget Authority and Tax Expenditures........................     5
Congressional Budget Office Cost Estimate........................     5
Performance Goals and Objectives.................................     6
Constitutional Authority Statement...............................     6
Advisory on Earmarks.............................................     7
Section-by-Section Analysis......................................     7
Changes in Existing Law Made by the Bill, as Reported............     8

                          Purpose and Summary

    The centuries-old common law and constitutional protections 
of the attorney-client privilege and attorney work product 
doctrine are fundamental to our Nation's system of justice. 
Unfortunately, recent governmental policies have given rise to 
a ``culture of waiver'' that places the continuing vitality of 
these crucial protections in serious jeopardy. H.R. 3013, the 
``Attorney-Client Privilege Protection Act of 2007,'' will 
restore judicial oversight to these protections, while 
preserving prosecutorial discretion necessary to fight 
corporate crime.

                Background and Need for the Legislation

    The United States Supreme Court's landmark decision in 
Upjohn Co. v. United States confirmed that companies are 
entitled to the protections of the attorney-client privilege 
and work product doctrine.\1\ With respect to communications 
between a company's attorney and its employees, the Court 
reasoned that the privilege operates in the public's best 
interest by encouraging corporate executives and managers to 
seek legal advice in order to ensure compliance with the law in 
their day-to-day work. Protecting client confidences helps to 
foster timely reporting of problems so that they can be either 
avoided or quickly addressed and remedied, thereby promoting 
well-informed and responsible company practices. Without this 
protection of confidentiality, employees may be hesitant to 
bring their of concerns to counsel
---------------------------------------------------------------------------
    \1\Upjohn Co. v. U.S. 449 U.S. 383 (1981).
---------------------------------------------------------------------------
    Recent empirical evidence supports the Supreme Court's 
conclusions regarding the importance of attorney-client 
privilege in the organizational context. In 2005, a survey of 
more than 700 corporate lawyers yielded the following findings:

         LReliance on privilege: In-house lawyers 
        confirmed that their clients are aware of and rely on 
        the privilege when consulting them (93% affirmed this 
        statement for senior-level employees; 68% for mid- and 
        lower-tier employees).

         LAbsent privilege, clients will be less 
        candid: If these communications are not protected, in-
        house lawyers believe, there will be a ``chill'' on the 
        flow or candor of information from clients (95%).

         LPrivilege facilitates delivery of legal 
        services: 96% of in-house counsel respondents reported 
        that the privilege and work product doctrines serve an 
        important purpose in facilitating their work as company 
        counsel.

         LPrivilege enhances likelihood that clients 
        will proactively seek advice: 94% of in-house counsel 
        respondents believe that the existence of the attorney-
        client privilege increases the likelihood that company 
        employees will come forward to discuss sensitive or 
        difficult issues regarding the company's compliance 
        with law.

         LPrivilege improves ability to implement 
        effective compliance initiatives: 97% of corporate 
        counsel surveyed believe that the privilege improves 
        the lawyer's ability to monitor, enforce, or improve 
        company compliance initiatives.\2\
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    \2\Association of Corporate Counsel Survey: Is the Attorney-Client 
Privilege Under Attack? (Apr. 6, 2005), at http://www.acc.com/Surveys/
attyclient.pdf.

