One of the greatest frontier lawyers, Abraham Lincoln, once made the thought-provoking statement that, if asked to chop down a tree within six hours, he would spend the first four hours sharpening his axe. The future president’s message, of course, was that preparation—long, disciplined preparation—was essential to accomplishing a task. In-house lawyers should consider Lincoln’s adage when confronted with the task of maintaining privilege protection for Board reports and legal-advice portions of the Board’s meeting minutes.

In my Privilege Place column, published in Today’s General Counsel Magazine, I discuss the privilege preparation that in-house lawyers should consider when reporting to the company’s Board of Directors and advising on how to structure the meeting minutes.  You may read my article as part of the entire issue at this link, or my specific article via this PDF.

A lawyer defending a Batson challenge to her peremptory juror strikes must present a neutral, non-discriminatory reason for the strike. Often the striking lawyer’s jury-selection notes supply evidence—one way or the other—of her reasons for excusing the challenged juror.  And these notes are work product—opinion work product—warranting the highest level of protection.

But in a case of first impression, the California Supreme Court ruled that a prosecutor waived work-product protection over his purportedly neutral juror-rating system by relying on it to defend a Batson challenge. People v. Superior Court of San Diego County, 499 P.3d 999 (Cal. 2021) (available here).  Does this opinion force a Hobson’s choice upon a striking lawyer: either defend a Batson challenge and waive work-product protection or keep work-product confidentiality but present a less robust Batson defense? Let’s discuss this conundrum.

Batson Challenge & Burden Shifting

In Batson v. Kentucky, 476 U.S. 79 (1986), the U.S. Supreme Court held that the Equal Protection Clause forbids a prosecutor to strike a potential juror solely on the basis of race.  The Court later expanded this holding to civil cases, Edmonson v. Leesville Concrete Co., Inc., 500 U.S. 614 (1991), and to gender-based juror strikes.  J.E.B. v. Alabama, 511 U.S. 127 (1996).

The Court adopted a burden-shifting analysis to decide a party’s Batson challenge to his adversary’s peremptory strikes.  The movant must first make out a prima facie case that the juror strike raises an inference of purposeful discrimination. The burden then shifts to the striking party, or really the striking lawyer, to articulate a neutral reason for excusing the juror.  The trial judge then assesses all relevant and surrounding circumstances to determine whether discrimination played a role in the lawyer’s striking decision.

For our purposes, the important part of the burden-shifting analysis is the striking lawyer’s burden to articulate a non-discriminatory, neutral basis for her decision.

Post-Conviction Batson Challenge & Juror Rating System

In 1994, a California jury convicted Bryan Maurice Jones of capital murder and returned a verdict of death.  During jury selection, Jones’s lawyer lodged multiple Batson objections to the prosecutor’s use of peremptory strikes to eliminate Black jurors. Employing Batson’s burden-shifting analysis, the trial court decided that Jones’s lawyer made a prima facie case of discriminatory strikes and turned to the prosecutor for non-discriminatory, neutral reasons for his decisions.

The prosecutor explained that he struck certain Black jurors based on a numerical rating system that the prosecution team developed.  Under this system, members of the prosecution team independently rated jurors based on their pretrial answers to the juror questionnaire, long before the prosecutors saw the potential jurors in the courtroom.  The prosecutor elaborated that, for instance, one of the Black jurors stricken had scored 13th lowest out of the entire jury venire, with many other jurors scoring much higher.

The trial judge accepted the prosecutor’s explanation and denied Jones’s Batson challenge.

Jury Selection Notes & Work-Product Protection

Fast forward to 2014.  After the exhaustion of direct appeals, Jones’s appellate lawyers filed a habeas petition claiming, among many other items, that Jones’s trial lawyers provided ineffective assistance of counsel by failing to properly litigate the Batson challenge.  As part of this petition, Jones sought post-conviction discovery of the contemporaneous jury-selection notes created by the prosecution team before and during jury selection.

The prosecutors objected, claiming, correctly, that the work-product doctrine protected their jury-selection notes from discovery. But Jones argued that the prosecution team waived the work-product protection because they used the notes—and the numerical rating system—as a basis to defend the Batson challenge.  In other words, this is a simple case of at-issue waiver.

Ultimately, the California Supreme Court reviewed the case.

Ruling—Waiver

The Court recognized that a lawyer’s jury-selection notes can provide significant evidentiary support in favor of a Batson challenge.  But the opposite is also true—the lawyer’s notes could successfully counter claims of racial bias in exercising peremptory challenges.  The question, though, is when may a court compel a lawyer to produce his notes for purposes of a Batson challenge.

