Tobacco cases may be only the tip of the iceberg for assaults on privilege.

• Author: Mulderig, John J.

Radical incursions on privilege law approved in the Minnesota tobacco litigation may be used against other companies and counsel to deny traditional protections

IF YOU follow what plaintiffs' counsel have been saying in the popular press and law review articles, the tobacco industry is unique in the annals of American litigation. According to them, challenges to privilege claims and crime-fraud proceedings mounted in tobacco cases pose no threat to other industries.(1) Not so.

Courts have not limited their intrusions on traditional privilege doctrine to tobacco litigation. The precedent being established is fully applicable to any industry that manufactures consumer goods that are alleged to cause human injury. The plaintiffs' success in these cases--which derives less from obtaining privileged documents than from generating enormous bias against the defendants in the public arena and in the courts--almost guarantees that similar tactics will be employed in litigation against other corporate defendants.

In the tobacco cases, as in so many mass tort and product liability cases today, the plaintiffs do not limit their complaints to allegations that the product was defective or that there was a failure to warn. Rather, they include counts for negligence, misrepresentation, fraud and, increasingly, violations of consumer protection and antitrust statutes. In the Minnesota litigation, as in other tobacco cases, these causes of action purportedly were supported by a number of "factual" allegations. Among these is the argument that the defendants falsely promised to conduct and disclose research on smoking and health to the public but, in fact, either refused to conduct research or refused to publish the research findings. As a result, the plaintiffs alleged that the state, Blue Cross Blue Shield of Minnesota, and consumers were defrauded.

This article describes the privilege challenges and crime-fraud proceedings in the Minnesota attorney general action against the tobacco industry. To set the stage for a full appreciation of the potential impact of the precedent created in the Minnesota action, this article begins with a brief discussion of the history of privilege challenges in tobacco litigation, illustrating the unique turn that those challenges took in Minnesota. It then describes the privilege proceedings in Minnesota, the unprecedented procedures adopted by that court, and the results of those proceedings. Discussed finally is the potential impact of the Minnesota proceedings (and continuing litigation of privilege issues in other tobacco cases) on other corporate defendants, particularly those embroiled in mass tort actions.

CRIME-FRAUD EXCEPTION: ITS NATURE AND SCOPE

Most lawyers are familiar with the attorney-client privilege, the work product doctrine, as well as the joint defense privilege.(2) Many may be less familiar with the crime-fraud exception to those privileges.

In our legal system, the attorney-client privilege has been jealously guarded. Courts have long recognized that individuals and corporations need freedom to consult with counsel without fear that those communications would be used against them.(3) Today, courts are highly conscious that corporations need to consult continuously with counsel in order to comply with the mass of state and federal laws and regulations that govern corporate conduct.(4)

The privilege, however, is not absolute. Courts recognize that the privilege conflicts with discovery rules favoring full disclosure and that it is an impediment to the search for truth.(5) Moreover, the policy behind the privilege--permitting clients to confer with counsel in order to comply with the law--would be subverted were clients to confer with counsel in order to find creative ways to violate the law. Courts have been justifiably unwilling to convert a license to practice law into a license to facilitate crimes and frauds under the shield of an inviolable privilege.

The crime-fraud exception is just that: an exception to the attorney-client privilege and, by extension in some jurisdictions, to the work product doctrine. The crime-fraud exception holds that whenever a client uses an attorney to commit a crime or fraud--whether or not the attorney is a knowing participant--the privilege will be abrogated as to all communications in furtherance of that wrong.

In order to invoke the crime-fraud exception, the challenging party must make a threshold showing that the proponent of the privilege committed or intended to commit a crime or fraud and secured the services of a lawyer to further that wrongdoing. If the court finds that the party challenging the privilege has established a prima facie case, it will conduct an in camera review of the privileged documents and consider the privilege proponent's rebuttal to the crime-fraud allegations. If the privilege proponent is not able to rebut the prima facie case adequately as applied to the documents under review, the court will overrule the privilege claim and order the documents to be produced.(6)

It is the crime-fraud exception on which the plaintiffs in tobacco litigation have focused their attention.

