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Parties Involved:
Sealed Case

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 10, 1996 Decided March 4, 1997

No. 96-3085

IN RE: SEALED CASE

Consolidated with

No. 96-3086

Appeals from the United States District Court

for the District of Columbia

(95ms00374)

(95ms00377)

-

Before: EDWARDS, Chief Judge, RANDOLPH and ROGERS, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge: This appeal arises out of ongoing grand jury proceedings. The

grand jury is investigating violations of federal election laws. The record is sealed. The appellant is

a corporation, whichwe shall callthe "Company." The Company refused to produce two subpoenaed

documents, for which it was held in contempt. One of the documents is a memorandum from a

Company vice president to the president, with a copy to the Company's general counsel. The

memorandum reflects a conversation between the vice president and the Company's general counsel

about campaign finance laws. The Company withheld it on the basis of the attorney-client privilege.

The other document is a memorandum written by the general counsel, apparently at the request of

outside counsel. The Company withheld it on the basis of the attorney-client privilege and work

product immunity.

The district court examined both documentsin camera (see United States v. Zolin, 491 U.S.

554 (1989)), and, without deciding whether they were covered by the privilege or the work product

doctrine, ordered the Company to turn them over. The court found that the crime-fraud exception

applied because of these circumstances. In late June 1994, the Company's political action committee

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1An order compelling testimony is not generally appealable unless the witness refuses to

comply and is held in contempt. But under Perlman v. United States, 247 U.S. 7 (1918), the

Company, as holder of the privilege, may appeal so long as the witness swears he will give the

testimony. See In re Sealed Case, 754 F.2d 395, 399 (D.C. Cir. 1985) (Sealed Case II). 

contributed the maximum amount permitted by law to a former candidate for federal office who was

seeking to retire his campaign debt. The vice president wrote his memorandum and had his

discussion with the general counsel in earlyAugust 1994. Later in the same month, the vice president

called two individuals who did business with the Companyand asked themto contribute to the former

candidate. The individuals and their wives made the contributions. After several weeks had passed,

the vice president authorized checks to be drawn from his department's budget to reimburse these

individuals not only for the amount of their contributions, but also to make up for the additional taxes

they would incur from reporting the reimbursement asincome. The vice president's solicitation may

have been permissible but, according to the government, this use of corporate funds was illegal.

The other subpoenaed documentthe general counsel's memorandum to the filewas written

more than a year later. It mentions dates in November 1995, and according to the Company's

appellate counsel, recites actions the Company took to correct the vice president's use of corporate

funds to reimburse the donors.

In addition to appealing from the order to produce the documents and the contempt citation,

the Company appeals the district court's order compelling the vice president to testify in the grand

juryabout a late August 1994 meeting between him, theCompany's president, and its general counsel.

The participants at the meeting discussed certain facts and the general counselgave legal advice about

federal election laws. In the grand jury, the vice presidentwho had been granted

immunityinvoked the attorney-client privilege on behalf of the Company. Again, the district court

ruled that the crime-fraud exception applied and ordered him to testify about the late August 1994

meeting. The vice president then signed an affidavit stating that he would honor the court's directive.

The court stayed its order pending the outcome of the Company's appeal.1

I

We will take up first the vice president's early August 1994 memorandum and his meeting in

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2

In nearly all cases, a client's innocence will bar application of the crime-fraud exception. We

say "nearly all" because there may be rare casesthis is not one of themin which the attorney's

fraudulent or criminal intent defeats a claim of privilege even if the client is innocent. See, e.g.,

Moody v. IRS, 654 F.2d 795, 800-01 (D.C. Cir. 1981); In re Impounded Case (Law Firm), 879

F.2d 1211, 1213-14 (3d Cir. 1989). 

3To this the Restatement drafters added: "By the same token, lawyers might be discouraged

from giving full and candid advice to clients about legally questionable courses of action." Id.