The Court noted that, like the attorney–client privilege, a party may impliedly waive work-product protection over materials when he puts those materials “directly at issue.”  Courts base an implied-waiver finding “on the need to protect the integrity of the judicial proceeding.”  It is the sword-and-shield analogy—a party may not rely on a document to establish key facts and simultaneously shield that document from disclosure to the adversary.

Here, the Court found that the prosecutor “invoked an undisclosed juror rating system in justifying his use of peremptory challenges.” The lawyer’s reliance upon this rating system was more than a lawyer simply glancing at notes to recall a juror’s answer provided during voir dire. Indeed, the Court stated that its decision in this case does not—

suggest that an attorney’s ordinary reliance on notes throughout trial would necessarily waive work product protections.

But in defending the Batson challenge, the lawyer here made “testimonial use” of undisclosed writings.  The Court found that the striking attorney “placed in issue information that goes to the heart of the question before the court, whether there has been discrimination in jury selection.” And that decision “constitutes waiver of any claim that the information may be withheld as protected work product”:

The point, in the end, is simple: A striking attorney cannot both stand on such a rating system and assert privilege over it.

Hobson’s Choice?

The Batson burden-shifting analysis required the prosecutor to explain the basis for striking Black jurors, and he did so with, in his view, the best evidence available: the prosecution team’s race-neutral juror rating system.  The prosecutor did not voluntarily put his juror-rating system at issue—he had to do so to defend the Batson challenge.  Isn’t this a Hobson’s choice—either defend Batson with your best evidence and waive work-product protection or keep the best evidence confidential and increase the risk of a Batson loss?

Perhaps, but the take-away here is that, unless a lawyer (with client consent) has no concern about disclosing his work product, the only route to avoid work-product waiver is to verbally explain that he struck the juror because of non-discriminatory characteristics—such as occupation, volunteer activities, and the like—discovered through voir dire.  Reliance upon notes, rating systems, or evaluation methods waives work-product protection over those materials—at least according to the California Supreme Court.

Abstract

This post is the third of a three-part series.  In An Examination of the Bank-Examination Privilege (I): Overview of an Enigma, I provided an overview of the bank-examination privilege and explained its origin and scope. In An Examination of the Bank-Examination Privilege (II): Burden-Shifting and Good Cause, I discussed conflict of laws, procedural hurdles, and the burden-shifting that courts apply.  In this final installment of this series, I put the substantive and procedural nuances of the bank-examination privilege together to show how it works by examining the court’s decision in In re Wilmington Tr. Sec. Litig., 2016 WL 9753979 (D. Del. Aug. 16, 2016), available here.

A Bad Situation

The Wilmington Trust Corporation (“the Bank”) was in trouble. The Bank’s primary regulator, the Federal Reserve, criticized the Bank’s risk-management procedures and internal controls in 2007 and 2008.  A year later, the Federal Reserve required the Bank to enter a Memorandum of Understanding that identified various deficiencies and forced the Bank to restructure the way it originated, monitored, and accounted for its loans.  The Federal Reserve effectively took over the Bank’s credit operations in 2010, and the Bank ultimately sold for 50% of its stock value. Criminal investigations and convictions of some of the Bank’s executives followed.

Securities Class Action

Institutional investors who had purchased common stock in the Bank filed a class action claiming that the Bank and other defendants, such as KPMG and JP Morgan Securities, made materially false statements about the Bank’s commercial real-estate lending and accounting practices.  Discovery commenced, but the Bank told the plaintiffs that it would not produce certain requested documents because the Federal Reserve demanded that the Bank withhold them due to the bank-examination privilege.

Requesting Privileged Documents

Rather than subpoenaing the Federal Reserve, which, as noted in my prior post, it perhaps could have done, the plaintiffs sent a formal Touhy request to the Federal Reserve seeking certain bank-examination documents. You may read the request here.  In a letter available here, the Federal Reserve denied the request, claiming that the documents were not relevant and that the plaintiffs could prove their case with evidence other than privileged documents.

The plaintiffs sent Touhy requests to the Office of the Comptroller of the Currency (OCC), available here, and the Delaware Office of the State Bank Commission (OSBC), available here, seeking bank-examination materials.  The OCC and OSBC, too, denied this request.

Having exhausted administrative remedies, the plaintiffs filed a motion to compel. The Federal Reserve, OCC, and OSBC produced privilege logs and intervened in the lawsuit to assert that the bank-examination privilege prevented disclosure of the requested materials.

