Thursday, November 10, 2016

Crime Fraud Exception Permits Civil Discovery To Go Forward

The Maine Supreme Judicial Court has in the main affirmed findings that a defendant in civil litigation could not claim attorney-client privilege with respect to certain communications that had included a third party.

Paul Coulombe and two LLCs under his control—PGC1, LLC, and PGC2, LLC—appeal from discovery orders entered in the Business and Consumer Docket (Murphy, J.) that required the disclosure of specific communications over the assertion that those communications were protected by the attorney-client privilege. Coulombe contends that the court erred in determining that (A) Coulombe’s communications with his attorney that included a third party were not privileged and (B) the crime-fraud exception to the attorney-client privilege applied to allow the disclosure of other communications between Coulombe and counsel. We affirm the judgment except with respect to one communication that we conclude the trial court must consider further on remand.

The case involves a broken promise to hire the plaintiff to manage a golf course

Relevant here, Harris alleged that Coulombe, with assistance from his attorneys, Hawley Strait and John Carpenter, was secretly seeking a different golf course manager while Coulombe was simultaneously reassuring Harris that Harris was to manage the golf course. Harris alleged that it did not learn until March 2013—after ceasing independent efforts to purchase the Club, selling nearby JJR property to Coulombe at a discount, and beginning to manage Coulombe’s golf course after Coulombe purchased the Club—that someone else, Dan Hourihan, would be hired as the manager of the course.

The court applied the crime-fraud exception

 In this context, fraud must be understood broadly “as [a] generic term, embracing all multifarious means which human ingenuity can devise, and which are resorted to by one individual to get advantage over another by false suggestions or by suppression of truth, and includes all surprise, trick,cunning dissembling, and any unfair way by which another is cheated.”

... Ultimately, in determining what must be proved for the crime-fraud exception to apply in Maine, we must balance the need for clients to have the protection of privileged communications with their attorneys in order to obtain effective representation regarding current legal concerns or any past wrongdoing, against the need to prevent attorneys in the honorable practice of law from being used to perpetrate ongoing or future wrongdoing. Striking the proper balance is critical in assuring that attorneys can serve their clients effectively without having their legal services used for fraudulent or criminal purposes.

In order to strike that balance, and to maintain the high standards of the legal profession, the focus in determining whether the fraud portion of the crime-fraud exception applies must be on the elements within the control of the client that involve either the engagement in or the planning of a fraud. Because proof of planned fraudulent activity can result in the exception being applied, fraudulent activity may, for purposes of the crime-fraud exception to attorney-client privilege, be activity that, although deceptive and fraudulent, falls short of the fully realized civil tort of fraud.

Although proof of the complete tort is not necessary for the exception to apply, a party seeking to establish that a client was engaged in or planning fraudulent activity must offer evidence of the client’s intention and expectation that the party alleging injury would rely on the client’s misrepresentations, omissions, or other deceptive actions...

 Here, the court’s findings demonstrate that it applied the proper legal test. It found, for purposes of the discovery motion, that Harris had demonstrated by a preponderance of the evidence that (a) Coulombe was engaged in or planning fraudulent activity when the attorney-client communications took place and (b) Coulombe’s communications with counsel were intended by him to facilitate or conceal the fraudulent activity.

The evidence was sufficient for discovery with a caveat

 There is one possible exception to our decision affirming the trial court’s determination, however. Although Coulombe does not specifically argue that any particular pages of the materials submitted for the court’s review were improperly included in the court’s disclosure order, one email exchange appears to be unrelated to Coulombe’s dealings with Harris and may have been inadvertently ordered disclosed. We therefore remand for the court to clarify whether it intended to include that email exchange, which appears at pages 15626 through 15633 of the materials submitted for review, in its order requiring disclosure.

 

http://lawprofessors.typepad.com/legal_profession/2016/11/the-maine-supreme-judicial-court-has-in-the-main-affirmed-findings-that-a-defendant-in-civil-litigation-could-not-claim-attor.html

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