Mr McGahn, a former White House counsel whose evidence was used extensively in the Mueller report, had been scheduled to testify in front of the committee on Tuesday, but late on Monday his lawyer said McGahn would not appear.
In a legal opinion released on Monday, the justice department said lawmakers on Capitol Hill can not compel McGahn, who was subpoenaed by the House judiciary committee, to answer their questions under oath.
As tensions rose between the Republican president and the Democrats who control the House of Representatives, lawmakers also negotiated for future testimony by Special Counsel Robert Mueller on his Russian Federation investigation and debated whether to launch high-stakes impeachment proceedings against Trump.
The subpoenas seek testimony and documents in connection with the committee's probe of whether the president obstructed Mueller's inquiry into Russian interference in the 2016 USA election and contacts between Trump's campaign team and Moscow.
An Indian-American judge has rejected President Donald Trump's attempt to block House Democrats from getting his financial records, dealing an early setback to his administration in its legal battle with Congress. According to investigators, McGahn threatened to resign when the president ordered him to have Mueller fired.
"Accordingly, Mr. McGahn is not legally required to appear and testify about matters related to his official duties as Counsel to the President".
Pelosi resisted, noting that several committees were doing investigations already and they had been successful in one court case.
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"There are a growing number of people who will continue to make the case about the importance of opening an inquiry, but we recognize that the speaker will make that judgment", Representative David Cicilline, a Democrat on Judiciary, told Newsweek.
Pelosi will meet with top House Democrats Wednesday morning to discuss new strategies for investigating-and possibly impeaching-Trump.
Other Democrats voiced more explicit support.
In the hours after the discussion, Pelosi and Nadler met privately. But Pelosi and other party leaders, including House Majority Leader Steny Hoyer and Democratic Caucus Chair Hakeem Jeffries, are against an impeachment inquiry, even if it would aid them in obtaining the witness testimonies and documents they've subpoenaed. But he noted that Democrats had won a court victory without having to take that step.
The White House also says that people on Trump's staff can not legally be compelled to testify - an argument that Nadler disagrees with. Indeed, Judge Mehta was appointed in 2014 during President Obama's term, just as Trump has appointed many other judges during his time in office.
Trump has said that his administration will fight "all the subpoenas". He had been subpoenaed by the House Judiciary Committee to appear Tuesday. The committee later voted to recommend that the full House hold Barr in contempt for defying a subpoena for the unredacted Mueller report.
McGahn's name is mentioned on more than 65 pages of the 448-page Mueller report.