Counsel For Appellant, John Doe
Counsel For Appellant, John Doe
Counsel For Appellant, John Doe
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OPINION OF THE COURT
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announced in United States v. Zolin, 491 U.S. 554, 572 (1989), applies to determine
whether to conduct an in camera examination of a witness. We also find that the District
Court did not abuse its discretion in applying this standard, in determining procedures for
the examination, or in ultimately finding that the crime-fraud exception applies. We
therefore affirm the District Courts order enforcing the grand jury subpoena.
I.
A.
This matter is before us in the context of an ongoing grand jury investigation. To
maintain confidentiality, we will refer only to the facts that have been made public and
will refer to those involved as Corporation, Client, and Attorney in order to
maintain their anonymity. We also note that we and the District Court had access to
information pertaining to the alleged criminal violations via the Governments Ex Parte
Affidavit, which set forth the basis for the Governments belief that the Intervenors
committed FCPA violations.
oil and gas projects. Two of the five projects were approved and financed by the Bank,
resulting in the payment of nearly $8 million in success fees to Corporation. For all five
projects, Banker, an official and banker at the Bank, was the operation leader
responsible for overseeing the financing process. In 2008 and 2009, Corporation made
payments totaling more than $3.5 million to Bankers sister. The payments occurred
within months of the success-fee payments to Corporation. No evidence showed that
Bankers sister worked on or was involved in any of the projects or meaningfully
contributed to any of Corporations other ventures.
Attorney worked out of Corporations office but practiced law independently. In
exchange for permitting Attorney to work out of the office rent-free, Client would
periodically consult Attorney on ordinary legal matters.
interactions with Client regarding one of the successful financing projects. In April 2008,
Client approached Attorney to discuss issues he was having with the project. Client
explained that he planned on paying Banker in order to ensure that the project progressed
swiftly, as Banker was threatening to slow down the approval process. Attorney did
some preliminary research, found the FCPA, and asked Client whether the Bank was a
government entity and whether Banker was a government official. Although Attorney
could not ascertain given his limited research whether the planned action was legal or
illegal, he advised Client not to make the payment. Despite this advice, Client insisted
that his proposed payment did not violate the FCPA, and informed Attorney that he
would go ahead with the payment. Attorney gave Client a copy of the FCPA. After this
communication, Attorney and Client ended their relationship.1
In February of 2010, the Bank began an internal investigation into the transactions
between Intervenors and Bankers sister.
Unit) in the United Kingdom was informed of the situation, and the Unit informed the
Federal Bureau of Investigation (FBI). The Unit arrested Banker and Bankers sister in
the United Kingdom; their prosecution is ongoing. The FBI began its investigation into
Intervenors in February 2010. Due to the parallel prosecution of Banker and Bankers
sister in the United Kingdom, Intervenors have some knowledge of the nature of the
grand jury investigation of which they are subjects.
B.
The grand jury served Attorney with a subpoena.
District Court invited Intervenors and the Government to submit questions for the District
Court to ask Attorney, which both did.
On January 8, 2013, the District Court questioned Attorney in camera, with only
Attorneys own counsel present. After this examination, Intervenors requested that the
District Court release a transcript of Attorneys testimony so that they could argue that
the communications were not subject to the crime-fraud exception. On January 18, 2012,
the District Court issued a memorandum and order granting the Governments motion to
enforce the subpoena and directing Attorney to testify before the grand jury. Based upon
its review of the Governments Ex Parte Affidavit and Attorneys in camera testimony,
the District Court found a reasonable basis to suspect that Intervenors intended to commit
a crime when Client consulted Attorney and could have used the information gleaned
from the consultation in furtherance of the crime. The District Court also declined to
release a transcript of the testimony. Intervenors timely appealed and the District Court
granted a stay of its order compelling Attorneys grand jury testimony pending resolution
of this appeal.
II.
The District Court had jurisdiction under 18 U.S.C. 3231. Ordinarily, this Court
has jurisdiction only over final decisions of district courts. 28 U.S.C. 1291. When a
district court orders a witness to testify or produce documents, the order is generally not
immediately appealable; rather, the witness who wishes to object must refuse
compliance, be held in contempt, and then appeal the contempt order. In re Grand Jury,
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705 F.3d 133, 143 (3d Cir. 2012) (internal quotation marks and citation omitted).
