In Re: Grand Jury

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
11-23-2005
In Re: Grand Jury
Precedential or Non-Precedential: Precedential
Docket No. 04-4136
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PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 04-4136
____________
UNITED STATES OF AMERICA
Appellant
v.
JOHN DOE
Appellee
____________
Appeal from the United States District Court
For the District of New Jersey
D.C. No.: 04-mc-00106
District Judge: Honorable John W. Bissell, Chief Judge
____________
Argued: October 25, 2005
Before: SLOVITER, FISHER, and ROSENN, Circuit Judges
(Filed November 23, 2005)
Nicholas A. Marsh (Argued)
Peter R. Zeidenberg
United States Department of Justice Criminal Division
1400 New York Avenue, N.W.
Washington, D.C. 20005
Counsel for Appellant
Jeffrey D. Smith (Argued)
DeCotiis, Fitzpatrick, Cole & Wisler
500 Frank W. Burr Boulevard
Glenpointe Centre West
Teaneck, NJ 07666
Counsel for Appellee
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OPINION OF THE COURT
____________
ROSENN, Circuit Judge.
This appeal raises several serious questions concerning
the time-respected role of privileged communication between
client and attorney and the crime-fraud exception. For almost
four years now, the Government has had an active grand jury
investigating certain activities of a federal law enforcement
officer (hereinafter referred to as “Target”). The Government
submitted details of the investigation to the District Court
under seal through an ex parte affidavit of Peter R.
Zeidenberg, a trial attorney of the Criminal Division of the
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Public Integrity Section of the United States Department of
Justice. The Government sought the grand jury testimony of
an attorney (hereinafter referred to as “Attorney”) from whom
Target sought legal advice in connection with an allegedly
fraudulent, and likely criminal, course of conduct.
Specifically, the Government claims to have discovered
evidence that Target proposed to engage in future criminal
conduct, and that Target’s purpose in consulting Attorney was
to ascertain how best to conceal the illegal activity in which
he planned to engage.
Attorney refused to respond to a grand jury subpoena,
invoking the attorney-client privilege and moving to quash the
subpoena. The District Court for the District of New Jersey
conducted a sealed hearing on the motion to quash. The
Government argued that the crime-fraud exception to the
privilege applied to Target’s conversations with the lawyer
because they were in furtherance of Target’s planned criminal
activity. The Government also opposed the motion to quash
because certain conversations between the attorney and Target
involved the participation and presence of a third party
(hereinafter referred to as “Witness”) that dispelled the
privilege.
The District Court issued an oral ruling granting the
motion to quash, concluding that the crime-fraud exception
did not apply and that the presence of Witness did not dispel
the privilege. The Government timely appealed. For reasons
set forth below, we reverse and direct the denial of the motion
to quash.
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I.
On appeal, the Government raises two issues of law:
(1) that the District Court erred in applying a “cumulative
evidence” standard to the motion to quash because the
testimony sought was unnecessary for the grand jury in light
of the testimony that it had already heard, and (2) the Court
erred in interpreting the crime-fraud exception to require an
attorney’s knowing furtherance of the client’s crime before
the privilege can be pierced. We exercise de novo review
over the issues of law underlying the application of the
attorney-client privilege. In re Impounded, 241 F.3d 308, 312
(3d Cir. 2001). As to other issues, our standard of review of
the application of that law is for abuse of discretion. Id.II.
The attorney-client privilege is a well-established
historic rule which protects confidential communications
between client and attorney. The privilege belongs to the
client, not the attorney. The Supreme Court has long
emphasized that the central concern of the privilege is 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.”
United States v. Zolin, 491 U.S. 554, 562 (1989) (quoting
Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). The
attorney-client privilege under federal law is the “oldest of the
privileges for confidential communications known to the
common law.” Id.; State of Maine v. U.S. Dept. of the
Interior, 298 F.3d 60, 70 (1st Cir. 2001). The privilege is not
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lost if a client proposes a course of conduct which he is
advised by counsel is illegal, but is extinguished when a client
seeks legal advice to further a continuing or future crime.
Zolin, 491 U.S. at 563. Because this ancient and valuable
privilege is at the expense of the full discovery of the truth, it
should be strictly construed. In re Grand Jury Proceedings,
219 F.3d 175, 182 (2nd Cir. 2000).
The common interest privilege allows for two clients to
discuss their affairs with a lawyer, protected by the attorney-
client privilege, so long as they have an “identical (or nearly
identical) legal interest as opposed to a merely similar
interest.” F.D.I.C. v. Ogden Corp., 202 F.3d 454, 461 (1st
Cir. 2000). The District Court found that Target and Witness
shared a common interest, and therefore, the presence of
Witness did not vitiate the attorney-client privilege. The
Government has not challenged this finding of common
interest on appeal and so we do not reach this issue
III.
A.