CHALLENGES IN TOBACCO LITIGATION BEFORE MINNESOTA

Tobacco product liability litigation began in the early 1950s. Not until the 1990s did any plaintiffs challenge the legitimacy of privilege claims and the legitimacy of the lawyer conduct underlying privileged documents as part of their litigation strategy.

The first challenge, in Haines v. Liggett Group Inc. in the U.S. District Court for the District of New Jersey, addressed 1,500 documents listed on privilege logs prepared by the defendants. The challenge was based on claims that documents relating to litigation counsels' work with outside scientists and experts, denominated "Special Projects," were either not privileged at all or were subject to the crime-fraud exception. In particular, the plaintiffs argued that the defendants controlled and suppressed Special Projects undertaken under the auspices of the Council for Tobacco Research (CTR), contrary to the industry's representation that CTR's grant research program was independent and objective. The plaintiffs argued that privileged documents relating to CTR Special Projects would reveal that counsel had used CTR Special Projects to conduct research that demonstrated that smoking "caused" cancer and other diseases and that the defendants knew of, but suppressed and lied about, the research results.

In Haines, the special master and magistrate judge reviewed all the challenged documents in camera, and the magistrate's report expressly rejected the plaintiffs' crime-fraud allegations and recommended upholding privilege claims as to all but six of the 1,500 documents. U.S. District Judge H. Lee Sarokin, however, ignored the recommendations and published an inflammatory opinion that quoted directly from privileged documents.(7) He concluded that the plaintiffs had made a prima facie showing that the defendants controlled and suppressed research through CTR, contrary to industry representations, and he held that six of the challenged documents were subject to the crime-fraud exception.

The Third Circuit reversed and removed Judge Sarokin from the case, but his opinion generated continuing interest in the CTR Special Projects.(8)

In 1994, a paralegal who worked on document review for counsel representing one of the tobacco manufacturers publicly disseminated about 8,000 pages of documents, many of which were privileged.(9) Before a protective order could be obtained, the documents were shipped to anti-tobacco activists, who placed them in the University of California library and posted them on the Internet.(10)

Following the theft and public release of those documents, privilege claims to certain of the stolen documents and the CTR Special Projects documents were challenged in several cases. In the State of Florida's action against the tobacco companies, American Tobacco Co. v. Florida, the plaintiffs' counsel filed motions challenging the privilege claims to as many as 123 of defendants' privileged documents. Again the plaintiffs' allegations focused on CTR Special Projects, adding allegations that lawyers had suppressed records of internal company research relating to smoking and health. A final order was entered only on 13 privileged documents designated by the plaintiffs for immediate review.

A special master reviewed the 13 documents as to which privilege was claimed. After the state and the defendants presented arguments and evidence, the special master upheld privilege claims for five of the 13 challenged documents and ruled that eight were subject to the crime-fraud exception to the privilege. The trial court confirmed the master's report, and the defendants filed an interlocutory appeal.

The Florida Court of Appeals denied the writ of certiorari, finding the trial court's ruling did not depart from established legal requirements.(11) As a result, the eight documents were produced to the plaintiffs.

Because only a small number of documents were challenged, these early proceedings appeared to fit within the traditional confines of the privilege and the crime-fraud challenges. Only in Minnesota did it become clear how radical the plaintiffs' challenges to privileged documents would become in tobacco litigation.

MINNESOTA CHALLENGES

In 1994, the State of Minnesota and Blue Cross and Blue Shield of Minnesota brought a lawsuit against 11 tobacco manufacturers and related entities seeking reimbursement of Medicaid costs for the treatment of smoking-related illnesses. The complaint in State ex rel. Humphrey v. Philip Morris Inc. made sweeping allegations of fraud and conspiracy, as well as violations of the state's consumer protection and antitrust statutes. It alleged wrongful conduct extending back to the early 1950s and continuing to the date of filing. The plaintiffs used these broad allegations to propound more than 150...