Limits on the Attorney-Client Privilege: Crime/Fraud

This series has discussed limits in class action and ERISA litigation, this post discusses the crime/fraud exception generally.  May you never need to analyze it.

This exception asserts the attorney-client privilege does not apply to communications “made for the purpose of getting advice for the commission of a fraud or crime.”[1]  Qualifying for it is a two step process.  “First, the party must show that the client was engaged in or planning a criminal or fraudulent scheme when it sought the advice of counsel to further the scheme.”[2]  The second step is to “demonstrate that the attorney-client communications for which production is sought are sufficiently related to and were made in furtherance of the intended, or present, continuing illegality.”[3]

The attorney need not have been aware that the client harbored an improper purpose. Because both the legal advice and the privilege are for the benefit of the client, it is the client’s knowledge and intent that are relevant. The planned crime or fraud need not have succeeded for the exception to apply. The client’s abuse of the attorney-client relationship, not his or her successful criminal or fraudulent act, vitiates the privilege.[4]

The moving party must prove the exception applies by the preponderance of the evidence and both sides have the right to present evidence about the exception.  If only an in camera review is sought, a lower burden applies.  But before granting such a review, “the judge should require a showing of a factual basis adequate to support a good faith belief by a reasonable person, that in camera review of the materials may reveal evidence to establish the claim that the crime-fraud exception applies.”[5]

For an example, this issue arose in Lewis v. Delta Air Lines, Inc. where an employee alleged he was terminated due to his medical diagnosis rather than his absenteeism.[6]  He then sought Delta’s internal communications with its in-house employment counsel.  In preliminarily resolving the issue, the court noted a variety of cases “holding that the crime-fraud exception is not strictly limited to cases alleging criminal violations or common law fraud.”  It cited one that applied it to tortious interference with contract or prospective business relations and defamation.  Another had applied it to breach of fiduciary duty-self dealing, and civil rights conspiracy, while yet another applied it to misappropriation of trade secrets.  Based upon the intentional torts alleged, Lewis concluded the plaintiff met his burden for an in camera review.

[1] United States v. Zolin, 491 U.S. 554, 563 (1989).

[2] In re Napster, Inc. Copyright Litigation, 479 F.3d 1078, 1090 (9th Cir. 2007).

[3] Id.

[4] Id.

[5] Zolin, 491 U.S. at 572.

[6] No. 2:14-cv-1683, 2015 U.S. Dist. LEXIS 171797 (D. Nev. Dec. 23, 2015).