However, under Perlman v. United States, 247 U.S. 7 (1918), a privilege holder may
immediately appeal an adverse disclosure order when the privileged information is
controlled by a disinterested third party who is likely to disclose that information rather
than be held in contempt for the sake of an immediate appeal. In re Grand Jury, 705
F.3d at 138. Attorney is a disinterested third party controlling allegedly privileged
information.
confidential communications made between attorneys and clients for the purpose of
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obtaining or providing legal assistance to the client. In re Grand Jury, 705 F.3d at 151.
Although the communications are often relevant and highly probative of the truth, they
are protected in order to encourage full and frank communication between attorneys and
their clients and thereby promote broader public interests in the observance of law and
administration of justice. Upjohn Co., 449 U.S. at 389.
Despite their importance, the protections afforded by the privilege are not
absolute. [T]he reason for that protection . . . ceases to operate at a certain point,
namely, where the desired advice refers not to prior wrongdoing, but to future
wrongdoing.
A.
Intervenors raise issues with: the standard that the District Court applied to
determine whether to conduct an in camera examination, its decision to hold an
examination in this case, and the procedures that it used in that examination.2 We hold
that the District Court applied the proper standard and did not abuse its discretion in
finding that the standard applied or in fashioning procedures for the examination.
1.
In Zolin, the Supreme Court announced the inquiry that should precede an in
camera review of documents to determine the applicability of the crime-fraud exception.
491 U.S. at 572. The Court stated that a district court 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 crimefraud exception applies. Id. (internal quotation marks and citation omitted). In Zolin,
the government sought to compel the production of tapes of communications and
documents covered by the attorney-client privilege under the exception. Id. at 557.
Intervenors also argue that the District Courts examination of the Attorney
violated the separation of powers doctrine. This claim plainly misunderstands the roles
of the grand jury in investigating independently from any branch of government and of
the district court in ensuring that the grand jury does not infringe upon common law
privileges. The grand jury belongs to no branch of the government, instead serving as a
kind of buffer or referee between the Government and the people. In re Impounded, 241
F.3d at 312 (quoting United States v. Williams, 504 U.S. 36, 47 (1992)) (internal
quotation marks omitted). The District Court was fulfilling its obligation to check the
grand jurys investigative power by reviewing the grand jury subpoena in order to protect
the attorney-client privilege. See id. at 313.
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Intervenors assert that due to key differences between documented materials and the oral
examination of an attorney, the latter should be subject to a more stringent standard than
that announced for the former in Zolin.
In determining the standard that should apply to in camera examination of a
witness about oral communications, we first note that the Supreme Court did not exclude
oral communications from the ambit of its holding. Id. at 574. Nevertheless, in camera
examination of a witness implicates different concerns than examination of documents or
recordings, so we must determine whether we should adopt the Zolin standard where
unmemorialized oral communications are at issue.
In determining whether there ought to be a threshold showing for in camera
review, the Supreme Court articulated three concerns with the use of in camera
examinations: erosion of the privilege that is aimed at fostering disclosure between
attorney and client, due process implications, and additional burdens on the district
courts. Id. at 571. Intervenors present an additional concern the malleability of witness
recollections. We will weigh these concerns against the need to prove the applicability of
the crime-fraud exception.
While the policy of protecting open and legitimate disclosure between attorneys
and clients is of the utmost importance, id. at 571, a district courts examination of a
witness does no more to erode the protection than examination of written or recorded
communications.
accountability when the communications, whether at the behest of the client or not, were
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communications. Hickman v. Taylor, 329 U.S. 495, 512-13 (1947) (Under ordinary
conditions, forcing an attorney to repeat or write out all that witnesses have told him and
to deliver the account to his adversary gives rise to grave dangers of inaccuracy and
untrustworthiness.). Despite these concerns, we are confident that district courts will be
able to question an attorney-witness in a way that ensures that the attorney accurately
recounts the communications with the client. The risk of inaccuracies is mitigated by the
fact that the attorney will be under oath and face questioning from a judge rather than an
adversary. The concern over the malleability of witness memory does not outweigh the
importance of ensuring that abuses of the privilege are exposed. Some abuses of the
privilege cannot be demonstrated by extrinsic evidence, so forbidding consideration of
the communications would be too great an impediment to the proper functioning of the
adversary process. Zolin, 491 U.S. at 569.
