10.07.01. Crime-Fraud Exception [Restatement § 82]

The crime-fraud exception is often cited when seeking to compel disclosure of communications between a lawyer and her client. The reality is, however, that the exception is narrow. Here is what the exception applies to: when the client comes to the lawyer and seeks advice or assistance to engage in a crime or fraud.^[1] The justification is that society does not have an interest in protecting communications where a client seeks advice on how to commit a crime or fraud and then carries out that crime/fraud. Thus, there are two elements to the crime-fraud exception: (1) the client seeks the lawyer’s advice in furtherance of a crime or fraud and (2) the client either uses the lawyer’s advice or disregards the lawyer’s advice not to engage in certain conduct.  It is important to note that both elements must be satisfied for the crime-fraud exception to apply.

Bob Businessman has always operated his businesses on the edge of the law.  He uses Leo Lawyer for advice on his transactions.  One day, Bob calls Leo and tells him about a new business venture.  Leo warns Bob that the way he was planning to go about the purchase would be considered fraudulent and he could be prosecuted.  In a subsequent email, Bob says to an associate, “I’m thinking about using Leo’s advice” to engage in the fraudulent action.  However, there is no evidence that Bob ever actually engaged in the fraud.  Does the crime-fraud exception apply so that the government can force the Leo to testify about his conversation with Bob? [In re Grand Jury Matter No. 3, 847 F.3d 157 (3rd Cir. 2017)] 

No.  In this instance the first element is met.  Bob came to Leo seeking to engage in a transaction that is fraudulent.  However, under these facts there is no evidence that Bob actually used the advice to engage in the fraud.  As the court notes in In re Grand Jury Matter No. 3, “if a client approaches a lawyer with a fraudulent plan that the latter convinces the former to abandon, the relationship has worked precisely as intended” and the privilege still attaches.  If, however, the client uses the lawyer’s advice to commit a fraud, the crime-fraud exception applies.

It is also important to note that the crime fraud exception does not apply when a client has committed a crime and comes to the lawyer for advice.  In those situations, societal interests in ensuring full disclosure from the client and candid advice by the lawyer outweigh any interest in disclosure.^[2]

[1] Restatement (Third) of the Law Governing Lawyers § 82.

[2] Restatement (Third) of the Law Governing Lawyers § 82, cmts. b.