Entity May Appeal Privilege Order to Disclose Its Data Held by Former Employee But Not by Employees’ Counsel at Its Request — Perlman Unaffected by Mohawk (Circuit Split) — Reasonable-Basis-to-Suspect-Test for Crime-Fraud Excepttion
In re Grand Jury, 2012 U.S. App. LEXIS 25318 (3d Cir. Dec. 11, 2012):
ABC Corp., John Doe 1, and John Doe 2 are subjects of an ongoing grand jury investigation into an alleged criminal tax scheme. As part of that scheme, ABC Corp., under the direction of John Doe 1 and John Doe 2, purchased and subsequently sold numerous companies. These consolidated appeals concern whether documents and testimony relating to legal advice obtained by ABC Corp. in connection with these transactions are shielded by the attorney-client and work product privileges.
When ABC Corp. objected that the Government had improperly served a subpoena for documents on ABC Corp., the Government issued grand jury subpoenas for those documents to ABC Corp.'s current outside counsel — LaCheen, Wittels & Greenberg, LLP, and Blank Rome, LLP. Later, it also served subpoenas for documents and testimony on three attorneys formerly employed by ABC Corp. as in-house counsel. In each instance, the firms and counsel asserted attorney-client and work product privileges on ABC Corp.'s behalf, the Government moved to enforce the subpoenas, and ABC Corp. opposed the motion as the purported privilege holder.
The District Court granted the Government's motions to enforce based in part on the crime-fraud exception, which permits the Government to obtain access to otherwise privileged communications and work product when they are used in furtherance of an ongoing or future crime. Finding that the requested communications and work product either did not qualify as privileged or that any protection afforded was vitiated by this exception, the Court largely rejected ABC Corp.'s privilege claims and issued corresponding disclosure orders--the first directed to ABC Corp., LaCheen Wittels, and Blank Rome in March 2012 (the "March Order"), and the second directed to the three in-house counsel in June 2012 (the "June Order").
ABC Corp. seeks to appeal these Orders. Disclosure orders are not normally immediately appealable final decisions. To obtain immediate appellate review, a privilege holder must disobey the court's order, be held in contempt, and then appeal the contempt order. That has not happened here. ABC Corp. argues nonetheless that it can appeal under an exception to the contempt rule established in Perlman v. United States, 247 U.S. 7 (1918). Under Perlman, a privilege holder may immediately appeal an adverse disclosure order when the traditional contempt route is unavailable to it because 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.
We disagree that we have jurisdiction to hear ABC Corp.'s appeal from the March Order.
Footnote 3 We previously issued an opinion and judgment on May 24, 2012, dismissing the appeal of the March Order for lack of jurisdiction. Although we continue to dismiss the appeal for lack of jurisdiction, we vacate that opinion to avoid any confusion--particularly with respect to our dicta in that opinion regarding a recent Supreme Court case, Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100, 130 S. Ct. 599 (2009). [Note: This withdrawn opinion was excerpted in our blog post of June 1, 2012.]
It directs both ABC Corp. and the law firms to produce the withheld documents. While Blank Rome is in physical possession of them, it is holding them at the behest of ABC Corp. If ABC Corp. wants immediate appellate review, it can take possession of the documents, defy the disclosure Order, and appeal any resulting contempt sanctions. Because it has not yet taken these steps, we dismiss its appeal from the March Order for lack of appellate jurisdiction.
Footnote 4 As we explain below, if the parties cannot agree on how to transfer the documents, the District Court should impose a suitable method of transfer.
We agree, however, that we have jurisdiction to hear ABC Corp.'s appeal from the June Order, which is directed solely to its former in-house counsel. ABC Corp. cannot be held in contempt of this Order because it does not direct ABC Corp. to take or refrain from any action. And there is no indication that ABC Corp.'s former employees are anything but disinterested third parties unwilling to be held in contempt to vindicate its purported privilege. We therefore reach the merits of ABC Corp.'s appeal from the June Order.
ABC Corp. alleges a series of problems with that Order: (1) the Court applied the wrong standard of proof in determining whether the Government made a sufficient showing to support application of the crime-fraud exception; (2) no matter the proof required, the Court wrongly found that the Government satisfied its burden; (3) the Court erred in applying the crime-fraud exception to work product generated by the in-house counsel because there is no suggestion these attorneys were involved in the alleged criminal scheme; and (4) with respect to five particular documents, the Court ruled incorrectly that they either did not qualify as privileged or were subject to the crime-fraud exception.
