In the wake of the DOJ's decision to reduce a prosecutor's ability to ask corporations to waive attorney-client privilege, the advice-of-counsel defense and crime-fraud exceptions to the attorney client privilege are vital to understand. Common misunderstanding of how these two exceptions play out in day-to-day corporate communications raises the risk that some will draw undue comfort from the new policy and fail to appreciate the still very significant risk to the confidentiality of attorney-client communications.
"We relied on the advice of our lawyers." Rather than serving as the get-out-of-jail free card that many laypersons believe they obtain by seeking legal advice with respect to a contemplated transaction, invoking the advice of counsel defense can prolong, complicate and even exacerbate a dispute. This is because in practice it can be very difficult to meet the two requirements of the defense, i.e., that full disclosure of the facts was made or that the advice was followed precisely.
Likewise, with the crime-fraud exception, a common misunderstanding is that the lawyer must have known of the fraud. This is not the case. It is the intent of the client, not the lawyer, that it is determinative. Thus, even legal advice rendered by the lawyer in good faith can fall within the crime-fraud exception. Second, because this exception arises most frequently in criminal cases, people tend to focus on the "crime" prong of the exception and dismiss the "fraud" prong, which can be the much broader of the two.
The information above is condensed from an article that ran in the February 28 issue of White Collar Crime Reporter. For the full article, click the link located on the right side of this page.