The FBI search of Trump attorney Michael Cohen’s office triggered widespread speculation about the contours of the crime-fraud exception to the attorney-client privilege. But don’t look to the U.S. Supreme Court for much enlightenment.
Four years ago, the justices passed on an opportunity to fill in the blanks left open by the court’s last substantive ruling on the crime-fraud exception—the 1989 decision in United States v. Zolin.
Communication between a lawyer and a client that is intended to further a crime or fraud is not protected by the attorney-client privilege. President Donald Trump bemoaned the death of the attorney-client privilege after the Cohen raid, to which one critic replied: “Long live the crime-fraud exception.”
Since 1989, federal district and appellate courts have taken a variety of sometimes conflicting approaches to open questions concerning the exception: When can a judge interview a lawyer in chambers to evaluate whether the crime-fraud exception applies, and what is the ultimate standard of proof for applying the crime-fraud exception?
Attorneys from Blank Rome in 2014 filed a petition for review in In re Grand Jury Subpoena, No. 14M14, urging the court to take up the crime-fraud exception. They argued that the U.S. Court of Appeals for the Third Circuit, in its approach to the crime-fraud exception, had significantly eroded the attorney-client privilege.
Blank Rome’s petition arose from a grand jury investigation into alleged violations of the Foreign Corrupt Practices Act. The grand jury served a subpoena on the attorney for the client—the corporation’s president—and the company itself, a Pennsylvania consulting firm. The government moved to enforce the subpoena based on the crime-fraud exception to the attorney-client privilege.
After questioning the attorney in chambers, the district court found the exception applied and required the attorney to testify. The client and corporation appealed to the Third Circuit, challenging the judge’s interview of the lawyer, the procedures the district court used for the examination and the ultimate finding that the exception applied. The Third Circuit affirmed the district court.
The attorney had advised the client not to make a $3.5 million payment to a foreign banker’s sister to ensure that the banker, who worked for a bank owned by several foreign nations, moved swiftly on the financing of three projects. The attorney had informed the client about the Foreign Corrupt Practices Act, but the client insisted his proposed payment would not violate the law.
The Third Circuit held that the district court properly applied the Supreme Court’s test for in camera examination of documents to determine whether the crime-fraud exception applies.
In 1989, the justices in the Zolin case said district courts should require the government, using nonprivileged evidence, to make a showing of a “factual basis adequate to support 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.”
But what about an in camera live interview of the attorney?
The Supreme Court did not exclude oral communications and also did not address them. The Third Circuit, despite acknowledging “different concerns” than with examination of documents, rejected requiring a higher showing by the government and said the same Zolin standard should apply.
In its petition to the Supreme Court, Blank Rome asked the justices to determine the appropriate threshold standard that must be met before a judge can conduct an in-chambers interview with a lawyer about unrecorded oral communications.
Some scholars report that although Zolin did not specify the amount of proof needed to trigger in camera review, all the courts that have addressed the issue agree it is very low.
The Supreme Court in Zolin also declined to clarify the amount of proof the government—or the moving party in a civil action—must produce to compel the ultimate disclosure of the privileged information.
Not surprisingly, the Blank Rome petition also asked the justices to decide what was the ultimate standard that must be met before the government could overcome the attorney-client privilege by alleging a crime or fraud. The Justice Department’s solicitor general office waived a response to the case, and the justices denied the petition, without comment, in November 2014.
No one knows yet what role, if any, the crime-fraud exception will play in the Cohen investigation. But it has already been used in Special Counsel Robert Mueller’s investigation.
On Oct. 30, Chief Judge Beryl Howell of the U.S. District Court for the District of Columbia unsealed an order granting Mueller’s motion to compel former counsel to Paul Manafort Jr. and a business associate, Richard Gates, to testify before a grand jury regarding certain aspects of her prior representations.
Howell rejected their former counsel’s assertions of attorney-client privilege and attorney work product protection, finding that the information sought by the special counsel—sources relied on by the attorney for two Foreign Agent Registration Act submissions—fell within the “crime-fraud” exception to the attorney-client privilege.