We sympathize with the difficult position of ABC Corp.'s attorneys. They are arguing against the applicability of the crime-fraud exception without knowledge of the underlying evidence for that exception. Because this evidence would reveal aspects of the grand jury's investigation and thus cannot be made public, the District Court filed its March and June Orders under seal and provided only redacted copies to the parties. See Fed. R. Crim. P. 6(e)(2). Though we limit our discussion to background facts already disclosed to both parties in order to maintain this secrecy, we have received and closely reviewed unredacted versions of the Orders, as well as secret grand jury information submitted ex parte by the Government. On the basis of that review, we affirm the District Court's June Order. ***
***ABC Corp., John Doe 1, and John Doe 2 are subjects of an ongoing grand jury investigation that seeks to determine whether they and others undertook fraudulent business transactions in order to evade federal income taxes. ABC Corp. is an administratively "dissolved" corporation. It was formed in early 2004 and it ceased business operations in late 2005. John Doe 1 was the company's President and sole (though indirect) shareholder. John Doe 2, who was also affiliated with the company, is his son.
During ABC Corp.'s existence, it acquired companies with large cash accounts, few or no tangible assets, and considerable tax liabilities. ABC Corp. would transfer these target companies to two limited liability companies. According to the Government, shortly thereafter the limited liability companies would engage in various transactions that had the effect of fraudulently eliminating the target companies' tax liabilities. Having done so, John Doe 1 and John Doe 2 would then divert the target companies' cash assets to themselves and their family members. ***
Although the Government does not challenge Appellants' standing, we are obliged to address it sua sponte. FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 230-31 (1990) (quoting Anthony v. Council, 316 F.3d 412, 416 (3d Cir. 2003)). A person has standing to challenge a grand jury subpoena issued to another when he has a "sufficiently important, legally-cognizable interest in the materials or testimony sought." In re Grand Jury, 111 F.3d 1066, 1073 (3d Cir. 1997) (collecting cases). ABC Corp. has standing to challenge the grand jury subpoenas because it claims attorney-client and work product privileges in the documents and testimony at issue. Id.8 John Doe 1 and John Doe 2, in contrast, do not hold any privilege in the sought-after documents or testimony and have not asserted any other interest in them. They therefore lacked standing to oppose the Government's motion to enforce the subpoenas, and do not have standing to appeal the District Court's resulting Orders. ***
The District Court had jurisdiction under 18 U.S.C. § 3231. Although our jurisdiction is in dispute, we have the jurisdiction to decide that dispute. Alaka v. Att'y Gen., 456 F.3d 88, 94 n.8 (3d Cir. 2006).
A. Finality and the Contempt Rule
"[T]he right to a judgment from more than one court is a matter of grace and not a necessary ingredient of justice . . . ." Cobbledick v. United States, 309 U.S. 323, 325 (1940). Congress has bestowed this grace by granting the courts of appeals jurisdiction over "final decisions" of the district courts. 28 U.S.C. § 1291. Whether a decision is "final" depends on its effects. Marcus v. Twp. of Abington, 38 F.3d 1367, 1370 (3d Cir. 1994). "Ordinarily, a final decision will have two effects. First, the decision will fully resolve all claims presented to the district court. Second, after the decision has been issued, there will be nothing further for the district court to do." Aluminum Co. of Am. v. Beazer East, Inc., 124 F.3d 551, 557 (3d Cir. 1997) (citing Catlin v. United States, 324 U.S. 229, 233 (1945)).
When a district court orders a witness--whether a party to an underlying litigation, a subject or target of a grand jury investigation, or a complete stranger to the proceedings--to testify or produce documents, its order generally is not considered an immediately appealable "final decision" under § 1291. See United States v. Ryan, 402 U.S. 530, 532-34 (1971); Cobbledick, 309 U.S. at 326-29; Alexander v. United States, 201 U.S. 117, 118-22 (1906). It is well settled that a witness who "seeks to present an objection to a discovery order immediately to a court of appeals must refuse compliance, be held in contempt, and then appeal the contempt order." Church of Scientology of Cal. v. United States, 506 U.S. 9, 18 n.11 (1992) (citing Ryan, 402 U.S. 430); see also Cobbledick, 309 U.S. at 326-29; Alexander, 201 U.S. at 118-22; DeMasi v. Weiss, 669 F.2d 114, 121-23 (3d Cir. 1982). A district court's contempt order is itself immediately appealable because it is a final judgment imposing penalties on the willfully disobedient witness in what is effectively a separate proceeding. The contempt route to an immediately appealable final decision is a firmly established feature of federal appellate procedure, stretching back to at least the Supreme Court's 1906 decision in Alexander, but the decision to travel that route must not be made lightly. The Supreme Court has
consistently held that the necessity for expedition in the administration of the criminal law justifies putting one who seeks to resist the production of desired information to a choice between compliance with a trial court's order to produce prior to any review of that order, and resistance to that order with the concomitant possibility of an adjudication of contempt if his claims are rejected on appeal.
