UNITED STATES OF AMERICA
BEFORE THE BOARD OF GOVERNS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, DC

This issue arises out of an enforcement proceeding brought by the Board of Governors of the Federal Reserve System (the “Board”) against Jean Peyrelevade (the “Respondent”), the former chief executive officer of Credit Lyonnais . In a Notice of Charges against Respondent, the Board alleged that Respondent engaged in violations of the Bank Holding Company Act in connection with Credit Lyonnais’s ownership and control over a California insurance company, Executive Life, in the early 1990s, and that Respondent made false representations to the Board in 2001 and 2002 concerning the knowledge of Credit Lyonnais’s then senior management (including Respondent) relating to these activities.

At the request of Board Enforcement Counsel, the Administrative Law Judge (“ALJ”) overseeing this proceeding issued a subpoena to Cleary Gottlieb Steen & Hamilton (“Cleary Gottlieb”), attorneys for Credit Lyonnais, seeking notes taken by Cleary Gottlieb attorneys at interviews conducted as part of an internal investigation of the Executive Life matter. Among the documents requested were notes taken during two interviews of Dominique Bazy (“Bazy”), a former Credit Lyonnais executive, that took place in May and September 1999. Bazy asserted that both sets of interview notes were subject to the attorney-client privilege and that the September 1999 interviews were protected by the joint defense or common interest privilege. At Bazy’s request, Cleary Gottlieb declined to produce the notes of these interviews.

After Board Enforcement Counsel filed a motion with the ALJ to overrule these, and other, privilege objections, Bazy filed an opposition to Enforcement Counsel’s motion and a sur-reply to its reply brief. Cleary Gottlieb represented that it and its client Credit Lyonnais do not object to producing the internal interview notes. On June 21, 2005 , the ALJ issued an Order rejecting Bazy’s privilege claims and ordering Cleary Gottlieb to produce the requested interview notes within 20 days.

On July 1, 2005 , Bazy filed with the ALJ a motion for interlocutory review of the June 21, 2005 Order, and requested the ALJ to stay the production of the disputed documents pending the interlocutory review request. In his motion, Bazy contends that the ALJ ignored evidence demonstrating that he had an objectively reasonable belief that his May 1999 and September 1999 meetings with Cleary Gottlieb lawyers were subject to attorney-client privilege; applied an inappropriate standard in determining the attorney-client privilege issue given Bazy’s circumstance; and improperly held that Cleary Gottlieb could unilaterally waive the joint defense agreement privilege with respect to the content of the September 1999 meetings. Board Enforcement Counsel filed a response to Bazy’s motion, arguing that the Board’s Rules of Practice (“Rules”) do not allow a non-party such as Bazy to seek interlocutory review by the Board. In a reply to Enforcement Counsel’s response, Bazy argued that he is an interested party to the proceeding as it relates to the enforcement of the subpoena served on Cleary Gottlieb and that the Board’s Rules of practice merely failed to contemplate his particular circumstance. On July 11, 2005 , the ALJ granted a stay of the order requiring Cleary Gottlieb to produce the documents, and, pursuant to Uniform Practice Rule 263.28(c), referred Bazy’s motion to the Board for final disposition.

Discussion

A. Availability of Interlocutory Review

The Board’s Rules of Practice provide that “[a]ny request for interlocutory review shall be filed by a party with the administrative law judge within ten days of his or her ruling …” 12 C.F.R. § 263.28(c) (emphasis added). The Rules also specifically define “party” to include only “the Board and any person named as a party in any notice.” 12 C.F.R. § 263.3(j). Thus, under this definition, the only “party” in this proceeding, other than the Board, is Jean Peyrelevade, and Bazy, as a non-party, is not entitled to interlocutory review under the Board’s rules.

Bazy’s arguments to the contrary are not persuasive. Bazy first argues that he is plainly “an interested party to the action as it relates to Enforcement Counsel’s attempt to obtain production of the meeting notes” based upon his substantial participation in the proceedings relating to the notes. While Bazy obviously has an interest in the outcome of the production issue, the Board’s rules are clear that interlocutory review is available only to a “person named as a party in [the] notice.”

Bazy also argues that the Rules “do not appear to contemplate the unique procedural posture of his present circumstance.” The lack of an available administrative remedy for Bazy’s circumstance does not, in and of itself, demonstrate a failure to contemplate the existence of such a circumstance, nor does it leave Bazy without a remedy. In fact, the Rules contemplate allowing a party to seek interlocutory review of an ALJ discovery order that requires the production of allegedly privileged materials, while including no comparable provision for non-party subpoenas, such as the subpoena at issue here. Compare 12 C.F.R. § 263.25 (document requests to parties) with 12 C.F.R. § 263.26 (document subpoenas to non-parties).