    Like the attorney-client privilege, the work product 
doctrine facilitates open and frank discussion of issues among 
management, employees, and counsel in order to prepare for 
litigation, as the doctrine generally protects that discussion 
from disclosure. The work product doctrine promotes the 
effectiveness of ``adversary system by safeguarding the fruits 
of an attorney's trial preparations from the discovery attempts 
of the opponent.''\3\ If a corporation routinely waives the 
protection of the work product doctrine, employees may be 
hesitant to assist counsel in preparation for litigation, or 
may even be discouraged from seeking legal advice at all. As 
the Supreme Court observed sixty years ago, ``[M]uch of what is 
now put down in writing would remain unwritten. . . . 
Inefficiency, unfairness and sharp practices would inevitably 
develop in the giving of legal advice and in the preparation of 
cases for trial . . . And the interests of the clients and the 
cause of justice would be poorly served.''\4\
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    \3\United States v. Amer. Tel & Tel. Co., 642 F.3d 1286, 1299 (D.C. 
Cir. 1980).
    \4\Hickman v. Taylor, 329 U.S. 495, 511 (1947).
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    In recent years, however, certain government agencies have 
adopted policies that may place companies at greater risk of 
prosecution if they claim any of the fundamental protections 
embodied in the attorney-client privilege or work product 
doctrine. The genesis of these recent policies is a series of 
Department of Justice (``DOJ'') memoranda designed to provide 
prosecutors with factors to consider when determining whether 
to charge a corporation with a criminal offense. Since then, 
other Federal agencies have issued similar guidance to their 
prosecutors.
    The first of such memorandum was issued by Deputy Attorney 
General Eric Holder in 1999; it was superseded by a 2003 
memorandum from Deputy Attorney General Larry Thompson, and 
then by a 2006 memorandum from Deputy Attorney General Paul 
McNulty. These memoranda list factors that Federal prosecutors 
should consider when charging companies. One of the factors is 
the corporation's ``timely and voluntary disclosure of 
wrongdoing and its willingness to cooperate in the 
investigation of its agents, including, if necessary, the 
waiver of corporate attorney-client and work product 
protections.''\5\
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    \5\See, e.g., Memorandum from Deputy Attorney General Larry 
Thompson to Heads of Department Components and U.S. Attorney, 
``Principles of Federal Prosecution of Business Organizations'' (Jan. 
20, 2003).
---------------------------------------------------------------------------
    In practice, these new policies have created a ``culture of 
waiver,'' despite the fact that their tone may be moderate and 
the officials representing these government agencies may stress 
their intent to implement them in reasonable ways. By creating 
a differential in the treatment of a company based upon whether 
that company waives--whether that differential is in the form 
of a ``reward'' for waiving or in the form of a ``penalty'' for 
not waiving--these policies put undue pressure on companies to 
relinquish fundamental rights.
    The coercive effect of these new policies is inherent in 
the differential itself, whereby companies are forced to waive 
regardless of whether the Federal prosecutor or investigator 
``demands'' waiver, ``requests'' waiver, or does not explicitly 
mention waiver at all. The clear thrust of these new policies 
is that waiver is required to get ``cooperation'' credit, a 
crucial element in charging decisions.
    While aggressive enforcement against corporate wrongdoers 
is appropriate, stripping corporate targets of their 
fundamental rights is neither a necessary nor appropriate 
tactic for a government agency to employ in the course of an 
investigation, especially before any finding of culpability. 
Companies may cooperate with government investigations in a 
variety of ways that will serve the interests of justice and 
the swift and sure prosecution of wrongdoers, without the need 
for waiver.
    Claims that corporate misconduct today is too complex, 
large-scale, and difficult to unravel and analyze without 
coercing a waiver of these protections are unpersuasive. 
Immense and complex acts of fraud have been perpetrated since 
the days of the robber barons; today's acts are nothing new. 
Moreover, it is well-settled that there is a wide range of 
prosecutorial tools available to prosecutors and investigators 
that do not require waiver and that have been used effectively 
for decades. While it may be more expeditious for a prosecutor 
or investigator to coerce waiver, taking such a short cut has 
not been necessary in the past and is not necessary now.
    H.R. 3013 is carefully crafted to restore judicial 
oversight to the important protections of attorney-client 
privilege and attorney work product doctrine, while preserving 
prosecutorial discretion necessary to fight corporate crime. 
Nothing in the legislation is intended to prevent a prosecutor 
or enforcement official from vigorously and professionally 
investigating the facts or bringing the guilty to justice. 
Likewise, the bill does not preclude or inhibit a company or an 
individual from cooperating with prosecutors in the conduct of 
an investigation. In short, the bill attempts to strike a 
balance between the promotion of effective law enforcement and 
compliance efforts, on the one hand, and the preservation of 
essential legal protections on the other.
    Under the bill, an agent or attorney of the United States 
may base cooperation credit on the facts that are disclosed, 
but is prohibited from basing cooperation credit upon whether 
or not the materials are protected by attorney-client privilege 
or attorney work product. As a result, an entity that 
voluntarily discloses should receive the same amount of 
cooperation credit for disclosing facts that happen to be 
contained in materials not protected by attorney-client 
privilege or attorney work product as it would receive for 
disclosing identical facts that are contained in materials 
protected by attorney-client privilege or attorney work 
product. There should be no differentials in an assessment of 
cooperation (i.e., neither a credit nor a penalty) based upon 
whether or not the materials disclosed are protected by 
attorney-client privilege or attorney work product.
    Receipt by an agent or attorney of the United States of 
inadvertently disclosed materials that are protected by 
attorney-client privilege or attorney work product would not 
constitute a violation of the bill. Similarly, an agent or 
attorney of the United States does not violate it by 
propounding a general discovery request that does not 
specifically request materials protected by attorney-client 
privilege or attorney work product, even if certain protected 
materials may be responsive.
    Finally, the measure is not intended to limit any statutory 
authority of any agent or attorney of the United States to 
access material protected by attorney client privilege or 
attorney work product. Nor is it designed to prohibit an agent 
or attorney from charging an entity or individual under a 
Federal statute that makes the conduct in itself an independent 
offense.

