The reasoning for the crime-fraud exception is clear. The legal system does not condone communications that a client may use to help further a wrongdoing or learn to evade the consequences of such wrongdoing. While traditionally this exception has only applied to crimes and fraud, it is now being expanded to other torts.
The standards and procedures for invoking this exception vary among jurisdictions in important ways, including when to apply the exception and the standard of proof to use when deciding if the exception applies.
Crime-Fraud Exception and Its Development in the Supreme Court
When analyzing the crime-fraud exception, the focus of the inquiry is on the client’s intent, not the attorney’s intent. In Clark,the Supreme Court held that the privilege will be negated by the crime-fraud exception regardless of whether the attorney is aware of, or involved in, the client’s crime or fraud. See Clark v. U.S., 289 U.S. 1, 53 S.Ct. 465 (1933). In order to establish this intent, the party asserting the exception must make a prima facie showing sufficient to prove that the evidence should be exposed before the moving party can pierce the privilege veil. Id.
Approximately 50 years after Clark, the Supreme Court revisited the crime-fraud exception. In Zolin, the Court held that courts are entitled to make an in camera examination of the allegedly privileged materials in order to determine whether the crime-fraud exception applies. U.S. v. Zolin, 491 U.S. 554, 574-75 (1989).
Crime-Fraud Exception Expands to Intentional Torts
In dicta, the Supreme Court recognized that the exception may apply to other torts as well, not just fraud and crimes. Commodity Futures Trading Commission v. Weintraub, 471 U.S. 343, 105 S.Ct. 1986 (1985). As such, many jurisdictions have expanded the crime-fraud exception to other torts.
For example, Ohio has expanded the exception into “wrongful conduct” that falls outside the realm of fraud or crimes. If the conduct involves similar elements of malicious or injurious intent and deliberate falsehood, then courts may apply the exception. See Safety Today, Inc. v. Roy, 2013 WL 5597065 (S.D. Ohio 2013); Sutton v. Stevens Painton Corp., 193 Ohio App.3d 68 (8th Dist. 2011). Ohio has applied the exception to claims of invasion of privacy, intentional infliction of emotional distress, tortious interference, conspiracy, and breach of fiduciary duty. Id.
Other state courts have also expanded the exception. For example, the Kentucky Supreme Court has applied the exception to breach of fiduciary duty. Steelvest v. Scansteel Service Ctr., 807 S.W.2d 476 (Ky. 1991). The court held that this type of breach is on par with fraud and deceit.
Circuit courts have also expanded the exception. For example, the D.C. Circuit has applied the exception to a “crime, fraud, or other type of misconduct fundamentally inconsistent with the basic premises of the adversary system.” In re Sealed Case, 676 F.2d 793, 812 (D.C. Cir. 1982). The precedent set by these jurisdictions indicates that courts are willing to allow access to communications that discussed the furthering or implementation of some sort of intentional tort, keeping in mind that only the intention of the client is relevant to the analysis.
The Supreme Court, in Zolin, indicated that the quantum of proof needed to establish the exception was to still be decided. Zolin, 491 U.S. at 563. Thus, the standard of proof required to make the prima facie showing varies from jurisdiction to jurisdiction.
Given the fact that the Supreme Court has yet to set a standard, the lower courts have articulated the prima facie standard differently. From a case law analysis, it is clear that there is a conflict among the courts concerning the evidentiary threshold that must be met before the attorney-client privilege will be invaded. However, despite these differences, most courts have a fairly high burden of proof and use some variation of a probable cause or reasonable basis standard to establish the prima facie case.
Analysis of the federal courts. The First Circuit establishes a "reasonable cause" standard when applying the factors the Circuit has established. In re Grand Jury Proceedings, 417 F.3d 18, 23 (1st Cir. 2005). The elements that must be proven are (1) that the "client was engaged in (or was planning) criminal or fraudulent activity when the attorney-client communications took place" and (2) "that the communications were intended by the client to facilitate or conceal the criminal or fraudulent activity." In re Grand Jury Proceedings, 183 F.3d 71, 75 (1st Cir. 1999). These are the two most common elements for the crime-fraud exception.
