On The Case

DOJ to Bain: Consultant-client privilege is not a thing

(Reuters) - The Justice Department filed a fascinating petition Tuesday night in Boston federal court, asking for a court order to compel the consulting firm to turn over about 2,000 documents related to Bain’s work on a confidential project for Visa. DOJ said its antitrust lawyers need to see the Bain materials as part of their investigation of Visa’s planned $5.3 billion acquisition of the fintech startup Plaid, arguing that Bain’s “business strategic consulting work” on the confidential project could affect DOJ’s analysis of the impact of the Plaid acquisition on the market for debit services. The government sent Bain a demand for the documents in June, but, according to DOJ’s petition, the consulting firm has claimed that its communications with Visa are protected by attorney-client privilege.

Wait, what?

To be clear, Bain isn’t saying that it provided legal services to Visa, according to the DOJ’s petition. But it contends that its work on the Visa project was within the scope of its consulting engagement for Visa on an antitrust case in the U.K., Sainsbury’s Supermarkets v. Visa Europe Services. Bain “takes the untenable position,” DOJ said, that this relationship gives Visa a privilege over all of Bain’s … work product. Similarly, Visa’s counsel has asserted that the privilege applies to all aspects” of Bain’s consulting on the confidential project. (The name of the project and all identifying specifics about it are redacted from the petition.)

“Despite any tangential relationship to the Sainsbury’s case,” the DOJ petition said, “the underlying purpose of (the confidential project) was to communicate business ideas, not to render legal advice regarding the litigation. As such, the … documents are not privileged.”

Bain lawyer Matthew Knowles of McDermott Will & Emery and Visa counsel Julia York of Skadden, Arps, Slate, Meagher & Flom did not respond to my detailed email query on the DOJ petition. DOJ antitrust lawyer Lara Trager said in an accompanying declaration that when she met by phone with Knowles and York on Oct. 20, Knowles said that unless Visa instructed Bain to do so, the consulting firm would not comply with DOJ’s document demand without a court order.

Interestingly, the Justice Department said Bain’s allegedly unfounded claim of privilege is part of a larger pattern among consultants, accountants and investment banks. But courts have refused to allow privilege assertions to shield business advisory documents, the DOJ petition said. The government cited a 2006 ruling, De Beers LV v. De Beers Diamond Syndicate (2006 WL 357825), in which U.S. District Judge Denise Cote of Manhattan said documents reflecting Bain’s business advice were not privileged; and a 2010 decision, Dahl v. Bain Capital (714 F.Supp.2d 225), in which Boston federal judge Edward Harrington ordered JPMorgan Chase to turn over communications with an M&A client, even though the communications included the client’s lawyer.

Visa’s own CEO, according to DOJ, as much as admitted in deposition testimony that Bain was hired to provide strategic advice, not to help with the Sainsbury’s antitrust case. The CEO, who is not named in the DOJ filing, was asked flat-out if Visa hired Bain in “an effort to try and resolve any litigation that Visa faces.” His answer: No.

Visa’s CEO testified, in fact, that the company retained Bain through a contract with its outside law firm with the intention of keeping Bain’s advice under wraps. “This was done under privilege because I don’t want these kinds of things in a record anywhere,” the CEO testified, according to DOJ’s petition. “That could be extraordinarily harmful.” DOJ described Visa’s contract with Bain as an attempt “to give Bain’s work a false aura of privilege.”

And to demonstrate the alleged speciousness of the consultant’s assertion of privilege, the DOJ petition described a January 2020 email from a Bain partner to a Visa executive vice-president. Both Bain and Visa produced the email in response to DOJ’s document demand. In the version turned over by Bain, the petition said, nearly every line of the email was blacked out – even though no lawyers were involved in the communication. Visa’s version of the email, according to DOJ, had no redactions.

“The unredacted version shows that none of the text Bain redacted contains any legal communication or work product, nor that any of the work was done for purposes of the Sainsbury’s litigation,” DOJ said. “Instead of litigation strategy, Bain’s work concerned only Visa’s business strategy.”

In what the government describes as an eleventh-hour attempt to avoid DOJ’s demand, Bain informed DOJ that it had transferred all of the confidential project documents to Visa so it was no longer a party to the civil investigative demand. The government isn’t buying that. Bain has retained the original version of the disputed documents on its lawyer’s server, the DOJ petition said. So the consulting firm is still subject to the civil investigative demand.

To find otherwise, the government told the court, “would set a dangerous precedent” and would interfere with DOJ’s ability to conduct antitrust investigations of proposed mergers.

As I mentioned, neither Bain nor Visa lawyers responded to my query about the DOJ petition. I’m eager to see how Bain explains the privilege assertion.