Ninth Circuit tightens crime-fraud exception
The attorney-client privilege is not as iron-clad as some clients would like to believe. Communications between a lawyer and client can be subject to discovery and used as evidence under the "crime-fraud exception," which eliminates the privilege for communications made in furtherance of a client's criminal or fraudulent scheme.
The on-going Napster copyright litigation has now spawned a Ninth Circuit opinion that makes it a bit more difficult to destroy the privilege via the crime-fraud exception. Yesterday in In re Napster, Inc. Copyright Litigation, the court observed that the procedures for applying the crime-fraud exception in the federal courts are "surprisingly unclear." The court sought to bring clarity the process, holding that (1) both the party seeking discovery of the communications and the party seeking to preserve the privilege must be allowed to present relevant evidence to the trial court, and (2) the burden of proof on the party seeking discovery is preponderance of the evidence. Formerly, courts had held that the party seeking to enforce the privilege had no right to present evidence on the subject, and that the burden on the moving party was a hard-to-define "prima facie" test.
The copyright plaintiffs had claimed that Bertelsmann AG had made a "sham" loan to Napster, and sought to obtain attorney-client communications relating to that loan under the crime-fraud exception. The Ninth Circuit held that plaintiffs failed to prove that the exception applied to what was apparently a routine business transaction.
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