Crime-Fraud Exception to Privilege Requires Misuse of Advice

The crime-fraud exception cannot be used to pierce the attorney work-product privilege without the required showing that the work product was actually used in furtherance of the purported crime or fraud. The U.S. Court of Appeals for the Third Circuit clarified that, without more, even compelling evidence of a crime or fraud is insufficient to invoke the exception. The ruling has important ramifications for practitioners advising clients on the contours of lawful conduct.

Inadvertent Disclosure in Response to Grand Jury Subpoena

In In re Grand Jury Matter #3, the government empaneled a grand jury to investigate the allegedly fraudulent business practices of Company A, and John Doe, its sole owner and president, following numerous individual and class action lawsuits throughout the country. Deposition testimony obtained during one class action reflected that Doe had transferred ownership of Company A to Company B, and that Company A was out of business, with few remaining assets. Those disclosures led to a settlement of ten percent of the full value of plaintiffs' claims. The government theorized that Doe never transferred ownership of his company, and that Doe and his business associate made false representations to induce a lower settlement.