Attacking Attorney-Client Privilege the Old-Fashioned Way

Federal prosecutors continue to attack attorney-client privilege through aggressive use of the crime-fraud exception ' a government tactic easy to forget amidst the hoopla surrounding the government's attempts to exact attorney-client privilege waivers as the sine qua non of cooperation. A recent Third Circuit case illustrates the worrisome potential breadth of the exception.

The Reach of the Privilege

Direct and Third-Party Communications

The attorney-client privilege applies to: 1) all communications between client and counsel; 2) in-tended to be, and in fact, kept confidential; 3) made for the purpose of obtaining or providing legal advice. 8 Wigmore, Evidence ' 2292 at 554 (McNaughton Rev. 1961). The privilege even survives the death of the client. Swidler & Berlin v. United States, 524 U.S. 399 (1998).

However, corporate counsel must tread cautiously. The privilege will not cover communications in which the corporate counsel is wearing a 'business' rather than a lawyer's hat. See Upjohn v. U.S., 449 U.S. 383 (1981). It also will not cover communications with corporate counsel that arguably do not concern legal advice. See Burton v. R.J. Reynolds Tobacco Co., 200 F.R.D. 661 (D.Kan. 2001) (privilege does not protect counsel's position papers about how to respond to media questions). Importantly, the privilege also may not cover communications with ex-employees, especially about matters other than prior communications which themselves were privileged. See United States ex rel. Hunt v. Medco Health Solutions, Inc., 340 F.Supp. 554 (E.D.Pa. 2004) (privilege does not protect counsel's communications preparing ex-employee for a deposition or government interview).

The privilege generally does not embrace communications between counsel or client and a third party, because the presence of the third party destroys the confidentiality of the communication. However, the courts have extended the attorney-client privilege to communications with third parties if they are made in confidence for the purpose of helping counsel provide legal advice to the client. This can include:

• Fact-gathering communications be-tween counsel and current corporate employees to enable counsel to advise the corporation. Upjohn v. U.S., supra. (1981) (internal investigation);
• Communications with other counsel under a joint-defense or common-interest agreement. Haines v. Liggett Group, Inc., 975 F.2d 81 (3d Cir. 1992); and
• Communications to and from persons hired by counsel to assist counsel in 'translating' information, or otherwise aiding counsel, for the purpose of rendering legal advice. See, e.g., United States v. Kovel, 296 F.2d 918 (2d Cir. 1961) (accountant); In re Cendant Corporation Securities Litigation, 343 F.3d 658 (3d Cir. 2003) (consulting expert in trial strategy ' work product doctrine); FTC v. GlaxoSmithKline, 294 F.3d 141 (D.C.Cir. 2002) (public relations consultant).

Crime-Fraud Exception Basics

Even if applicable, the attorney-client privilege will be trumped, if a client knowingly seeks a lawyer's legal advice in furtherance of a continuing or future crime or fraud. Clark v. United States, 289 U.S. 1 (1933). The client's intent controls. It is long settled that the crime-fraud exception may apply even when the attorney is entirely innocent and unaware that the client is engaged in or planning a crime. In re Sealed Case, 754 F.2d 395 (D.C.Cir. 1985).

The crime-fraud exception will not apply if the client seeks legal advice about an illegal course of conduct that stops upon consulting the lawyer or about a past or completed crime. Clark, supra; United States v. Doe, 429 F.3d 450 (3d Cir. 2005). In both instances, the privilege stands because the consultation was not 'in furtherance' of a crime or fraud.

In criminal cases, the government bears the burden of showing that (a) the client was committing or intending to commit a fraud or crime, and (b) the attorney-client communications were in furtherance of that alleged crime. In re Grand Jury Subpoena, 223 F.3d 213 (3d Cir. 2000). The exception can be established by the content of the disputed communications. If the government can present evidence sufficient to support a good-faith, reasonable belief that the contested communications themselves may show furtherance of a crime or fraud, then the court, in its discretion, may conduct an in camera review. To preserve grand jury secrecy, the government is permitted to make ex parte submissions to show the context and nature of the alleged crime or fraud. United States v. Zolin, 491 U.S. 554 (1989). Thus, the defense is almost always at a tremendous disadvantage in seeking to rebut the government's claim.

