Privilege Pierced by Ongoing or Future Wrongful Conduct: The Crime-Fraud Privilege Exception is Broader Than You Think.

• Author: O'Connell, W. Scott
• Date: 01 March 2024
• Published date: 01 March 2024

THE attorney-client privilege is an old and robust document intended to promote candor in attorney-client communications by keeping them confidential. There are exceptions to this confidential treatment. One such exception includes communications between an attorney and client that are in furtherance of a crime or fraud. (1)

Such communications are not protected by privilege and must be produced.

Some practitioners take false comfort in the mistaken belief that this exception to privilege is only applicable to alleged criminal conduct. Fraud, of course, has criminal and civil causes of action. Increasingly, many courts have taken a broad view of this exception and applied it to types of conduct other than strict crimes or frauds. Specifically, some courts have determined that claims for breach of fiduciary duty and tortious interference with contract are, in appropriate circumstances, sufficient to trigger the exception. (2)

The unwitting in-house or outside practitioner can trigger this exception, and vitiate privilege, through seemingly routine day-to-day counseling. Knowing the full reach of this exception is essential to protect the privilege and protect communications between attorney and client.

I. The Attorney-Client Privilege

The U.S. Supreme Court has summarized the privilege this way:

We have recognized the attorney-client privilege under federal law, as
                the "oldest of the privileges for confidential communications known to
                the common law." Upjohn Co. v. United States, 449 U. S. 383, 389
                (1981). Although the underlying rationale for the privilege has changed
                over time, see 8 J. Wigmore, Evidence [section] 2290 (McNaughton rev
                1961), courts long have viewed its central concern as one "to encourage
                full and frank communication between attorneys and their clients and
                thereby promote broader public interests in the observance of law and
                administration of justice." Upjohn, 449 U.S., at 389. That purpose, of
                course, requires that clients be free to "make full disclosure to their
                attorneys" of past wrongdoings, Fisher v. Unite d States, 425 U. S
                391, 403 (1976), in order that the client may obtain "the aid of
                persons having knowledge of the law and skilled in its practice," Hunt
                v. Blackburn, 128 U. S. 464, 470 (1888). (3)
                

While privilege promotes important public policies, it is not absolute. It must, and does, yield to competing public interests. (4)

II. The Crime-Fraud Exception

The crime-fraud exception is a common law doctrine that is often codified as a rule of evidence. The attorney-client privilege does not protect communications concerning ongoing or future wrongdoing. The U.S. Supreme Court has explained:

The attorney-client privilege must necessarily protect the confidences
                of wrongdoers, but the reason for that protection--the centrality of
                open client and attorney communication to the proper functioning of our
                adversary system of justice--ceases to operate at a certain point
                namely, where the desired advice refers not to prior wrongdoing, but to
                future wrongdoing. 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."'
                (5)
                

New Hampshire Rule of Evidence 502(d)(1) provides an apt example of how this exception has been codified by rule. It states "[t]here is no privilege... [i]f the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit in the future what the client knew or reasonably should have known to be a crime or fraud."

The distinction between past conduct or ongoing and future conduct is critical. The exception permits the disclosure of otherwise privileged communications when a party "consults with an attorney in order to facilitate the party's commission or concealment of ongoing or future wrongdoing." (6)

III. The Expansion of the Exception

Many courts have taken a broad view of this exception and applied it to types of conduct other than strict crimes or frauds. Specifically, these courts have determined that a breach of fiduciary duty, tortious interference with contract, or other wrongful conduct may trigger the exception. (7)

Specifically, in Koch, the court addressed secretive, collusive, and tortious conduct and found that "fraud" under the exception encompasses the tortious interference with prospective economic advantage and contractual relations. (8) In addition to the extensive case law, the commentary to the Restatement (Third) of Law Governing Lawyers Section 82 comt. d (2000) supports broadening the crime-fraud exception to include other tortious conduct. The Restatement's commentary on the exception defines fraud "for the purpose of the exception as requir[ing] a knowing or reckless misrepresentation... likely to injure another." (9)

IV. Invoking the Crime-Fraud Exception

To protect against improper intrusions into privileged materials, courts have required more than just an allegation that the exception applies. Rather, the court often requires the party invoking the crime-fraud exception to "present evidence: (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." (10)

A reasonable basis to believe the client engaged in...