However, the Second Circuit applies a "probable cause" standard of proof. U.S. v. Jacobs, 117 F.3d 82, 87 (2nd Cir. 1997). The party attempting to establish the exception "must demonstrate that there is a factual basis for a showing of probable cause to believe that a fraud or crime has been committed and that the communications in question were in furtherance of the fraud or crime." Id. This holding implies that the exception will not be recognized unless a crime or fraud has actually been committed.
The Third Circuit states that "[t]he communication condemned and unprotected by the attorney-client privilege is advice that is illicit because it gives direction for the commission of future fraud or crime. The advice must relate to future illicit conduct by the client. . ." Haines v. Liggett Group, Inc., 975 F.2d 81, 90 (3rd Cir. 1992). The standard of proof is a presentation of evidence "which, if believed by the fact-finder, would be sufficient to support a finding that the elements of the crime-fraud exception were met." Id. at 95–96.
The Fourth Circuit states that in order to establish that the exception should be applied, the moving party must (1) show that the client engaged in the planning of a crime or fraud at the time he sought the advice of counsel, and (2) the communications sought bear a close relationship to the crime or fraud alleged. Chaudhry v. Gallerizzo, 174 F.3d 394, 403 (4th Cir. 1999). The standard of proof must be sufficient “to subject the opposing party to the risk of non-persuasion if the evidence as to the disputed fact is left unrebutted.” In re Grand Jury Proceedings, 401 F.3d 247, 251 (4th Cir. 2005) (citing Duplan Corp. v. Deering Milliken, Inc., 540 F.2d 1215, 1220 (4th Cir. 1976)).
The Fifth Circuit has established that the moving party can overcome the attorney-client privilege by showing that the communication or work-product sought was intended to further the future crime or fraud. In re Grand Jury Subpoena, 220 F.3d 406, 409 (5th Cir. 2000). However, this Circuit has yet to establish the standard required to establish this exception, but in some instances it has been ruled that the moving party must be able to establish the elements of that crime or fraud.
The Sixth Circuit has articulated its standard in U.S. v. Collis. First, the Collis court stated that a prima facie showing could be made if "a prudent person would have a reasonable basis to suspect that the client was committing or intending to commit a fraud or crime when the communications were made." U.S. v. Collis, 128 F.3d 313, 321(6th Cir. 1997). Next, the moving party must show that "the attorney-client communications were in furtherance of that alleged crime or fraud.” This reasonable basis standard was intended to be reasonably demanding, but it does not require that the party asserting the crime-fraud exception to introduce evidence sufficient to show that it is more likely than not that the crime or fraud occurred. Id.
The Seventh Circuit has stated the requirement for the crime-fraud exception in the broadest terms. In the Seventh Circuit, the moving party must make a prima facie case that "gives color to the charge" to show that a foundation of fact exists. If this question exists, the trial court can require the party opposing the privilege to come forward to explain the evidence offered against the privilege. U.S. v. BDO Seidman, LLP, 492 F.3d 806, 818 (7th Cir. 2007).
The Eighth Circuit, similar to other circuits, requires a primary threshold showing. The party seeking a crime-fraud exception "must make a threshold factual showing that the exception applies" by presenting facts that warrant a reasonable belief that the client obtained advice to further a crime or fraud. Kilpatrick v. King, 499 F.3d 759, 766 (8th Cir. 2007)(citing In re BankAmerica Corp. Sec. Litig, 270 F.3d 639, 642 (8th Cir. 2001). Therefore, in the Eighth Circuit, the standard is a reasonable belief. Once this threshold showing has been made, the materials will be reviewed in camera by the trial court to determine whether the exception applies prior to invading the attorney-client privilege.
The Ninth Circuit has perhaps the most well-defined definition of the crime-fraud exception. This Circuit ensures that the courts err on the side of allowing full disclosures between clients by making the showing more difficult. In re Grand Jury Proceedings, 87 F.3d 377, 381 (9th Cir. 1996)(see also U.S. v. Zolin, 491 U.S. 554, 563 (1989). In order to invoke the exception, the moving party must establish that the client was currently engaged in or planning the fraud or crime at the time the client sought the legal advice. Id. at 381 (citing In re Sealed Case, 754 F.2d 395, 399 (D.C. Cir. 1985)). The burden on the moving party is to establish a “reasonable cause to believe,” which can translate into a "more likely than not" standard. Id. at 381. See also In re Napster, Inc. Copyright Litigation, 479 F.3d 1078-1094-95 (9th Cir. 2007).