                                Hearings

    The Committee's Subcommittee on Crime, Terrorism, and 
Homeland Security held 1 day of hearings on the issue of the 
right to counsel, particularly in the context of corporate 
investigations, on March 8, 2007. Testimony was received and 
heard from Barry M. Sabin, Deputy Attorney General, U.S. 
Department of Justice; Andrew Weissman, Partner, Jenner and 
Block; Richard White, Senior Vice President, Secretary, and 
General Counsel, The Auto Club Group; William Sullivan, Jr., 
Partner, Winston & Strawn; and Karen J. Mathis, President, 
American Bar Association.

                        Committee Consideration

    On July 24, 2007, the Subcommittee on Crime, Terrorism, and 
Homeland Security met in open session and ordered the bill 
H.R.3013 favorably reported, by voice vote, a quorum being 
present. On August 1, 2007, the Committee met in open session 
and ordered the bill favorably reported without amendment, by 
voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that there 
were no recorded votes during the Committee's consideration of 
H.R. 3013.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 3013, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, August 17, 2007.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3013, the 
Attorney-Client Privilege Protection Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Leigh Angres, 
who can be reached at 226-2680.
            Sincerely,
                                           Peter R. Orszag,
                                                  Director.

Enclosure

cc:
        Honorable Lamar S. Smith.
        Ranking Member
H.R. 3013--Attorney-Client Privilege Protection Act of 2007
    H.R. 3013 would prohibit federal prosecutors or agents, in 
a federal investigation, from demanding or requesting that a 
corporation waive its attorney-client privilege or from using a 
waiver as a factor in determining whether to indict the 
organization. The bill also would bar prosecutors from 
compelling a corporation to submit its attorneys' litigation 
materials. Under the bill, a corporation could agree to waive 
its attorney-client privilege as under current law.
    CBO estimates that H.R. 3013 would have no significant 
impact on the federal budget. According to the Department of 
Justice, the bill could alter and possibly increase federal 
attorneys' litigation duties. CBO estimates, however, that any 
resulting increase in federal spending would total less than 
$500,000 a year, assuming the availability of appropriated 
funds. Enacting H.R. 3013 would not affect direct spending or 
revenues.
    H.R. 3013 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of State, local, or tribal 
governments.
    The staff contact for this estimate is Leigh Angres who can 
be reached at 226-2860. The estimate was approved by Peter H. 
Fontaine, Assistant Director for Budget Analysis.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
3013, has as its primary objective the preservation of 
fundamental legal protections in the context of Federal 
investigation and enforcement matters.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8 of the Constitution.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3013 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Sec. 1. Short Title. Section 1 sets forth the bill's short 
title as the ``Attorney-Client Privilege Protection Act of 
2007.''
    Sec. 2. Findings and Purpose. Section 2 sets forth nine 
Congressional findings and explains that the purpose of the Act 
is to ``place on each agency clear and practical limits 
designed to preserve the attorney-client privilege and work 
product protections available to an organization and preserve 
the constitutional rights and other legal protections available 
to employees of such an organization.''
    Sec. 3. Disclosure of Attorney-Client Privilege or 
Advancement of Counsel Fees as Elements of Cooperation. 
Subsection (a) of section 3 adds a new section 3014 to title 18 
of the United States Code. New section 3014(a) defines the 
terms ``attorney-client privilege'' and ``attorney work 
product.''
    New section 3014(b)(1) prohibits an attorney or agent of 
the United States in any Federal investigation or criminal or 
civil enforcement matter from demanding, requesting, or 
conditioning treatment on the disclosure of any communication 
protected by attorney-client privilege or attorney work 
product. New section 3014(b)(2) prohibits an attorney or agent 
of the United States in any Federal investigation or criminal 
or civil enforcement matter relating to an organization or 
affiliated person from conditioning a charging decision upon, 
or using as a factor in determining cooperation, any one of 
five specified actions. These actions include:

        (1) Lmaking a valid assertion of attorney-client 
        privilege or attorney work product;

        (2) Lproviding counsel or contributing legal defense 
        fees or expenses to an organization's employee;

        (3) Lentering into joint defense, information sharing, 
        or common interest agreements with an organization's 
        employee;

        (4) Lsharing relevant information with an 
        organization's employee; and

        (5) Lfailing to terminate or otherwise sanction an 
        organization's employee because of that employee's 
        decision to exercise constitutional rights or other 
        legal protections.

