Friday, December 23, 2005

Third Circuit Finds Government Made Prima Facie Case That Crime-Fraud Exception To Attorney-Client Privilege Applied, Reverses Order Quashing Subpoena

In United States v. John Doe, 429 F.3d 450 (3d Cir. 2005), the Third Circuit reversed the district court’s order granting an attorney’s motion to quash a subpoena. The Circuit found that the government had satisfied its burden of establishing a prima facie case that the crime-fraud exception to the attorney-client privilege applied

In the course of a grand jury investigation into the activities of a federal law enforcement officer ("Target"), the government sought the testimony of an attorney ("Attorney"). The government claimed to have evidence that Target’s purpose in consulting Attorney was to determine how to conceal future criminal conduct. Attorney moved to quash the subpoena, invoking attorney-client privilege. The government argued (1) that the crime-fraud exception applied because Target’s conversations with Attorney were in furtherance of the planned criminal activity, and (2) that the involvement and presence of a third party ("Witness") at certain conversations destroyed the privilege. The district court disagreed with both contentions and granted the motion to quash.

The government appealed. Because the government did not challenge the district court’s finding that Target and Witness shared a common interest, the Third Circuit did not reach the issue of whether Witness’s presence vitiated the privilege. The Circuit also dismissed as without merit the argument that the district court improperly focused on whether the evidence was cumulative and necessary.

The Third Circuit then turned to the government’s principal argument that the district court improperly interpreted the crime-fraud exception to the attorney-client privilege. The Third Circuit noted the absence of formal findings of fact regarding Target’s intent in consulting Attorney, but found the record sufficient to support a finding that the government had met its burden of establishing a prima facie case, meaning that "the evidence, if believed by the fact-finder, would be sufficient to support a finding that the elements of the crime-fraud exception were met" (quoting In re Grand Jury Subpoena, 223 F.3d 213, 217 (3d Cir. 2000) (internal citation omitted). The elements are that "‘the client was committing or intending to commit a fraud or crime’" and that the consultation was ‘in furtherance of that alleged crime or fraud’" (quoting In re Grand Jury Subpoena, 223 F.3d at 217).

The district court also failed to make findings of fact regarding the intent of either Target or Witness, and it applied the wrong standard for the crime-fraud exception. Reviewing the entire oral opinion, the Third Circuit stated, leads to the conclusion that the district court improperly relied on whether the consultation assisted or furthered the crime, rather than focusing on the intent of Target and Witness in consulting with Attorney. And the record, the Third Circuit said, "is reasonably clear as to the criminal intent of Target." The Circuit thus reversed the order of the district court and remanded the matter to the district court with instructions to deny the motion to quash the subpoena.

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