Feb 17

Third Circuit OK’s In Camera Interview of Lawyer to Establish Crime-Fraud Exception

The attorney-client privilege is sacrosanct – “the oldest of the privileges for confidential communications known to the common law,” Upjohn Co. v. United States, 449 U.S. 383, 389 (1981) – yet when the attorney’s advice is used to commit a crime, the privilege evaporates. Under the crime-fraud exception, a party seeking to overcome the privilege must make an initial showing that (1) the client was committing or intending to commit a fraud or crime and (2) the attorney-client communications were in furtherance of that alleged crime or fraud. In re Grand Jury, 705 F.3d 133, 151 (3d Cir. 2012). The Supreme Court has held that in order for a court to evaluate the applicability of the exception, a court may review the attorney-client communications in camera. United States v. Zolin, 491 U.S. 554, 568-69 (1989).

Just last week, the Third Circuit applied the in camera review procedures to oral communications between a client and the lawyer and affirmed the trial court’s order requiring the lawyer’s grand jury appearance. In re Grand Jury Subpoena, No. 13-1237 (3d Cir. Feb. 12, 2014).

How did the lawyer end up being hauled into the grand jury to testify about communications with his client?

The client, the president of a consulting corporation, approached the lawyer in connection with the corporation’s efforts to assist its customers in obtaining loans from a bank in the United Kingdom. The client informed the lawyer that he intended to pay a banker to “ensure that the project progressed swiftly.” The lawyer introduced the client to the Foreign Corrupt Practices Act (including providing him a copy of it) and asked whether the bank or the banker was a governmental entity. The attorney ultimately advised the client not to make the payment, but the client nonetheless went ahead with payments . . . to the banker’s sister.

When a federal grand jury served the attorney with a subpoena, the client and corporation intervened and objected, asserting the attorney-client privilege. The district court interviewed the attorney in camera and granted the government’s motion to enforce the subpoena, finding that there was a reasonable basis to suspect that the client and corporation intended to commit a crime when the client consulted the attorney and “could have used the information in furtherance of the crime.”

The Third Circuit rejected the client and corporation’s challenge on appeal to an in camera interview on the grounds that a lawyer’s recollection is less trustworthy than written or documentary evidence. The Third Circuit expressed confidence that district courts will be able to question – under oath – an attorney-witness “in a way that ensures that the attorney accurately recounts the communications with the client.” The court also affirmed the rejection of the intervenors’ request of a transcript of the interview. The Third Circuit held that disclosure of the transcript would provide an impermissible preview of the attorney’s grand jury testimony and reveal both grand jury evidence and the government’s eventual trial evidence and strategy.

Having blessed the procedure adopted by the district court, the court then turned to the application of the crime-fraud exception, which it admitted was a “close call.” The court focused primarily on the “in furtherance of” requirement that the advice “advance, or the client must intend the advice to advance, the client’s criminal or fraudulent purpose.” Distinguishing a situation where a lawyer informs a client not to undertake a certain action yet the client simply goes ahead with it anyway as planned, the court here concluded that the client used the advice to further the crime. The court highlighted the lawyer’s discussion of the FCPA and the client’s change from paying the banker to paying the banker’s sister. The court concluded that the district court did not abuse its discretion in finding that “there was a reasonable basis to conclude that [Attorney’s] advice was used by [Intervenors] to fashion conduct in furtherance of [their] crime.”

In re Grand Jury Subpoena provides a warning to defense lawyers: providing advice to a client not to engage in potentially problematic conduct does not insulate the lawyer’s advice from being used by the client to commit a crime or fraud. It also serves as a lesson to anyone who may think about crossing that potentially blurry line: using a lawyer’s advice to further a crime or fraud may result in the lawyer one day having a date with a federal judge to recount what lawyer and client alike considered privileged.

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