The “crime-fraud” exception can deny privilege protection for certain otherwise protected communications between lawyers and their clients. However, many litigants and even some lawyers misunderstand the doctrine’s narrow reach.
In In re General Motors LLC Ignition Switch Litigation, Nos. 14-MD-2543 (JMF) & 14-MC-2543 (JMF), 2015 U.S. Dist. LEXIS 159721 (S.D.N.Y. Nov. 25, 2015), Judge Furman analyzed plaintiffs’ attempt to strip away GM’s privilege protection for communication with its ignition switch litigation lawyers at King & Spalding. Plaintiffs claimed that the communications involved GM’s knowing concealment of ignition switch troubles — and sought production of the withheld communications or at least the court’s in camera review of those documents. The court rejected plaintiffs’ arguments. Although acknowledging that GM’s deferred prosecution agreement provided evidence that GM may have engaged in criminal or fraudulent conduct, the court held that plaintiffs fell short of providing a “factual basis” for their argument that “any particular communications or work product they seek . . . were made with the intent to further a crime or fraud.” Id. at *128. The court correctly applied the crime-fraud exception. That doctrine does not destroy privilege protection for documents that might evidence the client’s misconduct. Instead, the adversary must establish to some degree (courts disagree on the exact standard) that the withheld communications furthered the client’s sufficiently egregious misconduct.
With the increasing criminalization of corporate wrongdoing, companies should be relieved that most courts continue to hold the line on an “exception” to the attorney-client privilege that could otherwise swallow the protection. Next week’s Privilege Point will discuss another favorable ruling in the same case.