Ryan, 402 U.S. at 533 (citations omitted). The rule, "though at times a harsh one, was formulated to discourage appeals in all but the most serious cases." In re Grand Jury Proceedings, 604 F.2d 798, 800 (3d Cir. 1979). Requiring a person who objects to a disclosure order to "refuse to comply, be subjected to sanctions in contempt, and then appeal from the sanctions . . . [,] puts the objecting person's sincerity to the test by attaching a price to the demand for immediate review." Wilson v. O'Brien, 621 F.3d 641, 643 (7th Cir. 2010). It forces the objector to weigh carefully the likelihood of success of its challenge to the underlying disclosure order against the seriousness of the sanctions it would face--whether incarceration, a hefty monetary fine, or some other penalty--if it disobeys the order to disclose. It also forces the objector to assess the importance it attaches to avoiding the ordered disclosure and protecting any associated privileges.
B. The Perlman Exception to the Contempt Rule
In Perlman v. United States, 247 U.S. 7 (1918), the Supreme Court carved out an exception to the rule that a privilege holder must stand in contempt of a disclosure order before an immediate appeal may be taken. ***
Though the Perlman doctrine's reach has not been set precisely by the Supreme Court, it generally permits an interlocutory appeal of a disclosure order if it is directed at a disinterested third party lacking a sufficient stake in the proceeding to risk contempt by refusing compliance. See Church of Scientology, 506 U.S. at 18 n.11; United States v. Nixon, 418 U.S. 683, 691 (1974). In that circumstance, the privilege holder is allowed to appeal immediately without suffering contempt sanctions because the privilege holder cannot itself disobey the disclosure order and the third party to whom the disclosure order is directed is unlikely to do so on its behalf. See In re Grand Jury Empanelled Aug. 14, 1979, 638 F.2d 1235, 1237 (3d Cir. 1981) (explaining that the privilege holder in Perlman and its progeny "were not the targets of the subpoena itself, which meant that the contempt route for obtaining an appeal was not available to them"); In re Grand Jury Applicants, 619 F.2d 1022, 1025 (3d Cir. 1980) (explaining that "the Alexander-Cobbledick-Ryan [contempt] rule restricting appellate review is limited to situations where the contempt route to a final order is available to the appellant"); In re Grand Jury Proceedings, 604 F.2d at 800-01 (permitting Perlman appeal where the disclosure order adverse to the attorney-client privilege was not directed to the privilege holder); In re Air Crash at Belle Harbor, N.Y. on Nov. 12, 2001, 490 F.3d 99, 105-06 (2d Cir. 2007); Wilson, 621 F.3d at 642-43; In re Motor Fuel Temperature Sales Practices Litig., 641 F.3d 470, 485-86 (10th Cir. 2011).
C. Mohawk and its Effect on Perlman
In addition to contempt and Perlman appeals, some courts permitted privilege holders to take immediate appeals of adverse privilege determinations if they could satisfy the requirements of the collateral order doctrine. The doctrine, first announced in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), provides that there is a small class of collateral rulings that, although they do not terminate the litigation, are appropriately deemed final under § 1291. Id. at 545-46. "That small category includes only decisions  that are conclusive,  that resolve important questions separate from the merits, and  that are effectively unreviewable on appeal from the final judgment in the underlying action." Swint v. Chambers Cnty. Comm'n, 514 U.S. 35, 45 (1995).
In Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100, 130 S. Ct. 599 (2009), however, the Supreme Court held that disclosure orders adverse to the attorney-client privilege do not qualify for immediate appeal under the collateral order doctrine. Focusing exclusively on the third requirement of the collateral order doctrine, the Mohawk Court held that "collateral order appeals are not necessary to ensure effective review of orders adverse to the attorney-client privilege" where the privilege holder is a party to the litigation because "postjudgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege." Mohawk, 130 S. Ct. at 606. "Appellate courts can remedy the improper disclosure of privileged material in the same way they remedy a host of other erroneous evidentiary rulings: by vacating an adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence." Id. at 606-07.
The Government argues that this decision narrows the traditionally understood scope of the Perlman doctrine to instances where effective postjudgment review is unavailable. Deciding whether Mohawk precludes our jurisdiction in this case--where the privilege holder, ABC Corp., is a subject of a grand jury investigation--prompts two distinct inquiries.
The first is whether Mohawk, which dealt with the collateral order doctrine, applies to the Perlman rule at all. Other courts of appeals—see Holt-Orsted v. City of Dickson, 641 F.3d 230, 236-40 (6th Cir. 2011); United States. v. Krane, 625 F.3d 568, 572-73 (9th Cir. 2010); Wilson, 621 F.3d at 642-43 — have concluded that the Supreme Court's reasoning in Mohawk about the effective reviewability of disclosure orders that would break the attorney-client privilege applies equally to Perlman so long as the privilege holder is a party to an underlying litigation. When that is the case, those claims can be reviewed effectively postjudgment, making immediate appeals unnecessary.
Assuming Mohawk narrows Perlman at all, the second inquiry is whether this reasoning extends to prohibit Perlman appeals from grand jury investigations. An order requiring the disclosure of privileged materials arguably is as effectively reviewable, absent an immediate appeal, for subjects of a grand jury investigation as it is for parties in civil litigation. If the grand jury's investigation leads to an indictment and later a conviction, we can remedy an "improper disclosure of privileged material . . . by vacating the adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence." Mohawk, 130 S. Ct. at 606-07. Of course, this may not always be the case. A subject of a grand jury investigation may not actually have an opportunity for post-conviction review of a disclosure order; he may never be indicted, the charges may be dismissed, or he may be acquitted. The same is often true in civil litigation, however. After an unfavorable privilege ruling, a civil litigant may nonetheless settle, obtain summary judgment, or win a favorable verdict, leaving the privilege broken and the District Court's ruling unchallenged.
Regardless, we decline to hold that the Supreme Court narrowed the Perlman doctrine--at least in the grand jury context--sub silentio. See Hohn v. United States, 524 U.S. 236, 252-53 (1998) ("Our decisions remain binding precedent until we see fit to reconsider them, regardless of whether subsequent cases have raised doubts about their continuing vitality."); Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989) ("If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions."). Perlman himself sought to prevent the disclosure of documents to a grand jury that was conducting an investigation into whether he committed perjury in a patent infringement action. The Supreme Court has not subsequently suggested that Perlman's status as a grand jury subject would today deny him immediate appellate review and the Mohawk Court gave no clear indication that this was a consequence of its intended holding. It did not discuss, mention, or even cite Perlman, a fact that is not that surprising given that the Perlman doctrine and the collateral order doctrine recognize separate exceptions to the general rule of finality under § 1291. See Krane, 625 F.3d at 572.
Footnote 11. The Mohawk Court surveyed other appellate options available to aggrieved privilege holders, and indicated that, when confronted with an adverse decision from the district court, a party in a civil proceeding can still receive an immediate appeal via the contempt route. 130 S. Ct. at 607-08. This may indicate that the Perlman doctrine, which can be seen as an exception to the normal rule requiring a privilege holder to be held in contempt to appeal interlocutory, remains in place where the holder is a civil litigant or grand jury subject.
The Government argues that we should nonetheless hold that the Mohawk Court narrowed Perlman because "Mohawk's description of the final-judgment rule relied on . . . precedent regarding what it means for an order to be effectively 'final,' and this precedent indisputably includes Perlman." Government's Br. at 26 (Aug. 31, 2012). The Government cites Ryan for its statement that all appeals under § 1291--which includes both collateral order and Perlman appeals--should be limited to "cases where denial of immediate review would render impossible any review whatsoever of an individual's claims." 402 U.S. at 533; see also Cobbledick, 309 U.S. at 328 (noting that the "analysis of finality" applied in Cobbledick is "illustrated" by Perlman). In the same passage of Ryan, however, the Court described Perlman--a case where the privilege holder was a grand jury subject--as satisfying the finality requirement. 402 U.S. at 533.
We cannot say that the Supreme Court has abandoned that determination on the basis of a later case, Mohawk, that never cites, let alone discusses, Perlman. If and when that Court next hears a case involving the Perlman doctrine, it may well hold that the doctrine does not allow grand jury subjects to receive immediate appellate review of adverse privilege determinations. And, given the need for judicial efficiency in the criminal context, such a decision may be justifiable. We will not, however, intrude on the Supreme Court's prerogative to make that determination. We therefore conclude that the Perlman exception remains viable. ***
A. Crime-Fraud Exception: Quantum of Proof
"Though they both operate to protect information from discovery, the work-product doctrine and the attorney-client privilege serve different purposes." In re Chevron Corp., 633 F.3d 153, 164 (3d Cir. 2011). The attorney-client privilege protects from disclosure confidential communications made between attorneys and clients for the purpose of obtaining or providing legal assistance to the client. In re Teleglobe Commc'ns Corp., 493 F.3d 345, 359 (3d Cir. 2007); accord Restatement (Third) of the Law Governing Lawyers § 68 (2000). Although such communications may be both relevant and highly probative of the truth, we shield them from production 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. v. United States, 449 U.S. 383, 389 (1981).
The work product doctrine, in contrast, "promotes the adversary system by enabling attorneys to prepare cases without fear that their work product will be used against their clients." In re Chevron Corp., 633 F.3d at 164 (quotation marks and citation omitted). It "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 v. Taylor, 329 U.S. 495, 505 (1947)).
Despite their importance, the protections afforded by the attorney-client privilege and the work product doctrine are not absolute. The Supreme Court has explained that the crime-fraud exception is one limit on the scope of the protection afforded by the attorney-client privilege.
The attorney-client privilege must necessarily protect the confidences of wrongdoers, but the reason for that protection--the centrality of open client and attorney communication to the proper functioning of our adversary system of justice--ceases to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing.
United States v. Zolin, 491 U.S. 554, 562-63 (1989) (quotation marks, alterations, and citations omitted). We have held that this exception also applies to the work product doctrine. "The work product privilege is perverted if it is used to further illegal activities as is the attorney-client privilege, and there are no overpowering considerations in either situation that would justify the shielding of evidence that aids continuing or future criminal activity." In re Grand Jury Proceedings, 604 F.2d 798, 802 (3d Cir. 1979).
To circumvent these privileges under the crime-fraud exception, the party seeking to overcome the privilege--in this case, 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." In re Grand Jury Subpoena, 223 F.3d at 217 (citations omitted). The "prima facie" standard is drawn from the Supreme Court's decision in Clark v. United States, 289 U.S. 1 (1933). ***
While there is general agreement on these precepts, courts of appeals are divided as to the appropriate quantum of proof necessary to make a prima facie showing. This is not surprising. "'Prima facie' is among the most rubbery of all legal phrases; it usually means little more than a showing of whatever is required to permit some inferential leap sufficient to reach a particular outcome." In re Grand Jury Proceedings, 417 F.3d 18, 22-23 (1st Cir. 2005) (citing Black's Law Dictionary 1228 (8th ed. 2004); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973)).
When the Supreme Court last addressed the crime-fraud exception, it did little to clarify the necessary evidentiary showing. Because it is difficult to determine whether a document contains communications used in furtherance of a crime or fraud, courts sometimes review the allegedly privileged materials in camera to decide whether the crime-fraud exception applies to preclude the privilege. The Supreme Court affirmed the permissibility of that practice in Zolin so long as there is independent evidence "sufficient to support a reasonable belief that in camera review may yield evidence that establishes the exception's applicability." 491 U.S. at 574-75. The Court indicated that this is a "lesser evidentiary showing" than is "required ultimately to overcome the privilege," id. at 572, but declined to address the amount of proof that is ultimately required, id. at 563.
