Circuit Court Applies the Crime-Fraud Exception Narrowly in the Case of Alleged Securities Fraud

January 7, 2002

Because they obviously fall outside the type of communications that society wants to encourage, discussions between a lawyer and client about a client’s future crime or fraud do not deserve attorney-client privilege protection. The crime-fraud exception has widened dramatically in recent years (to the detriment of corporations), but a recent Circuit Court decision applied the doctrine narrowly.

In In re BankAmerica Corp. Securities Litigation, 270 F.3d 639 (8th Cir. 2001), a lower court applied the crime-fraud exception in a case alleging that Bank of America used a lawyer’s advice to commit securities fraud. The lower court failed to conduct an in-camera review of the pertinent documents, and failed to insist that the plaintiff present some proof that the Bank’s alleged failure to disclose information was fraudulent (as opposed to unintentional).

The Eight Circuit issued a writ of mandamus, and overturned the lower court’s broad application of the crime fraud exception. Its strict language and insistence that lower courts conduct an in-camera review provide welcome relief to the trend toward expanding the crime-fraud exception.