    New section 3014(b)(3) prohibits an attorney or agent of 
the United States in any Federal investigation or criminal or 
civil enforcement matter from demanding or requesting that an 
organization or affiliated person not take any of these five 
specified actions.
    New section 3014(c) provides that the Act does not prohibit 
an attorney or agent of the United States from requesting or 
seeking material that such an attorney or agent reasonably 
believes is not entitled to protection under the attorney-
client privilege or attorney work product doctrine.
    New section 3014(d) establishes that the Act is not 
intended to prohibit an organization from making, or an 
attorney or agent of the United States from accepting, a 
voluntary and unsolicited offer to share the organization's 
internal investigation materials.
    Subsection (b) of section 3 of the Act amends the table of 
sections for chapter 201 of title 18 of the United States Code 
to add new section 3014.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                      TITLE 18, UNITED STATES CODE

           *       *       *       *       *       *       *
PART II--CRIMINAL PROCEDURE

           *       *       *       *       *       *       *

                    CHAPTER 201--GENERAL PROVISIONS

Sec.
3001.    Procedure governed by rules; scope, purpose and effect; 
          definition of terms; local rules; forms-Rule.
     * * * * * * *
3014.    Preservation of fundamental legal protections and rights in the 
          context of investigations and enforcement matters regarding 
          organizations.

           *       *       *       *       *       *       *

Sec. 3014. Preservation of fundamental legal protections and rights in 
                    the context of investigations and enforcement 
                    matters regarding organizations

    (a) Definitions.--In this section:
            (1) Attorney-client privilege.--The term 
        ``attorney-client privilege'' means the attorney-client 
        privilege as governed by the principles of the common 
        law, as they may be interpreted by the courts of the 
        United States in the light of reason and experience, 
        and the principles of article V of the Federal Rules of 
        Evidence.
            (2) Attorney work product.--The term ``attorney 
        work product'' means materials prepared by or at the 
        direction of an attorney in anticipation of litigation, 
        particularly any such materials that contain a mental 
        impression, conclusion, opinion, or legal theory of 
        that attorney.
    (b) In General.--In any Federal investigation or criminal 
or civil enforcement matter, an agent or attorney of the United 
States shall not--
            (1) demand, request, or condition treatment on the 
        disclosure by an organization, or person affiliated 
        with that organization, of any communication protected 
        by the attorney-client privilege or any attorney work 
        product;
            (2) condition a civil or criminal charging decision 
        relating to a organization, or person affiliated with 
        that organization, on, or use as a factor in 
        determining whether an organization, or person 
        affiliated with that organization, is cooperating with 
        the Government--
                    (A) any valid assertion of the attorney-
                client privilege or privilege for attorney work 
                product;
                    (B) the provision of counsel to, or 
                contribution to the legal defense fees or 
                expenses of, an employee of that organization;
                    (C) the entry into a joint defense, 
                information sharing, or common interest 
                agreement with an employee of that organization 
                if the organization determines it has a common 
                interest in defending against the investigation 
                or enforcement matter;
                    (D) the sharing of information relevant to 
                the investigation or enforcement matter with an 
                employee of that organization; or
                    (E) a failure to terminate the employment 
                of or otherwise sanction any employee of that 
                organization because of the decision by that 
                employee to exercise the constitutional rights 
                or other legal protections of that employee in 
                response to a Government request; or
            (3) demand or request that an organization, or 
        person affiliated with that organization, not take any 
        action described in paragraph (2).
    (c) Inapplicability.--Nothing in this Act shall prohibit an 
agent or attorney of the United States from requesting or 
seeking any communication or material that such agent or 
attorney reasonably believes is not entitled to protection 
under the attorney-client privilege or attorney work product 
doctrine.
    (d) Voluntary Disclosures.--Nothing in this Act is intended 
to prohibit an organization from making, or an agent or 
attorney of the United States from accepting, a voluntary and 
unsolicited offer to share the internal investigation materials 
of such organization.

           *       *       *       *       *       *       *

                                  
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