Courts of appeals have articulated the proper measure of proof in different ways. Some require there to be probable cause or a reasonable basis to suspect or believe that the client was committing or intending to commit a crime or fraud and that the attorney-client communications were used in furtherance of the alleged crime or fraud. See In re Grand Jury Proceedings, 417 F.3d at 23 & n.4; United States v. Jacobs, 117 F.3d 82, 87 (2d Cir. 1997); United States v. Collis, 128 F.3d 313, 321 (6th Cir. 1997); In re Grand Jury Proceedings, 87 F.3d 377, 381 (9th Cir. 1996). Other courts call for evidence sufficient to compel the party asserting the privilege to come forward with an explanation for the evidence offered against the privilege. See United States v. Boender, 649 F.3d 650, 655-56 (7th Cir. 2011); In re Grand Jury Subpoena, 419 F.3d 329, 336 (5th Cir. 2005). Still other courts demand a showing of evidence that, if believed by a trier of fact, would establish that some violation was ongoing or about to be committed and that the attorney-client communications were used in furtherance of that scheme. See In re Grand Jury, 475 F.3d 1299, 1305 (D.C. Cir. 2007); In re Grand Jury Proceedings #5 Empanelled January 28, 2004, 401 F.3d 247, 251 (4th Cir. 2005); In re Grand Jury Investigation, 842 F.2d 1223, 1226-27 (11th Cir. 1987).
Our own statement of the proof necessary to apply the crime-fraud exception is not particularly helpful. We have consistently expressed the amount of proof required as follows: "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.'" In re Grand Jury Subpoena, 223 F.3d at 217 (quoting Haines v. Liggett Grp. Inc., 975 F.2d 81, 95-96 (3d Cir. 1992)). This begs the quantum-of-proof question because it does not quantify what evidence is sufficient. For example, does the trier of fact have to find that there is probable cause to believe a crime or fraud occurred or that it is more likely than not a crime or fraud occurred?
The question of what proof we require to overcome evidentiary privileges arises in this appeal. Although the District Court cited our traditional "sufficient to support" language, it also concluded that the Government had met its burden by establishing that there was a "reasonable basis to suspect" that ABC Corp. had committed a crime or fraud. ABC Corp. urges us to disavow this "reasonable basis to suspect" language, which it asserts reflects a far less stringent standard than our own "sufficient to support" test, and to remand this matter to the District Court so that it can analyze whether the Government met its burden under the appropriate standard.
We have never held, however, that our crime-fraud standard was significantly more demanding than the standards set out by other courts of appeals. To the contrary, we have cited approvingly the Seventh Circuit Court's pronouncements that a party opposing the privilege meets its burden by introducing evidence sufficient to require the party asserting the privilege to come forward with an explanation, In re Impounded, 241 F.3d at 317 (citing In re Feldberg, 862 F.2d 622, 626 (7th Cir. 1988)), and that "prima facie evidence cannot mean 'enough to support a verdict in favor of the person making the claim,'" In re Grand Jury Investigation, 445 F.3d 266, 275 (3d Cir. 2006) (quoting In re Feldberg, 862 F.2d at 624). We have also stressed that "[t]he burden is not a particularly heavy one," and that "demonstrating a reasonable basis to suspect the perpetration of a crime, if based on adequate evidence, satisfies the first prong of the crime-fraud exception." Id. at 274-75; see also Haines, 975 F.2d at 95 (approving the District Court's determination that the "probable cause" formulation and the "sufficient to support" standard "amount to the same basic proposition").
Today, we clarify that our precedent is properly captured by the reasonable basis standard. The attorney-client privilege, work product doctrine, and crime-fraud exception are all compromises based on policy determinations. Although it is difficult to predict whether a particular standard of proof will strike the appropriate balance between these competing policy concerns, we believe, as do other circuit courts, that the reasonable basis standard affords sufficient predictability for attorneys and clients without providing undue protection to those that seek to abuse the privileges afforded to them. This is also the standard that we believe is closest to the Supreme Court's pronouncement that, for the crime-fraud exception to apply, "there must be something to give colour to the charge" that the attorney-client communication was used in furtherance of a crime or fraud. Clark, 289 U.S. at 15.
Where there is a reasonable basis to 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, this is enough to break the privilege. The reasonable basis standard "is intended to be reasonably demanding; neither speculation nor evidence that shows only a distant likelihood of corruption is enough." In re Grand Jury Proceedings, 417 F.3d at 23. At the same time, [*50] the party opposing the privilege is not required to introduce evidence sufficient to support a verdict of crime or fraud or even to show that it is more likely than not that the crime or fraud occurred. See id. at 22; In re Grand Jury Investigation, 445 F.3d at 274-75. The reasonable basis standard is one with which courts are familiar, and we are confident that they will be able to apply it consistently to achieve the policy objectives of the privileges and the crime-fraud exception.
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