The Tenth Circuit is different from others in terms of the burden the moving party must overcome. In this Circuit, the moving party must show that there is "some foundation in fact." In re Vargas, 723 F.2d 1461, 1467 (10th Cir. 1983)(citing Clark v. US, 289 U.S. 1, 15 (1933). See also Motley v. Marathon Oil Co., 71 F.3d 1547, 1551 (10th Cir. 1995). Therefore, this circuit is adhering to the standard set forth by the Supreme Court in 1933. However, this showing can be made ex-parte and the decision to undergo an in camera review is left up for the trial court to decide after determining whether the moving party overcame its burden. Motley v. Marathon Oil Co., 71 F.3d 1547, 1551-52 (10th Cir. 1995).
The Eleventh Circuit uses a two-part test to determine the applicability of the crime-fraud exception. First, the moving party must show that the client was engaged in criminal or fraudulent conduct at the time of seeking the advice of counsel; and, second, the moving party must show that the attorney’s advice was obtained to further the crime or fraud. Cox v. Adm'r U.S. Steel & Carnegie, 17 F.3d 1386, 1416 (11th Cir. 1994). This is the same two-part analysis that most courts follow. The Eleventh Circuit requires that the moving party show some foundation in fact. In re Grand Jury Investigation, 842 F.2d 1223, 1226 (11th Cir. 1987). Also, this circuit looks to see if the elements of the crime or fraud could be proven.
Similar to the Eleventh Circuit, the D.C. Circuit requires that the moving party must establish (1) that the client received communications with the intent to further a crime or fraud and (2) the client used these communications to further the crime or fraud. Just having the intent to further is not sufficient. In re Sealed Case, 107 F.3d 46, 49 (D.C. Cir. 1997). The burden that the moving party must establish is that the elements of the ongoing crime or fraud could be proven. Id. at 50 (citing In re Sealed Case, 754 F.2d 395, 399 (D.C. Cir. 1985). Furthermore, this Circuit has expanded the matters under which the exception can apply, and it can apply to any type of "misconduct that is fundamentally inconsistent with basic premises of the adversary system." In re Sealed Case, 676 F.2d 793, 812 (D.C. Cir. 1982).
Analysis of the state courts. Some states have established statutory provisions directly relating to the crime-fraud exception. For example, California has a statutory provision specifically dealing with the crime-fraud exception. Cal. Evid. Code § 956. The courts have interpreted this statute to require the moving party to establish a reasonable relationship between the fraud and the communication between the client and attorney. People v. Superior Court, 37 Cal. App. 4th 1757, 1769 (2nd Dist. 1995) (citing Cunningham v. Connecticut Mut. Life Ins., 845 F.Supp. 1403, 1412 (S.D. Cal. 1994).
The Oregon statutory provision is almost the same as California's wording. O.R.S. § 40.225(4)(a). In showing that this exception applies, the moving party must use evidence that is independent of the evidence that is contested; however, when conducting the in camera review, the courts can consider the evidence at issue. State v. Charlesworth, 151 Or. App. 100, 119–20 (Ct. of Appeals 1997).
In Texas, the exception is also rooted in statute. Tex.R.Civ.Evid. § 503(d)(1). Texas also observes the standard two-step procedure established in most jurisdictions. Granada Corp. v. Honorable First Court of Appeals, 544 S.W.2d 223, 228 (Tx. 1993).
Lastly, the exception in Ohio is also found in statute. O.R.C. § 2317.02(A)(2). The courts have applied a probable cause standard to parties trying to invoke this exception. Squire, Sanders & Dempsey, L.L.P. v. Givaudan Flavors Corp., 127 Ohio St.3d 161, 168 (Oh. 2010)(citing State ex rel. Nix v. Cleveland (Oh. 1998)). This list is not exhaustive; therefore, practitioners should look for similar statutes in their jurisdictions. It should be noted that Georgia once had a statutory basis for the crime-fraud exception, but it was recently repealed. Ga. Code Ann. § 24-9-24. The courts in Georgia still have a common law exception, but "communications which occur before perpetration of a fraud or commission of a crime and which relate" are not protected under the exception. Davis v. State, 285 Ga. 343, 346 (2009)(citing In re Fulton County Grand Jury Proceedings, 244 Ga. App. 380, 382 (2000).
