Opinion ID: 1309235
Heading Depth: 1
Heading Rank: 3

Heading: diversity in the scope of the fraud exception

Text: An issue that has resulted in little uniformity among courts involves the scope of the fraud component of the crime-fraud exception. As one court has observed, [t]he word `fraud' could be given its ordinary meaning, that is, common-law civil fraud. On the other hand, `fraud' might mean any tort which involves some element of planning. Milroy v. Hanson, 902 F.Supp. 1029, 1032-33 (D.Neb.1995). The diversity in the scope of the fraud exception is most easily demonstrated by reviewing how courts have treated the term. For example, one court has held that `[a]cts constituting fraud are as broad and as varied as the human mind can invent. Deception and deceit in any form universally connote fraud. Public policy demands that the `fraud' exception to the attorney-client privilege ... be given the broadest interpretation.' Fellerman v. Bradley, 99 N.J. 493, 493 A.2d 1239, 1245 (1985) (quoting In Re Callan, 122 N.J.Super. 479, 300 A.2d 868 (Ch. Div.1973), rev'd on other grounds, 66 N.J. 401, 331 A.2d 612 (1975)). While the Fellerman court interpreted the term fraud as almost boundless, other courts have been more cautious. In State v. Doster, 276 S.C. 647, 284 S.E.2d 218, 220 (1981), the South Carolina Supreme Court explained that the privilege does not extend to communications in furtherance of criminal, tortious or fraudulent conduct. In United Services Automobile Ass'n v. Werley, 526 P.2d 28 (Alaska 1974), the Alaska Supreme Court adopted a broad view of the fraud exception. Werley stated that the attorney-client privilege does not apply when there is evidence that an insurer through its attorney engage[d] in a bad faith attempt to defeat, or at least reduce, the rightful claim of its insured[.] Werley, 526 P.2d at 33. Thus, under Werley mere evidence of bad-faith can defeat the attorney-client privilege. But see Freedom Trust v. Chubb Group of Ins. Cos., 38 F.Supp.2d 1170, 1173 (C.D.Cal. 1999) ([T]here is no persuasive reason to include bad faith in the fraud exception to the lawyer-client privilege.). Indeed, in the context of the exception, there are nearly as many definitions for the term fraud as there are courts tackling the issue. See, e.g., In re Sealed Case, 754 F.2d 395, 399 (D.C.Cir.1985) (Communications otherwise protected by the attorney-client privilege are not protected if the communications are made in furtherance of a crime, fraud, or other misconduct.); Cooksey v. Hilton Int'l Co., 863 F.Supp. 150, 151 (S.D.N.Y.1994) ([T]orts moored in fraud can trigger the crime-fraud exception.); Central Constr. Co. v. Home Indem. Co., 794 P.2d 595, 598 (Alaska 1990) (same); Volcanic Gardens Mgmt. Co., 847 S.W.2d 343, 347 (`Fraud' is sometimes defined as `[a] generic term, embracing all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trick, cunning dissembling, and any unfair way by which another is cheated.' (quoting Johnson v. McDonald, 170 Okla. 117, 39 P.2d 150 (1934))); International Tel. & Tel. Corp. v. United Tel. Co. of Florida, 60 F.R.D. 177, 180 (M.D.Fla.1973) (The privilege may be overcome, not only where fraud or crime is involved, but also where there are other substantial abuses of the attorney-client relationship.). While West Virginia has never expressly defined the scope of our fraud exception, in State v. Douglass, 20 W.Va. 770 (1882), this Court made clear that civil fraud may defeat the attorney-client privilege. In the more recent case of Kessel v. Leavitt , the Court suggested that a narrow meaning should be afforded the fraud exception by commenting that when the fraud alleged bespeaks of tortious fraudulent conduct, ... the ... fraud exception does not operate to compel disclosure of the privileged communications. Kessel, 204 W.Va. at 183, 511 S.E.2d at 808. This language, which is mere dicta, does not overrule the precedent set by this court in Douglass, and should not be interpreted to mean that civil fraud [2] is unavailable as a basis for piercing the attorney-client privilege. Kessel did not hold and should not be construed as holding, that evidence of other types of tortious conduct, like bad faith, could not be used to pierce the attorney-client privilege. Under the facts presented in Kessel, it was not necessary for the Court to define the scope of the fraud component of the crime-fraud exception. Consequently, the Court did not create a new syllabus point in Kessel that sought to define what type of evidence would be appropriate to establish the fraud exception. See Syl. pt. 2, in part, Walker v. Doe, 210 W.Va. 490, 558 S.E.2d 290 (2001) ([N]ew points of law are ... articulated through syllabus points as required by our state constitution.). Accord Syl. pt. 13, State ex rel. Medical Assurance of West Virginia v. Recht, 213 W.Va. 457, 583 S.E.2d 80 (2003). As explained in In re Assessment of Kanawha Valley Bank, 144 W.Va. 346, 109 S.E.2d 649 (1959), [o]biter dicta or strong expressions in an opinion, where such language was not necessary to a decision of the case, will not establish a precedent. Kanawha Valley, 144 W.Va. at 382-83, 109 S.E.2d at 669. In the final analysis, Kessel does not limit the fraud exception to civil fraud, nor does the decision preclude using evidence of tortious misconduct, such as bad faith, to help establish the civil fraud exception. This is an issue that the Court will have to resolve when properly presented for a resolution.