This distinction in the Rules pertaining to remedies available in party and non-party discovery is logical. If a party fails to comply with a discovery order, the Board can review the discovery orders at the end of the proceeding or on an interlocutory basis under Rule 263.28 and impose effective relief. If a non-party fails to comply with a discovery order, however, the remedy is court enforcement. See 12 C.F.R. § 263.26(c). Administrative subpoenas are not otherwise self-enforcing. See generally, Government of the Territory of Guam v. Sea-Land Service, Inc. 958 F.2d 1150, 1153-54 (D.C. Cir. 1992) (noting that party to administrative proceeding may apply to district court to enforce subpoena issued by ALJ under agency procedures). Thus, if Cleary Gottlieb declined to produce the documents in violation of the ALJ’s Order, Enforcement Counsel could seek to enforce the subpoena in district court. 12 C.F.R. § 263.26(c). Similarly, in the event that Cleary Gottlieb decides to produce the documents pursuant to the ALJ’s Order, Bazy could initiate a court action and assert any alleged privilege claims in an attempt to enjoin Cleary Gottlieb from complying with the Order. Thus, the Board’s discovery rules reflect a conscious decision to distinguish between party and non-party discovery, as demonstrated by the enactment of separate rules setting forth distinct procedures to be applied with regard to each category of discovery requests.

Interlocutory appeals are generally disfavored because they interrupt the main proceeding and distract from the completion of the case. They present the decision-maker with small and often disjointed parts of the underlying case, often out of context, prior to the development of the entire case. Accordingly, federal court rules and practice evince a “firm congressional policy against interlocutory or ‘piecemeal’ appeals, and courts have consistently given effect to that policy.” Abney v. United States , 431 U.S. 651, 656 (1976).

The Board’s rules and prior decisions reflect the same policy against interlocutory review. Interlocutory review is always discretionary even when the rules permit it, see 12 C.F.R. 263.28(b) (the Board “may exercise interlocutory review” under specified circumstances), and in prior cases the Board has noted that “the scope within which such discretion should be exercised is extremely narrow,” reflecting “a strong and longstanding policy against piecemeal appeals before a final judgment.” In the Matter of Incus Co., 86 Federal Reserve Bulletin 246 (2000). In that light, the Board’s rules limiting interlocutory review to a party are consistent with other aspects of the rules relating to such reviews.

In short, because the Board’s Rules expressly reserve interlocutory review to parties, Bazy is not entitled to interlocutory review of the ALJ’s June 21, 2005 Order.

B. Bazy’s Privilege Claims

In the alternative, given the deferential standard with which the Board treats an ALJ’s discovery decisions, even if the Board were to grant interlocutory review, it would affirm the ALJ’s Order with respect to Bazy’s privilege claims.

1. Attorney-Client Privilege Claim

Using the widely adopted five-factor test set forth by the Third Circuit in Bevill, Bresler & Schulman Asset Management Corp., 805 F.2d 120, 125 (3d Cir. 1986) to determine whether a corporation’s attorney is separately representing a corporate employee, the ALJ properly determined that Cleary Gottlieb represented only Credit Lyonnais and not Bazy during the interviews conducted by the firm in May 1999 and September 1999 as part of Credit Lyonnais’s internal investigation. Under settled law, corporate employees seeking to establish the existence of a separate attorney-client privilege with corporate counsel must show, among other things, that “the substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the company.” Id . , 805 F.2d at 123. Here, it is undisputed that Bazy’s interview related specifically to “matters within the company”; he does not claim that he was seeking advice from Cleary Gottlieb in his individual capacity. Thus, the conflicting record evidence regarding Bazy’s asserted belief that the interviews were confidential is immaterial to the determination regarding privilege. Moreover, by the time of the September 1999 interview, Bazy had retained his own counsel at the request of Credit Lyonnais . This refutes any reasonable argument that Bazy believed Cleary Gottlieb was acting as his attorney during the September 1999 meeting.

2. Joint Defense Privilege Claim

Finally, Bazy has failed to demonstrate that a joint defense privilege applies to the content of his September 1999 interviews. Although Bazy cites case law noting that a joint defense privilege protects communications between an individual and an attorney for another when the communications are part of an ongoing and joint effort to set up a common defense strategy, he has failed to present any evidence demonstrating the existence of a joint defense agreement between himself and Credit Lyonnais. While a written agreement is not required to establish the existence of a joint defense privilege, a party must show, among other things, that “the parties had agreed to pursue a joint defense strategy.” Bevill, Bresler, supra, 805 F.2d at 126; see also U.S. v. Weissman, 195 F.3d 96, 100 (2d Cir. 1999) (noting that in order to demonstrate the existence of a joint defense privilege, a showing of some form of joint strategy is necessary, “rather than merely the impression of one side”).

Bazy’s only support for his joint defense privilege claim is his stated belief that it was “[his] understanding that the Cleary Gottlieb attorneys would maintain the confidentiality of [his] statements during [the September 1999] meeting.” Bazy Declaration, ¶ 7. Bazy has made no assertion that Cleary Gottlieb or Credit Lyonnais directly or indirectly communicated to him an agreement to pursue a joint defense strategy. Bazy’s unilateral belief is plainly insufficient to establish the existence of a joint agreement, as noted in the cases cited above. Accordingly, Bazy has failed to establish that a joint defense privilege exists with respect to his September 1999 interview.

As set forth herein, the arguments advanced by Bazy fail to demonstrate an appropriate basis upon which the Board may grant interlocutory review of the ALJ’s Order given his non-party status. In the atlernative, even if the Board were to grant interlocutory review, it would affirm the ALJ’s June 21, 2005 Order with regard to Bazy’s privilege claims. Accordingly, the Board declines Bazy’s request for interlocutory review of the ALJ’s June 21, 2005 Order.

By Order of the Board of Governors, this ____ day of August, 2005.

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

________________________________________
Jennifer J. Johnson
Secretary of the Board