The U.S. Court of Appeals for the Third Circuit has given its OK under the crime-fraud exception to attorney-client privilege to a trial court’s in camera interview of a lawyer about advice provided to an ex-client as well as its subsequent decision that it meets the exception so that a grand jury could hear the testimony.
In deciding to apply the exception, the appeals court in In re Grand Jury Subpoena extended the standard governing a court’s review of documents to interviews of attorneys conducted in chambers.
The U.S. Supreme Court set the standard for review of documents in its 1989 opinion in United States v. Zolin, and it “did not exclude oral communications from the ambit of its holding,” Judge D. Michael Fisher wrote on behalf of the three-judge panel. “Nevertheless, in camera examination of a witness implicates different concerns than examination of documents or recordings, so we must determine whether we should adopt the Zolin standard where unmemorialized oral communications are at issue.”
The court decided that it would.
The unnamed corporation that is at the center of the case is under a grand jury investigation related to alleged violations of the Foreign Corrupt Practices Act. It was identified only as a Pennsylvania-based consulting firm.
The client who consulted the attorney who was interviewed in camera by the trial judge is the corporation’s president and managing director.
Both the corporation and the client intervened in the case and sought to keep the lawyer’s testimony away from the grand jury, first by challenging the district court’s decision to interview the lawyer in camera.
They argued that the court should apply a more stringent standard when faced with the proposition of an in camera interview with a lawyer than it does for an in camera review of documents.
In addition to the three concerns that the Supreme Court noted for considering the standard to apply when considering in camera review—”erosion of the privilege that is aimed at fostering disclosure between attorney and client, due process implications, and additional burdens on the district courts,” as summarized by Fisher—the company and its president argued that the court should also consider “the malleability of witness recollections” in the context of conducting in camera interviews with lawyers.
Weighing each concern with respect to the court’s interview of a lawyer, the Third Circuit answered the first by saying, “If we were to apply a heightened standard to oral communications, would-be criminals could use the differing standards to avoid the proper application of the crime-fraud exception. A client could seek to take advantage of the higher showing necessary to delve into oral communications by instructing the attorney not to record the communications in any way. We do not want to incentivize circumventing the proper application of the crime-fraud exception.”
It dispensed with the next two by saying the district courts could be trusted to consider due process interests and that an interview may be more burdensome for the court than document review, but that shouldn’t bring with it a higher standard.
Then, Fisher said, “Intervenors’ concern about the pliability of a witness’s memory is a substantial one.”
A lawyer’s memory could be influenced by “the mere fact that the crime-fraud exception is implicated,” Fisher said, explaining that memory can be fallible in several ways.
“Despite these concerns, we are confident that district courts will be able to question an attorney-witness in a way that ensures that the attorney accurately recounts the communications with the client,” Fisher said. “The risk of inaccuracies is mitigated by the fact that the attorney will be under oath and face questioning from a judge rather than an adversary. The concern over the malleability of witness memory does not outweigh the importance of ensuring that abuses of the privilege are exposed.”
With that analysis, the Third Circuit held that the same standard governing a court’s decision to review documents would also govern a court’s decision to interview a lawyer.
Beyond the propriety of the interview itself, the company and its president also challenged the district court’s finding that the crime-fraud exception would apply to the lawyer’s testimony.
The Third Circuit called it “a close case.”
The allegations involve the president of the company making payments of $3.5 million to the sister of a banker in the United Kingdom who approved financing for two oil and gas projects, which resulted in a payment of nearly $8 million in “success fees” to the unnamed corporation, according to the opinion.
The attorney who was interviewed by the district court had an arrangement with the company whereby he had a rent-free office there and would “periodically consult” the company’s president on legal matters in exchange for the space.
In April 2008, one of these consultations took place. According to the opinion, at that time the president approached the lawyer and “explained that he planned on paying [the] banker in order to ensure that the project progressed swiftly, as [the] banker was threatening to slow down the approval process. The attorney did some preliminary research, found the FCPA, and asked [the president] whether the bank was a government entity and whether [the] banker was a government official.”
The lawyer advised the company president not to proceed with the payment, according to the opinion.
“Despite this advice, [the president] insisted that his proposed payment did not violate the FCPA, and informed [the] attorney that he would go ahead with the payment,” Fisher said. The lawyer then gave the company president a copy of the FCPA and ended the relationship, according to the opinion.
The district court didn’t abuse its discretion when it decided that the company president had intended to commit a crime when he consulted the lawyer, which would trigger the crime-fraud exception to the attorney-client privilege, the Third Circuit ruled.
On the panel with Fisher were Judges Thomas L. Ambro and Thomas M. Hardiman.
(Copies of the 23-page opinion in In re Grand Jury Subpoena, PICS No. 14-0228, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •