Commercial Litigation and Arbitration

Attorney-Client Privilege — Crime-Fraud Exception — Civil Actions

Most decisions addressing the crime-fraud exception arise in the criminal context. The Ninth Circuit, in In re Napster, Inc. Copyright Litig., 2007 U.S. App. LEXIS 5836 (9th Cir. Mar. 14, 2007), addressed three issues in the civil context: (1) the standard of review, (2) the burden of proof on the party seeking to vitiate the privilege when it asks district court to order it outright disclosure (preponderance or simply a prima facie showing?), and (3) whether the party asserting the privilege is entitled to submit evidence relevant to the existence of the privilege and to dispute applicability of the exception. The Ninth Circuit held:

1. Standard of Review. The appropriate standard of review is not abuse-of-discretion but, rather, de novo review because ‛’rulings on the scope of the privilege, including the crime-fraud exception, involve mixed questions of law and fact“ (internal quotations and citations omitted).

2. Burden of Proof. The party seeking access to the privileged communications must establish its entitlement by a preponderance of the evidence — i.e., that (i) the party asserting the privilege was engaged in, or planning, a criminal or fraudulent scheme when it sought the advice of counsel, and (ii) the attorney-client communication was made in furtherance of the crime or fraud. The Napster Court observed, however, that a lesser standard — a prima facie showing — may suffice when only in camera review is sought.

3. Party’s Right to be Heard to Protect Privilege. ‛[I]n civil cases where outright disclosure is requested the party seeking to preserve the privilege has the right to introduce countervailing evidence.“

Held, inadequate showing made. Assertion of privilege upheld.

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