Center of the Circle: In-House Counsel, the Crime-Fraud Exception and "Reasonable Suspicion".

"We recognize that corporate counsel coming upon evidence of criminality in communications protected under Upjohn are placed in an uncomfortable position." (1)

THE crime-fraud exception to the attorney-client privilege is not unique to in-house counsel. Yet, the very centrality of in-house counsel within their organizations has generated a distinct body of case law applying the exception to conversations between corporate constituents and in-house counsel. One of the unusual features of the exception is that it applies even though the consulted attorney does not know the client's ulterior purpose for the consultation. At the same time, in-house counsel--like their outside counsel counterparts--cannot feign "willful blindness" when there is a reasonable suspicion that a corporate employee is consulting the attorney to further a crime or fraud. Rather, taking appropriate action based on reasonable suspicion over the motive for the consultation can preserve, not lose, the corporation's attorney-client privilege.

This article first surveys the crime-fraud exception generally and then focuses on in-house counsel. On the latter, it both discusses cases applying the exception in the in-house context and examines the closely-associated professional duties to inquire about potential misconduct based on reasonable suspicion and report such misconduct to appropriate officials within the organization for investigation and remedial action that will ordinarily keep the review within the privilege.

  1. The Crime-Fraud Exception

    As the name implies, the "crime-fraud" exception removes the protection of the attorney-client privilege from communications that further a planned or ongoing crime or fraud. (2) Clients can and do consult lawyers about the potential legal consequences of contemplated conduct. ABA Model Rule of Professional Conduct 1.2(d) notes in this regard that "a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law."

    Both the crime-fraud exception and ABA Model Rule 1.2(d), however, articulate the unremarkable proposition that a client cannot use a lawyer to assist in planning for or committing a crime or fraud. (3) Speaking to privilege, the United States Supreme Court noted: "It is the purpose of the crime-fraud exception to the attorney-client privilege to assure that the 'seal of secrecy' . . . between lawyer and client does not extend to communications 'made for the purpose of getting advice for the commission of a fraud' or crime." (4) Comment 9 to ABA Model Rule 1.2, in turn, observes: "There is a critical distinction between presenting an analysis of legal aspects of questionable conduct and recommending the means by which a crime or fraud might be committed with impunity."

    Although the crime-fraud exception and ABA Model Rule 1.2(d) dovetail in many respects, the former addresses the application of the...

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