This seems to us rather doubtful. Why would a lawyer put his clientand himselfat such risk? 

Fully advising the client may prevent possibly unlawful action. On the other hand, if the lawyer

gives less than "full and candid" advice, the client may rely on it, wind up violating the law and

late August 1994 with the president and general counsel. Both the memorandum and the meeting,

as the Company sees it, are covered by the attorney-client privilege. Since the district court has yet

to pass on this question, we will assume the Company is correct. The "privilege of a witness," FED.

R. EVID. 501 tells us, is "governed by the principles of the common law as they may be interpreted

by the courts of the United States in the light of reason and experience." Those principles recognize

the importance of maintaining the confidentiality of attorney-client communications in order to

promote the rendering of legal services. In modern society, legal advice and assistance is often

essential. To provide effective representation, attorneys need "full and frank" disclosures from their

clients. Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Clients, it has been thought, might

not be forthright iftheir lawyers could be turned into witnesses against themor ifthey could be forced

to disclose their conversations with their lawyers.

The relationship between client and counsel may, however, be abused. And so the

attorney-client privilege is subject to what is known as the crime-fraud exception. Two conditions

must be met. First, the client must have made or received the otherwise privileged communication

with the intent to further an unlawful or fraudulent act.2In re Sealed Case, 754 F.2d 395, 399 (D.C.

Cir. 1985) (Sealed Case II); United States v. White, 887 F.2d 267, 271 (D.C. Cir. 1989). Second,

the client must have carried out the crime or fraud. In other words, the exception does not apply

even though, at one time, the client had bad intentions. Otherwise "it would penalize a client for

doing what the privilege is designed to encourageconsulting a lawyer for the purpose of achieving

law compliance." See RESTATEMENT OF THE LAW GOVERNING LAWYERS § 142 cmt. c, at 461

(Proposed Final Draft No. 1, 1996).3

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thus lose the privilege anyway. A lawyer representing such a client would have reason to be

concerned about his own personal civil and criminal liability. Rather than discouraging full advice,

that prospect plus the danger to the client provides a strong incentive for the lawyer to advise the

client clearly and firmly. 

4Of course, in many cases, a third party's access to a communication may destroy the

confidentiality required for the attorney-client privilege, see, e.g., In re Sealed Case, 877 F.2d

976, 980 (D.C. Cir. 1989) (Sealed Case III), but that is a separate problem. 

5At least one district court seems to have said that anyone's use of a communication to further

a crime or fraud defeats the attorney-client privilege, regardless of the innocence of the attorney

and the client. See Duttle v. Bandler & Kass, 127 F.R.D. 46, 53, 55-56 (S.D.N.Y. 1989). We

think this is incorrect. 

The privilege is the client's, and it is the client's fraudulent or criminal intent that matters. A

third party's bad intent cannot remove the protection of the privilege.4 For example, a stenographer

hired to record a meeting between an attorney and a client might intend to use his notes to commit

some kind of crimesay extortionbut the contents of the meeting would not therefore cease to be

privileged. Otherwise, existence of the attorney-client privilege would be unpredictable and the

interest of "full and frank communication" between client and counsel would be undermined. See

Upjohn Co., 449 U.S. at 389.5

As the party seeking to overcome the privilege, the government had the burden of showing

that the crime-fraud exception applied to the memorandum and the meeting. What was the nature

of that burden? Here we encounter some confusion. This court and others have described the

required showing in terms of establishing a "prima facie" case. See, e.g., Sealed Case II, 754 F.2d

at 399. The formulation can be traced to the Supreme Court's opinion in Clark v. United States, 289

U.S. 1, 14 (1933). The problem is, as the Supreme Court mentioned in Zolin, 491 U.S. at 563 n.7,

that "prima facie" evokesthe concept, familiar in civil litigation, ofshifting the burden from one party

to another. Yet it is altogether clear where the burden in these cases lieson the party invoking the

crime-fraud exception. In terms of the level of proof, is a "prima facie showing" a preponderance of

the evidence, clear and convincing evidence, or something else? 