For these reasons, we hold that district courts should use the Zolin standard to
determine whether to examine a witness in camera. Before a district court can undertake
an in camera examination of an attorney-witness to determine the applicability of the
crime-fraud exception, the party seeking to overcome the privilege must make 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.
omitted).
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This conclusion is not inconsistent with previous decisions of this Court. See In re
Grand Jury Investigation, 445 F.3d 266, 280 (3d Cir. 2006) (affirming the district courts
finding that the crime-fraud exception applied where the district court had examined
attorneys in camera); In re Grand Jury Subpoena, 223 F.3d at 216 (observing that use of
in camera proceedings or ex parte affidavits is a procedure consistently endorsed to
preserve grand jury secrecy). Nor is it inconsistent with decisions from other courts of
appeals. See, e.g., In re John Doe, Inc., 13 F.3d 633, 637 (2d Cir. 1994) (finding that a
district courts in camera examination of an attorney after the threshold Zolin showing
was made comported with due process).
The District Court properly applied the Zolin standard and the Governments Ex
Parte Affidavit sufficiently fulfilled this standard. The Ex Parte Affidavit contained
details from the FBI investigation into the projects involving the Bank for which
Corporation served as an advisor. The Affidavit also contained Attorneys statement to
the FBI that Attorney was consulted about a financing project, although Attorney did not
reveal the details of this communication. For these reasons, the District Court did not err
in concluding that there was a factual basis to support a good faith belief that in camera
examination of Attorney might reveal evidence establishing the applicability of the
crime-fraud exception and in conducting an in camera examination of Attorney.
2.
Intervenors contest the District Courts decision to exclude them from the in
camera examination of Attorney and its refusal to release a transcript or summary of the
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interviewing Attorney about his conversation with Client, if Attorney is willing. In this
way, Attorneys recollections are not grand jury secrets.
The Government argues, on the other hand, that the questions posed by the District
Court, some of which were submitted by the Government, do constitute grand jury
secrets.
uncovering what the Government wished to ask Attorney. Intervenors respond that they
already know what the grand jury is investigating due to the parallel prosecution in the
United Kingdom.
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The District Court did not abuse its discretion in excluding the Intervenors from
the interview or declining to release a transcript or summary of the testimony. The
District Court noted that even though secrecy concerns are minimized by the parallel case
in the United Kingdom, there appears to be a significant amount of information before
the grand jury that is not known to the Intervenors. The District Court did not err in so
concluding. Intervenors are not aware of how much the Government knows. But if they
were privy to the in camera examination, they could preview not only Attorneys grand
jury testimony, but also evidence already submitted to the grand jury, as reflected in the
Governments questions, and the Governments eventual trial evidence and strategy.
Even though some information regarding the investigation is public, the content of this
interview is entitled to protection as a grand jury secret. See In re Grand Jury Subpoena,
233 F.3d at 219 (Given the acknowledged need for secrecy in grand jury proceedings,
we reject Appellants argument that the unique facts and circumstances in this case,
including . . . the fact that the nature of the investigation has already been made public in
several contexts, required the District Court to order disclosure of the governments ex
parte affidavit.).
We therefore conclude that the District Court did not abuse its
suspect that the privilege holder was committing or intending to commit a crime or fraud
and that the attorney-client communications or attorney work product were used in
furtherance of the alleged crime or fraud . . . . In re Grand Jury, 705 F.3d at 153.3
We review the District Courts determination that there is sufficient evidence for
the crime-fraud exception to apply for an abuse of discretion. In re Impounded, 241 F.3d
at 318. We begin by acknowledging that this was a close case. The communication
between Attorney and Client was brief, and consisted mainly of informing Client of the
applicable law and advising that he not make the payment. However, we believe that the
questions posed by Attorney to Client and the information that Client could gain from
Intervenors argue on appeal that the District Court erred in applying this standard
for the crime-fraud exception. They maintain that the panel in In re Grand Jury
improperly overruled prior precedent to create this standard. In In re Grand Jury
Subpoena, we held that to invoke the exception, the government must make a prima
facie showing that (1) the client was committing or intending to commit a fraud or crime,
and (2) the attorney-client communications were in furtherance of that alleged crime or
fraud. 223 F.3d at 217 (internal citations omitted). We then clarified that [a] prima
facie showing requires presentation of evidence which, if believed by the fact-finder,
would be sufficient to support a finding that the elements of the crime-fraud exception
were met. Id. (quoting Haines v. Liggett Grp., Inc., 975 F.2d 81, 95-96 (3d Cir. 1992)).
