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'Crime-Fraud' Exception to Attorney-Client Privilege Gets Expanded

By Jonathan R. Tung, Esq. on January 05, 2016 | Last updated on March 21, 2019

The Appeals Court for the First Circuit affirmed a lower district court's decision on the production of allegedly privileged documentation, quite possibly expanding the exception to swallow the rule.

For attorneys, this is a good chance to check up on your privileges.

Crime-Fraud Exception

A quick refresher: communications by a client to his or her attorney for the purposes of seeking legal advice are generally privileged and may not be disclosed to other third parties -- including a court -- unless an exception applies. Communications made for the purpose of committing a crime-or-fraud, however, are not privileged and their production to the court may be compelled.

Gorski

The case of U.S. v. Gorski dealt with that exact issue. David Gorski was sued by the U.S. government on charges that he defrauded the government by submitting backdated compliance documents that would help maintain the status of his company, Legion Construction, as a Service Disabled Veteran Owned Small Business (SDVOSB). Such entities are guaranteed by the federal government to get three percent of all government contract jobs.

The issue of privilege comes in when Gorski sought a private attorney and asked him about 2010 changes in federal law that amended the regulatory criteria for SDVOSBs. However, the facts appeared to show that the compliance documents were actually signed before the times indicated on the papers.

Concurrent Communications

The district court found that Gorski's personal lawyer did not assist knowingly in any fraud, and that it was Gorski who submitted the backdated papers. The district court then found that the communications were privileged because the lawyer did not knowingly assist the fraud.

The circuit court, however, disagreed. It wasn't the lawyer's non-intent to defraud that mattered, but rather Gorski's intent to defraud that really mattered. Therefore, a prima facie case still existed because there was an intention on Gorski's part to conceal a crime, and that a crime took place at the same time when the communications took place -- Gorski's indictment for fraud.

Somewhat Troubling

What the First Circuit's decision means is somewhat troubling because it implies that the mere hint of fraud in an attorney communication can blow open the doors to attorney-client privilege because opposing counsel or the government can imply that there was fraudulent intent by the defendant -- not his attorney. Facts will be the main factor in the continued privilege. But beyond waiver, has the time come when the exception has swallowed the rule?

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