Our opinion in Sealed Case II contains this answer: "The government satisfies its burden of

proof if it offers evidence that if believed by the trier of fact would establish the elements of an

ongoing or imminent crime or fraud." 754 F.2d at 399. We appended a footnote to this statement

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6Zolin left the standard of proof question for another day. The Supreme Court decided only

that the crime-fraud exception need not be established entirely with independent evidence; that

courts may review allegedly privileged materials in camera in order to determine whether the

crime-fraud exception applies, 491 U.S. at 565-70; and that before "engaging in in camera

review ..., the judge should require 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," id. at 572 (internal quotation marks

and citation omitted). 

explaining that although the Second Circuit had "framed the test in terms of probable cause to believe

that a crime or fraud had been committed and that the communications were in furtherance thereof"

(see In re John Doe Corp., 675 F.2d 482, 491 & n.7 (2d Cir. 1982)), there was "little practical

difference" between that standard and the one just quoted from Sealed Case II. 754 F.2d at 399 n.3.

We confesssome difficulty in understanding why the differences between the two formulations were

considered slight, but there is no reason to dwell on the matter.6It is apparent here that the

government failed to make the sort of probable cause showing the Second Circuit would demand, or

the showing Sealed Case II contemplated. 

The critical consideration is that the government's presentation had to be aimed at the intent

and action of the client. It was not enough for the government to show that the vice president

committed a crime after he wrote his memorandum and attended the late August meeting with

Company counsel. The holder of the privilege is the client and, in this case, the client was the

Company, not the vice president. Unless the government made some showing that the Company

intended to further and did commit a crime, the government could not invoke the crime-fraud

exception to the privilege. 

As to the late August meeting, the government's evidence reveals that the participants

discussed campaign finance laws. That is not enough. One cannot reasonably infer from the meeting

that theCompanywas consulting its general counselwith the intention of committing a crime, or even

that the vice president was then doing so. Companies operating in today's complex legal and

regulatory environmentsroutinely seek legal advice about how to handle allsorts of matters, ranging

from their political activities to their employment practices to transactions that may have antitrust

consequences. There is nothing necessarily suspicious about the officers of this corporation getting

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such advice. True enough, within weeks of the meeting about campaign finance law, the vice

president violated that law. But the government had to demonstrate that the Company sought the

legal advice with the intent to further its illegal conduct. Showing temporal proximity between the

communication and a crime is not enough. Sealed Case II, 754 F.2d at 402; In re Grand Jury

Subpoenas Duces Tecum, 798 F.2d 32, 34 (2d Cir. 1986).

Moreover, from the material before the district court, there was no way of knowing or even

guessing whether the vice president was on a frolic of his own, against the advice of Company

counsel, when he reimbursed the donors with corporate funds. The government suggested at oral

argument that even if he was, the Company still could be held criminally liable. There are

circumstances under which corporations are responsible for the crimes of their agents. See, e.g.,

United States v. Sherpix, Inc., 512 F.2d 1361, 1367 & n.7 (D.C. Cir. 1975); New York Cent. &

Hudson River R.R. v. United States, 212 U.S. 481 (1909); RICHARD S.GRUNER,CORPORATECRIME

AND SENTENCING ch. 3 (1994). But neither in this court nor in the district court did the government

offer anything in terms of evidence or law to support the idea that the Company bore criminal

responsibility for the acts of this officer. Cf. Egan v. United States, 137 F.2d 369, 378-80 (8th Cir.

1943). The government therefore did not sustain its burden. In so holding, we express no view on

the Company's ultimate criminal liability. The law of corporate criminality is not well developed in

this circuit. Given the government's complete failure to address the subject, this is not the case to

develop it.