The In re Grand Jury panel observed that sufficient to support was not
particularly helpful, as it begs the quantum-of-proof question because it does not
quantify what evidence is sufficient. 705 F.3d at 152. The Court sought to clarify the
standard, and examined Third Circuit precedent to conclude that our precedent is
properly captured by the reasonable basis standard. Id. at 153.
The In re Grand Jury panel followed what was binding, see IOP 9.1; sufficient
to support was not a holding, but part of a standard that we clarified. The panel further
clarified that for a presentation of evidence to be sufficient, there must be a reasonable
basis to suspect that the elements of the crime-fraud exception are fulfilled. The In re
Grand Jury Court did not improperly overrule the holding from a prior opinion; rather, it
clarified an applicable precedent to delineate a more specific standard. Therefore, we
adhere to the reasonable basis to suspect standard.
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those questions are sufficient for us to conclude that the District Court did not abuse its
discretion in determining that the advice was used in furtherance of a crime or fraud.
For the crime-fraud exception to apply, the client must be committing or
intending to commit a crime or fraud at the time he or she consults the attorney. In re
Grand Jury, 705 F.3d at 153. This requirement is stated in the present tense, and does
not by its terms apply to a situation where a client consults an attorney about a possible
course of action and later forms the intent to undertake that action. We have also
observed that the attorney-client privilege is not lost if the client innocently proposes an
illegal course of conduct to explore with his counsel what he may or may not do. United
States v. Doe, 429 F.3d 450, 454 (3d Cir. 2005). The exception does not apply where the
client forms the intent to engage in criminal or fraudulent activity after the consultation.
Other courts of appeals have specifically clarified when the client must have
developed the requisite intent. The Second Circuit explained that because the exception
only applies where the communications were intended in some way to facilitate or to
conceal the criminal activity, United States v. Jacobs, 117 F.3d 82, 88 (2d Cir. 1997)
(quoting In re Grand Jury Subpoenas Duces Tecum, 798 F.2d 32, 34 (2d Cir. 1986))
(internal quotation marks omitted), it is required to show that the wrong-doer had set
upon a criminal course before consulting counsel. Id. (emphasis in original). See also
In re Grand Jury Subpoenas, 144 F.3d 653, 660 (10th Cir. 1998) (The evidence must
show that the client was engaged in or was planning the criminal or fraudulent conduct
when it sought the assistance of counsel . . . .); In re Grand Jury Proceedings, 87 F.3d
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377, 381 (9th Cir. 1996) (To trigger the crime-fraud exception, the government must
establish that the client was engaged in or planning a criminal or fraudulent scheme
when it sought the advice of counsel to further the scheme. (quoting In re Sealed Case,
754 F.2d 395, 399 (D.C. Cir. 1985)).
A hypothetical question posed by Judge Ambro at oral argument highlights the
importance of the timing of intent. A client consults with an attorney, intending at the
time to go as close to the line of illegality as possible but to remain within the realm of
legal conduct. The client tells the attorney of a possible course of conduct and asks for
advice on the applicable law. The attorney gives advice, explaining which actions would
be legal and which actions would be illegal. A year later, the client decides that he or she
will cross the line from legal to illegal. Here, the crime-fraud exception would not apply,
because the client was not committing a crime or fraud or intending to commit a crime or
fraud at the time he or she consulted the attorney. Even if the client clearly used the
advice obtained a year earlier in furtherance of the crime or fraud, the exception would
not apply because the client did not have the requisite intent at the time of the
consultation.
In this case, the District Court did not abuse its discretion in determining that
Client intended to commit a crime at the time he consulted with Attorney in April 2008.