DOJ Policy

In response to litigation over attempts via ethical rules to prohibit attorney subpoenas without prior court approval, see, e.g., Baylson v. Disciplinary Bd. of Supreme Court, 975 F.2d 102 (3d Cir. 1992), the Department of Justice (DOJ) established an unenforceable, ex parte internal review process. The policy requires that subpoenas (criminal and civil) of attorneys be pre-authorized by the Assistant Attorney General (AAG) for the Criminal Division after consideration of whether:

• The information is protected by a valid claim of privilege;
• The need for the information outweighs the potential adverse effects upon the attorney-client relationship and the risk that the attorney may be disqualified from representation of the client as a result of having to testify against the client;
• In a criminal investigation or prosecution, there are reasonable grounds to believe that a crime has been or is being committed;
• All reasonable attempts to obtain the information from alternative sources have been unsuccessful;
• The information sought is reasonably needed for the successful completion of the investigation or prosecution and not to obtain peripheral or speculative information; and
• The subpoena is narrowly drawn and directed at material information regarding a limited subject matter and covers a reasonable, limited period of time.

U.S. Attorney's Manual ' 9-13.410.

Authorization is not required in every instance in which a subpoena involves an attorney. Common situations in which it is not necessary include: subpoenas for an attorney's trust account records; law office business records (except client billing records); information about the attorney's personal activities (eg, real estate transactions); and business information directed to an attorney serving as a corporate officer. DOJ Criminal Resource Manual at ' 263 (Oct. 1997).

The Third Circuit Case

Suppose you represent a corporation that is served with a grand jury subpoena duces tecum. You call the manager to inform her that the company is subject to a subpoena, and provide legal advice about which documents are sought by the government. You note this conversation in your file. The manager then fails to halt the deletion of subpoenaed e-mails and is targeted for obstruction. Obviously, the government would love to have your testimony and notes to prove the specific intent element of its obstruction charge. See, e.g., 18 U.S.C. ' 1519. Yet evidentiary need alone cannot justify invasion of the privilege. Can you be compelled to produce your notes and testify about your routine, privileged conversation, which the manager did not even solicit?

The Third Circuit recently said 'Yes.' First it refused to stay the attorney's grand jury testimony or production of his notes pending its ruling. Then, relying on the ex parte affidavit of an FBI agent, the court held that the manager 'could be found to have engaged in the ongoing crime of obstruction of justice' and that the crime-fraud exception applied. In Re Grand Jury Investigation, 445 F.3d 266 (3d Cir. 2006).

Perhaps most significant was the panel's analysis of the 'in-furtherance' prong of the crime-fraud exception. The lower court apparently found that, at the time of the attorney-manager conversation, the manager was committing the crime of obstruction of justice. This should be critical, since the government should have to prove that the communication was 'made for the purpose of getting advice for the commission of a fraud' or crime, Zolin, 491 U.S. at 562-63 (emphasis added), and not simply that, at some time after getting legal advice, the target allegedly committed a crime related to it. Yet, the Court of Appeals appears to stretch the exception in just that direction. The panel found that if the manager 'learned of the Government's interest in certain documents from her conversation with Attorney ' and subsequently acquiesced' in their deletion or destruction, she may be viewed as furthering an obstruction, thus satisfying the in furtherance prong.

But the 'in-furtherance' standard under Zolin should not be whether the target, with knowledge of the privileged communication, could be found to have furthered an obstruction, but whether the legal communication itself was made 'for the purpose' of furthering the crime. The panel's opinion implies that the crime-fraud exception would apply even without a showing that the manager intended to commit a crime at the time of the advice.

Conclusion

Such an open-ended application of the crime-fraud exception should be of great concern to defense and in-house counsel. Advice about subpoenas is an everyday occurrence. Absent the element of a 'purposeful' legal communication by the target, counsel arguably would be exposed to the crime-fraud exception whenever a client is later alleged to have allowed the destruction of documents or committed other offenses. How far the courts will go in permitting the government to invade the privilege using the crime-fraud exception is an unfolding story well worth watching.

Ronald H. Levine ([email protected]), a member of this newsletter's Editorial Board, is a partner at the Philadelphia-based law firm of Post & Schell, P.C., heading its White Collar Defense, Compliance and Risk Management Group. He was previously Chief of the Criminal Division of the U.S. Attorney's Office for the Eastern District of Pennsylvania.