Many of the same points can be made about the vice president's memorandum. Like the

district court, we have examined this document, which the Company submitted in camera and ex

parte. From the memorandum and the other information the government presented, all that can be

discerned isthat the Company's vice president and its general counsel discussed federal election laws

in early August 1994, perhaps at the suggestion of the Company's president. The memorandum

reflected that discussion. Again, given the need for corporations and their officers to seek legal

advice about activitieslike political contributions, there is nothing suspect about this discussion. And

the fact that the vice president broke the law weeks later does not, without more, demonstrate the

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7So long as the client had the requisite intent, the propos- ed Restatement removes work

product immunitybut not the attorney-client privilegeeven if the client never carries out the

crime or fraud. Compare § 132 with § 142 of the RESTATEMENT OF THE LAW GOVERNING

LAWYERS, supra. Why the crime-fraud exception differs in these two contexts is not explained in

the draft's commentary or in the reporter's notes. 

validity of the government's assumption that the Company intended or probably intended to further

that crime. 

II

This brings usto the second ofthe two documentstheCompanywithheld. We have examined

the document. It is a memorandum by the Company's general counsel, written to the file and relating

to matters that occurred one year after the vice president's illegal action. As Company counsel

seemed to agree at oral argument, the document is covered by work product immunity rather than

the attorney-client privilege. The protection for attorney work product is broader than the

attorney-client privilege, but less absolute. Work product immunity covers not only confidential

communications between the attorney and client. It also attaches to other materials prepared by

attorneys (and their agents) in anticipation of litigation. Cf. FED. R. CIV. P. 26(b)(3). Like the

attorney-client privilege, work product immunity promotes the rendering of effective legalservices.

See Hickman v. Taylor, 329 U.S. 495, 510-11 (1947). And as with the privilege, the interests in

favor of work product immunity are overcome when the client uses the attorney to further a crime

or fraud. See In re Sealed Case, 676 F.2d 793, 811, 812 (D.C. Cir. 1982) (Sealed Case I); 1 SCOTT

N. STONE & ROBERT K. TAYLOR, TESTIMONIAL PRIVILEGES § 2.11, at 2-67 & n.284 (2d ed. 1993)

(collecting cases).

With respect to work product immunity, the crime-fraud exception calls for a somewhat

different inquiry than with the attorney-client privilege. The focus is not on the client's intent

regarding a particular communication, but on the client's intent in consulting the lawyer or in using

the materials the lawyer prepared. The question is: Did the client consult the lawyer or use the

material for the purpose of committing a crime or fraud?7

In light ofthese principles, the government's argument for invoking the crime-fraud exception

goes nowhere. As is apparent from the nature of the inquiry, the crime-fraud exception for work

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product immunity cannot apply if the attorney prepared the material after his client's wrongdoing

ended. See, e.g., Zolin, 491 U.S. at 562-63; Sealed Case II, 754 F.2d at 402; In re Grand Jury

Subpoena 92-1(SJ), 31 F.3d 826, 831 (9th Cir. 1994); In re Federal Grand Jury Proceedings 89-

10(MIA), 938 F.2d 1578, 1581 (11th Cir. 1991). Here, the general counsel wrote the memorandum

long after the vice president committed the offenses. The government points out that work product

might still be in furtherance of a crime or fraud even if the client's original offense was complete. The

client could be using the attorney to cover up or conceal his first crime. The trouble is that the

government has made no such allegation here and, even if it did, we have spotted nothing in the

record that would support it. And if the government cannot show that the Company or any of its

officers tried to or intended to cover up the vice president's illegality, it surely cannot show that the

Company used its general counsel for that purpose.

* * * 

The district court decided this case by assuming that the meeting and the memoranda fell

under either the attorney-client privilege or the work product doctrine and then finding that the

crime-fraud exception applied. Since we disagree with the district court's conclusions regarding the

crime-fraud exception, we reverse and remand the case.

So Ordered.

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