The evidence shows Clients intent to make a payment to Banker in order to ensure that
the project was approved in a timely manner. We can infer Clients pre-existing intent to
make the payment in part from his statement to Attorney that he was going to make the
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payment anyway, after Attorney advised him that he should not do so. This suggests that
Client had already considered the advisability of making the payment, and determined
that it was in his best interest to do so. The fact that the payment occurred in the same
month that the Bank approved the project financing also indicates that Client planned on
making the payment when he consulted with Attorney. Given the information available
to the District Court, we cannot say that it abused its discretion in concluding that Client
set upon an illegal course before seeking [Attorneys] advice about the schemes
legality. Jacobs, 117 F.3d at 89.
In delineating the connection required between the advice sought and the crime or
fraud, we have repeatedly stated that the legal advice must be used in furtherance of the
alleged crime or fraud. We have rejected a more relaxed related to standard, In re
Grand Jury Investigation, 445 F.3d at 277, and explained that the legal advice must
give[] direction for the commission of future fraud or crime, In re Grand Jury
Subpoena, 223 F.3d at 217 (quoting Haines, 975 F.2d at 90). Most recently, in In re
Grand Jury, we observed, [a]ll that is necessary is that the client misuse or intend to
misuse the attorneys advice in furtherance of an improper purpose. 705 F.3d at 157. It
is therefore clear from prior precedent that for advice to be used in furtherance of a
crime or fraud, the advice must advance, or the client must intend the advice to advance,
the clients criminal or fraudulent purpose. The advice cannot merely relate to the crime
or fraud.
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If the attorney merely informs the client of the criminality of a proposed action,
the crime-fraud exception does not apply. For example, consider the situation where a
client, intending to undertake an illegal course of action, consults a first attorney, tells the
attorney the proposed course of action, and the attorney advises that the course of action
is illegal. The client, dissatisfied with the first attorneys answer, then consults a second
attorney. The client tells the attorney the same proposed course of action, but this
attorney says yes, that course of action is legal. Both of these consultations would remain
privileged, because the attorneys merely opined on the lawfulness of a particular course
of conduct, and this advice cannot be used in furtherance of the crime.
The situation here is different. In addition to the advice Attorney provided to
Client that he should not make a payment, Attorney also provided information about the
types of conduct that violate the law. We cannot say that the District Court abused its
discretion in determining that there is a reasonable basis to conclude that [Attorneys]
advice was used by [Intervenors] to fashion conduct in furtherance of [their] crime.
Specifically, Attorneys questions about whether or not the Bank was a governmental
entity and whether Banker was a government official would have informed Client that the
governmental connection was key to violating the FCPA. This would lead logically to
the idea of routing the payment through Bankers sister, who was not connected to the
Bank, in order to avoid the reaches of the FCPA or detection of the violation. Of course,
it is impossible to know what Client thought or how he processed the information gained
from Attorney. But the District Court did not abuse its discretion in determining that
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Client could easily have used [the advice] to shape the contours of conduct intended to
escape the reaches of the law. For these reason, we affirm the District Courts finding
that the crime-fraud exception applies and its order compelling Attorney to testify before
the grand jury.
C.
Intervenors assert that Attorneys testimony is protected by the work product
doctrine. The District Court did not address this issue; however, it was fully briefed
before the District Court. The work-product doctrine . . . protects from discovery
materials prepared or collected by an attorney in the course of preparation for possible
litigation. In re Grand Jury Investigation, 599 F.2d 1224, 1228 (3d Cir. 1979) (quoting
Hickman, 329 U.S. at 505). The burden of proving the applicability of the work product
privilege rests upon the party asserting the privilege. Haines, 975 F.2d at 94. A lawyer
may assert the work product privilege, and [t]o the extent a clients interest may be
affected, he, too, may assert the work product privilege. In re Grand Jury Proceedings,
604 F.2d 798, 801 (3d Cir. 1979). Intervenors have attempted to assert the work product
privilege on their own behalf and on Attorneys behalf, arguing that an innocent attorney
can prevent disclosure of work product even if the client used it to further a crime or
fraud. Attorney did not raise the work product issue before the District Court and
Intervenors cannot assert the privilege on his behalf. Therefore, we need not address
whether an innocent attorney may raise the privilege when there is a crime-fraud finding.
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IV.
For the foregoing reasons, we affirm the order of the District Court enforcing the
grand jury subpoena.
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