Federal prosecutors continue to attack attorney-client privilege through aggressive use of the crime-fraud exception ' a government tactic easy to forget amidst the hoopla surrounding the government's attempts to exact attorney-client privilege waivers as the sine qua non of cooperation. A recent Third Circuit case illustrates the worrisome potential breadth of the exception.

The Reach of the Privilege

Direct and Third-Party Communications

The attorney-client privilege applies to: 1) all communications between client and counsel; 2) in-tended to be, and in fact, kept confidential; 3) made for the purpose of obtaining or providing legal advice. 8 Wigmore, Evidence ' 2292 at 554 (McNaughton Rev. 1961). The privilege even survives the death of the client. Swidler & Berlin v. United States , 524 U.S. 399 (1998).

However, corporate counsel must tread cautiously. The privilege will not cover communications in which the corporate counsel is wearing a 'business' rather than a lawyer's hat. See Upjohn v. U.S. , 449 U.S. 383 (1981). It also will not cover communications with corporate counsel that arguably do not concern legal advice. See Burton v. R.J. Reynolds Tobacco Co ., 200 F.R.D. 661 (D.Kan. 2001) (privilege does not protect counsel's position papers about how to respond to media questions). Importantly, the privilege also may not cover communications with ex-employees, especially about matters other than prior communications which themselves were privileged. See United States ex rel. Hunt v. Medco Health Solutions, Inc ., 340 F.Supp. 554 (E.D.Pa. 2004) (privilege does not protect counsel's communications preparing ex-employee for a deposition or government interview).

The privilege generally does not embrace communications between counsel or client and a third party, because the presence of the third party destroys the confidentiality of the communication. However, the courts have extended the attorney-client privilege to communications with third parties if they are made in confidence for the purpose of helping counsel provide legal advice to the client. This can include:

• Fact-gathering communications be-tween counsel and current corporate employees to enable counsel to advise the corporation. Upjohn v. U.S., supra. (1981) (internal investigation);
• Communications with other counsel under a joint-defense or common-interest agreement. Haines v. Liggett Group, Inc. , 975 F.2d 81 (3d Cir. 1992); and
• Communications to and from persons hired by counsel to assist counsel in 'translating' information, or otherwise aiding counsel, for the purpose of rendering legal advice. See, e.g., United States v. Kovel , 296 F.2d 918 (2d Cir. 1961) (accountant); In re Cendant Corporation Securities Litigation, 343 F.3d 658 (3d Cir. 2003) (consulting expert in trial strategy ' work product doctrine); FTC v. GlaxoSmithKline , 294 F.3d 141 (D.C.Cir. 2002) (public relations consultant).

Crime-Fraud Exception Basics

Even if applicable, the attorney-client privilege will be trumped, if a client knowingly seeks a lawyer's legal advice in furtherance of a continuing or future crime or fraud. Clark v. United States , 289 U.S. 1 (1933). The client's intent controls. It is long settled that the crime-fraud exception may apply even when the attorney is entirely innocent and unaware that the client is engaged in or planning a crime. In re Sealed Case, 754 F.2d 395 (D.C.Cir. 1985).

The crime-fraud exception will not apply if the client seeks legal advice about an illegal course of conduct that stops upon consulting the lawyer or about a past or completed crime. Clark, supra; United States v. Doe , 429 F.3d 450 (3d Cir. 2005). In both instances, the privilege stands because the consultation was not 'in furtherance' of a crime or fraud.

In criminal cases, the government bears the burden of showing that (a) the client was committing or intending to commit a fraud or crime, and (b) the attorney-client communications were in furtherance of that alleged crime. In re Grand Jury Subpoena, 223 F.3d 213 (3d Cir. 2000). The exception can be established by the content of the disputed communications. If the government can present evidence sufficient to support a good-faith, reasonable belief that the contested communications themselves may show furtherance of a crime or fraud, then the court, in its discretion, may conduct an in camera review. To preserve grand jury secrecy, the government is permitted to make ex parte submissions to show the context and nature of the alleged crime or fraud. United States v. Zolin , 491 U.S. 554 (1989). Thus, the defense is almost always at a tremendous disadvantage in seeking to rebut the government's claim.