The Government contends that the District Court erred
by focusing on whether Attorney’s testimony would be
necessary and cumulative. Although the Government must
make a preliminary showing of relevance, necessity and
significance are not part of the showing. In re Grand Jury
Proceedings, 507 F.2d 963, 966 (3rd Cir. 1975); In re Grand
Jury Matter, 906 F.2d 78, 88 (3d Cir. 1990) (“‘Requiring the
government to show both that the information it hopes to
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obtain . . . is significant and that that information is
unavailable from other sources would obviously impair the
efficiency of grand juries.’ . . . The grand jury cannot be
constrained to acquire only the minimum evidence necessary
to secure an indictment and is free to pursue cumulative
leads.”) (quoting In re Grand Jury Proceedings, 862 F.2d 430,
431-32 (2d Cir. 1988)). The purpose of the grand jury is not
to determine guilt or innocence of any person but to
investigate and determine whether or not there is probable
cause to prosecute a particular defendant. United States v. R.
Enters., Inc., 498 U.S. 292, 297-98 (1991). It is the best judge
of what evidence it deems necessary in the pursuit of its
investigation. “How much information is ‘enough’ is a matter
for the judgment of the grand jurors and the prosecution
rather than the court.” In re Grand Jury Matter, 906 F.2d at
88.
In stating its oral decision in this case, the District
Court confined its statements to the conduct of the attorney
and made no comments on whether the testimony of the
attorney was cumulative or necessary. These comments did
not enter into the rationale of its decision, but came only after
it had stated its decision and reasoning. It then simply noted
that it might have exercised its discretion to “strain a little
further, so to speak, to find an exception” to the attorney-
client privilege had the testimony been “truly critical.” The
Court’s comments did not constitute an abuse of discretion.
We reject this contention of the Government as having no
merit.
B.
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We now turn to the Government’s principal argument,
the crime-fraud exception to the attorney client privilege rule.
As the Supreme Court noted in Zolin, the attorney-client
privilege is not without limitations. A principal and
reasonable exception is that the privilege may not be used for
the purpose of obtaining advice to promote crime or fraud.
Although broad, the privilege does not allow a client to shield
evidence of an intent to use an attorney’s advice to further a
criminal purpose.
The crime-fraud exception to the attorney-client
privilege applies to any communications between an attorney
and client that are intended “to further a continuing or future
crime or tort.” In re Impounded, 241 F.3d 308, 316 (3d Cir.
2001). In this analysis, “the client’s intention controls and the
privilege may be denied even if the lawyer is altogether
innocent.” In re Grand Jury Proceedings, 604 F.2d 798, 802
(3d Cir. 1979). The 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. Only when a
client knowingly seeks legal counsel to further a continuing or
future crime does the crime-fraud exception apply.
Although the District Court made no formal findings
of fact as to the defendant’s intent in consulting with his
lawyer, the record is sufficient to support a finding that the
Government met its burden of establishing a prima facie case
to have the subpoena honored. A prima facie showing
“requires 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
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Subpoena, 223 F.3d 213, 217 (3d Cir. 2000) (quoting Haines
v. Liggett Group Inc., 975 F.2d 81, 95-96 (1992)).
Specifically, the Government must show that “the client was
committing or intending to commit a fraud or crime” and that
the consultation was “in furtherance of that alleged crime or
fraud.” Id.The District Court made no findings of fact as to the
intent of either Target or Witness and applied the wrong
standard for the crime-fraud exception. A hypothetical
introduced by the Court to discuss the case, which it stated
was close to the actual facts, appears to assume that the client
did not have an awareness of the illegality. The Court also
stated this was not a situation “where advice was sought for
and presumably utilized for [an illegal] purpose.” An
examination of the entire oral opinion, however, leads us to
conclude that the Court improperly relied on whether the
consultation assisted or furthered the crime. The Court should
have focused on the intent of Target and Witness in their joint
consultations with the attorney.
The record is reasonably clear as to the criminal intent
of Target. It shows that Target was an experienced federal
law enforcement officer, having served in that capacity for
seven years. Witness’ business was at the center of an
investigation in which Target was responsible for
coordinating Witness’ activities as an informant. Target
consulted Attorney in 1999, asking how he could invest in
Witness’ business. Witness later informed the Government
that Target “sought [Attorney’s] advice on how such an
investment could be made – and, in particular, whether
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[Target] could do the investment in [his] wife’s name rather
than in [Target’s] name so that he could not be directly tied to
the investment.”
The investment would have been a criminal violation
of 18 U.S.C. § 208 & 209 which bar any officer or employee
of an independent agency of the United States, unless
exempted or granted a special exception of the Government,
from having a financial interest in any business or any
arrangement concerning prospective employment, or from
receiving salary or compensation from nongovernmental
sources. We think it implausible that an experienced
government agent like Target would not know that the
proposed investment was a crime. In March 2000, Target
made the investment in the business of Witness and received
$1000-2000 per week for the duration of the investment. We
conclude that the Government has made a prima facie case
that the crime-fraud exception applies.
Although Target and Witness were involved in other
illegal activities after the consultations, the Government does
not contend that those activities were contemplated at the time
of the meeting, nor that Target or Witness attempted to further
those activities by the consultations in 1999.
III.
For the forgoing reasons, we reverse the order of the
District Court and remand the proceedings to the District
Court with instructions to deny the motion to quash the
subpoena by the Government.
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