The Bank-Examination Privilege

The court began its analysis by noting that the bank-examination privilege protects from disclosure “agency opinions, agency recommendations, and a bank’s responses thereto.”  The privilege’s purpose is to “preserve candor in communications between bankers and examiners,” a goal that is “essential to the effective supervision of banking institutions.”

The banking regulatory agency has the burden to prove that the privilege covers the withheld materials—and it must “present more than a bare conclusion or statement that the documents sought are privileged.”  And if the agency fails to meet this initial burden, then the privilege is inapplicable, and the agency must produce the documents.

Scope

The court noted that the privilege has a “narrow scope.”  It protects evaluative materials and particularly documents revealing the agency’s opinions and recommendations.  The privilege does not protect purely factual material.

Of course, many documents contain a mixture of factual and evaluative information. In these situations, the court noted that the agency should redact the evaluative material and produce the factual information. The agency cannot withhold entire documents simply because they contain some deliberative or evaluative information.

If the factual and evaluative information are inextricably intertwined, courts typically assess whether the agency must produce them by applying the good-cause balancing test.

Good Cause

The privilege is qualified, and the court recognized that, to the extent that the withheld documents contain privileged information, it must next “determine whether the good cause exception applies to override the privilege and warrant production of the documents in their entirety.” The good-cause analysis requires a balancing of the “the importance of the privilege against the need for the information and its availability from other sources.”

The court applied the widely accepted five-factor analysis for determining whether there was good cause to override the privilege:

(1) the relevance of the evidence sought to be protected; (2) the availability of other evidence; (3) the seriousness of the litigation; (4) the role of the government in the litigation; and (5) the possibility of future timidity by government employees who will be forced to recognize that their secrets are violable.

Rulings

To make its ruling, the court, as most courts do, ordered an in camera inspection of the withheld documents.  They fell within five broad categories: (1) bank-examination reports and examiner work papers; (2) correspondence between the regulators and the Bank; (3) the MOU and related correspondence; (4) internal Bank documents created in response to regulators’ requests; and (5) internal bank correspondence.

Upon review, the court found that some documents were purely factual and ordered their production.  For all others, including internal correspondence, the court found that they contained factual information but also revealed the agencies’ opinions and recommendations.  So, the court next applied the good-cause analysis.

Relevance

The court easily found that the privileged materials were “highly relevant.”  The bank-examination reports contained information that related to the Bank and other defendants’ knowledge of the Bank’s problems and misrepresentations. And they were relevant to defendant KPMG’s affirmative defenses. The MOU and internal correspondence also were relevant because they revealed “whether the Bank concealed the truth” before the Federal Reserve imposed the MOU.  This factor weighed in favor of disclosure.

Availability of Other Evidence

The regulatory agencies asserted that the class plaintiffs had access to relevant information through other sources, namely the Bank’s own internal communications and records. But the court reject this theory, saying that a bank’s own records, “even if complete and maintained in useable form,” cannot substitute for a bank-examination report, “whose contents form an essential part of plaintiffs’ cause of action.”  This factor weighed in favor of disclosure.

The court found one exception. It refused to order production of a summary of bank-examination reports because they contained no new information and the summary would be duplicative of information in the reports themselves.

Seriousness of the Litigation

The plaintiffs met the “sufficiently serious” element because the lawsuit dealt with the Bank’s failure.  In those situations, the court ruled, disclosure of privileged materials is necessary “to fully air the story.”  And these types of claims “raise fundamental issues regarding public confidence in the fairness of financial markets.”  By contrast, a requesting party’s subpoena to a bank regulatory agency in a lawsuit between two private litigants likely will not meet the seriousness test. But here, the court weighed the seriousness of the case in favor of disclosure.

Role of Government in the Litigation

The court weighed this factor in favor of nondisclosure because the regulatory agencies were not parties to the lawsuit and the case did not involve allegations that the regulatory agencies engaged in misconduct.

Chilling Effect

The regulatory agencies argued that disclosure will have a chilling effect on frank communications between banks and regulators that extends to future bank examinations rather than just the Bank at issue here. But the court favored disclosure because the Bank had already failed and “the risk of a chilling effect is minimal” and the public interest in disclosure outweighs the risks of such a disclosure.”

The court noted, though, that its ruling on the “chilling effect” should have “no precedential value” because each future court assessing the disclosure of future bank-examination materials should conduct a “fresh balancing” of the factors.

Result

So, after crossing procedural hurdles, intervening, preparing a privilege log, and submitting the putatively protected materials for in camera inspection, the bank regulatory agencies proved that the privilege covered most of the withheld documents, but the class-action plaintiffs overcame the privilege by proving there was good cause to do so.  The court ordered the agencies to produce virtually all of the documents.