DOJ Policy

In response to litigation over attempts via ethical rules to prohibit attorney subpoenas without prior court approval, see, e.g., Baylson v. Disciplinary Bd. of Supreme Court , 975 F.2d 102 (3d Cir. 1992), the Department of Justice (DOJ) established an unenforceable, ex parte internal review process. The policy requires that subpoenas (criminal and civil) of attorneys be pre-authorized by the Assistant Attorney General (AAG) for the Criminal Division after consideration of whether:

• The information is protected by a valid claim of privilege;
• The need for the information outweighs the potential adverse effects upon the attorney-client relationship and the risk that the attorney may be disqualified from representation of the client as a result of having to testify against the client;
• In a criminal investigation or prosecution, there are reasonable grounds to believe that a crime has been or is being committed;
• All reasonable attempts to obtain the information from alternative sources have been unsuccessful;
• The information sought is reasonably needed for the successful completion of the investigation or prosecution and not to obtain peripheral or speculative information; and
• The subpoena is narrowly drawn and directed at material information regarding a limited subject matter and covers a reasonable, limited period of time.

U.S. Attorney's Manual ' 9-13.410.

Authorization is not required in every instance in which a subpoena involves an attorney. Common situations in which it is not necessary include: subpoenas for an attorney's trust account records; law office business records (except client billing records); information about the attorney's personal activities (eg, real estate transactions); and business information directed to an attorney serving as a corporate officer. DOJ Criminal Resource Manual at ' 263 (Oct. 1997).

The Third Circuit Case

Suppose you represent a corporation that is served with a grand jury subpoena duces tecum. You call the manager to inform her that the company is subject to a subpoena, and provide legal advice about which documents are sought by the government. You note this conversation in your file. The manager then fails to halt the deletion of subpoenaed e-mails and is targeted for obstruction. Obviously, the government would love to have your testimony and notes to prove the specific intent element of its obstruction charge. See, e.g., 18 U.S.C. ' 1519. Yet evidentiary need alone cannot justify invasion of the privilege. Can you be compelled to produce your notes and testify about your routine, privileged conversation, which the manager did not even solicit?

The Third Circuit recently said 'Yes.' First it refused to stay the attorney's grand jury testimony or production of his notes pending its ruling. Then, relying on the ex parte affidavit of an FBI agent, the court held that the manager 'could be found to have engaged in the ongoing crime of obstruction of justice' and that the crime-fraud exception applied. In Re Grand Jury Investigation, 445 F.3d 266 (3d Cir. 2006).

Perhaps most significant was the panel's analysis of the 'in-furtherance' prong of the crime-fraud exception. The lower court apparently found that, at the time of the attorney-manager conversation, the manager was committing the crime of obstruction of justice. This should be critical, since the government should have to prove that the communication was 'made for the purpose of getting advice for the commission of a fraud' or crime, Zolin, 491 U.S. at 562-63 (emphasis added), and not simply that, at some time after getting legal advice, the target allegedly committed a crime related to it. Yet, the Court of Appeals appears to stretch the exception in just that direction. The panel found that if the manager 'learned of the Government's interest in certain documents from her conversation with Attorney ' and subsequently acquiesced' in their deletion or destruction, she may be viewed as furthering an obstruction, thus satisfying the in furtherance prong.

But the 'in-furtherance' standard under Zolin should not be whether the target, with knowledge of the privileged communication, could be found to have furthered an obstruction, but whether the legal communication itself was made 'for the purpose' of furthering the crime. The panel's opinion implies that the crime-fraud exception would apply even without a showing that the manager intended to commit a crime at the time of the advice.

Conclusion

Such an open-ended application of the crime-fraud exception should be of great concern to defense and in-house counsel. Advice about subpoenas is an everyday occurrence. Absent the element of a 'purposeful' legal communication by the target, counsel arguably would be exposed to the crime-fraud exception whenever a client is later alleged to have allowed the destruction of documents or committed other offenses. How far the courts will go in permitting the government to invade the privilege using the crime-fraud exception is an unfolding story well worth watching.

Ronald H. Levine ([email protected]), a member of this newsletter's Editorial Board, is a partner at the Philadelphia-based law firm of Post & Schell, P.C., heading its White Collar Defense, Compliance and Risk Management Group. He was previously Chief of the Criminal Division of the U.S. Attorney's Office for the Eastern District of Pennsylvania.