Furthermore, while other states do not have an established statutory provision, these states establish the exception through common law. For example, in Kentucky, a moving party needs to establish that the communication was sought to further a future or current crime or fraud. Steelvest v. Scansteel Service Ctr., 807 S.W.2d 476 (Ky. 1991). The burden on the moving party is to show that the evidence "more likely than not" shows the communications were sought and utilized in that manner. Florida follows the procedure set forth by Kentucky.
In New York, the standard is a reasonable basis to suspect that the communications were used improperly. People v. Radojcic, 998 N.E.2d 1212, 1223 (Il. 2013). Also, as in Oregon, the party must use evidence outside the realm of the evidence in question. The purpose for this rule is that, when reviewing the questionable evidence to determine if the exception applies, the parties have already broken the privilege to examine the evidence.
While many jurisdictions adhere to a two-part test, North Carolina has adopted a five-part test. However, this test can easily be broken down into the typical two steps other jurisdictions utilize. State v. McIntosh, 336 N.C. 517, 523-24 (N.C. 1994). The burden on the moving party is to establish the elements through affidavits, not by conclusory statements. In re Miller, 357 N.C. 316, 337 (N.C. 2003).
Washington has a more well-defined burden. The moving party must prove the two standard elements beyond a reasonable belief. Cedell v. Framers Ins. Co. of WA, 176 Wash.2d 686, 700 (WA 2013). This more simplified burden is in contrast to Arizona's burden. The burden on a moving party in Arizona is to go beyond "a color to the charge" that the charge has "some foundation in fact." Kline v. Kline, 221 Ariz. 564, 573 (Ct. of Appeals Div. 1 2009)(citing Buell v. Superior Court, 96 Ariz. 62, 68 (Az. 1964).
While it can be reasoned that most jurisdictions follow the standard two-step process, jurisdictions vary as to the process that is involved in trying to prove that the exception applies. Furthermore, jurisdictions vary in the burden that needs to be overcome in order to invoke the exception.
In Camera Review
In camera review may be used to determine whether privileged communications fall within the crime-fraud exception. See U.S. v. Zolin, 491 U.S. 554, 574–75 (1989). However, prior to getting to the in camera review step, the moving party must meet the threshold burden as established in that jurisdiction.
Even if the standard of proof of each jurisdiction is met, it is usually still within the court’s discretion to review the materials. This exercise of discretion depends on the facts and circumstances of the case, the volume of the materials the court must review, the relative importance to the case of the alleged privileged information, and the likelihood that the evidence produced for in camera review will establish that the crime-fraud exception applies.
The review may solely consist of a document review, but it may also involve attorney testimony. It is not uncommon for judges to ask a different judge or magistrate to conduct the review. If the review reveals communications that could establish the exception, these communications may be used by the court and/or counsel as evidence to prove a prima faciecase for piercing the privilege.
Scope of the Crime-Fraud Exception
In the event that the privilege exception applies, it will not destroy the entire privilege. Most courts hold that “the crime-fraud exception, when applicable, does not extend to all communications made in the course of the attorney-client relationship—rather it is limited to those communications and documents in furtherance of the contemplated or ongoing criminal or fraudulent conduct.” In re Grand Jury Subpoena, 419 F.3d 329 (5th Cir. 2005)(citing cases from the 10th, 2nd, 8th, and D.C. Circuits). However, upon the proper showing that a client’s entire representation by an attorney was in furtherance of the alleged crime or fraud, a client’s entire file may be ordered disclosed. Lastly, the crime-fraud exception also applies to the work-product doctrine. See In re Int’l Sys. & Controls Corp. Sec. Litig., 693 F.2d 1235, 1242 (5th Cir. 1982); In re Antitrust Grand Jury, 805 F.2d 155, 164 (6th Cir. 1986); In re Sealed Case, 676 F.2d 793, 812 (D.C. Cir. 1982); In re John Doe Corp., 675 F.2d 482, 492 (2nd Cir. 1982); In re Grand Jury Proceedings, 604 F.2d 798, 803 (3rd Cir. 1979).
The crime-fraud exception and its requirements vary drastically between jurisdictions. Therefore, when asserting an intentional tort or defending against such tort, attorneys should carefully examine the crime-fraud exception case law in the applicable jurisdiction. The impact of the crime-fraud exception is too great for attorneys to ignore.
Keywords: litigation, trial practice, attorney-client privilege, crime-fraud exception