You know already that lawyers should assume that any memos and emails they send clients will show up on the front page of The Wall Street Journal or The New York Times. You may not know that the same goes for purely oral advice. A recent ruling by the Third Circuit shows why.
The case involved an Attorney whose Client asked Attorney for help in connection with Client's effort, as President of Corporation, to get a loan from a Bank in the U.K. for a Corporation customer. As the panel noted:
In April 2008, Client approached Attorney to discuss issues he was having with the [loan-seeking] project. Client explained that he planned on paying Banker in order to ensure that the project progressed swiftly, as Banker was threatening to slow down the approval process.
In re Grand Jury Subpoena, No. 13-1237, slip op. 4 (3d Cir. Feb. 12, 2014). What did the lawyer do? This:
Attorney did some preliminary research, found the [Foreign Corrupt Practices Act], and asked Client whether the Bank was a government entity and whether Banker was a government official. Although Attorney could not ascertain given his limited research whether the planned action was legal or illegal, he advised Client not to make the payment.
Id. at 4-5. What did Client do? His company "made payments totaling more than $3.5 million to Banker's sister." Id. at 4.
Not to the Banker. To his sister.
A grand jury looking into possible violations of the FCPA by Client subpoenaed the Attorney. Corporation and Client objected, citing attorney-client privilege (and, later, attorney work-product).
The district court received ex parte evidence from the Department of Justice and questioned Attorney in camera. The court then held that the "crime-fraud" exception to privilege applied to Attorney's advice to Client. Corporation and Client appealed.
The Third Circuit affirmed the ruling. The panel held:
- Privilege protects a lawyer's advice to a client unless "'the party seeking to overcome the privilege . . . make[s] a prima facie showing that (1) the client was committing or intending to commit a fraud or crime, and (2) the attorney-client communications were in furtherance of that alleged crime or fraud.'" Id. at 8 (quoting In re Grand Jury, 705 F.3d 133, 151 (3d Cir. 2012)).
- A district court may order an in camera review of lawyer-client communications – including oral ones – upon "a 'showing of a factual basis adequate to suport a good faith belief by a reasonable person that in camera review of the materials may reveal evidence to establish the claim that the crime-fraud exception applies.'" Id. at 12.
- The court may exclude the holder of the privilege from the in camera review and may refuse to provide the holder a transcript of what the lawyer said during the review if doing so will protect the secrecy of grand jury proceedings. Id. at 15.
- The crime-fraud exception defeats a claim of privilege if the court finds a "reasonable basis to suspect" that the client used the lawyer's advice to further crime or fraud. Id. at 15-16.
- The record supported the district court's finding of a reasonable basis to suspect in that it suggested Client sought Attorney's advice after deciding to bribe Banker and then used the advice to come up with "the idea of routing the payment through Banker's sister, who was not connected to the Bank, in order to avoid the reaches of the FCPA or detection of the violation." Id. at 20.
- The crime-fraud exception applies just as much to the lawyer work product doctrine as it does to the lawyer-client privilege. Id. at 21-22.
The good news? A finding that the crime-fraud exception applies doesn't indicate that the lawyer did anything wrong. It just means that the client sought and used the lawyer's advice to help the client commit a crime or fraud.
But it does mean you'll have a non-client — and likely an adverse party — looking over what you wrote or said in what you thought was private.
So remember: Assume that anything you write or say will end up on the front page of a newspaper. You'll probably give better advice if you do. As Attorney apparently did in this case.