By Anthony P. Fritz, Esq.
The FBI raid on Michael Cohen’s office, home and hotel room in April 2018, and the seizure of business records, e-mails, audio tape records and other materials brought the issue of attorney-client privilege into national focus. Most people know that Mr. Cohen was one of Donald Trump’s longtime personal attorneys and that Cohen arranged a non-disclosure agreement with Trump and Stephanie Clifford, aka Stormy Daniels, in November 2016. Mr. Cohen also represented Elliott Broidy, former RNC deputy finance chairman, in a similar arrangement with a former Playboy model. Cohen’s third client, Sean Hannity, stated publicly that Mr. Cohen did little or no legal work for him.
In order to obtain search warrants, the FBI had to show probable cause that a crime was committed and that items connected to the crime are likely to be found in the places specified by the warrants. It remains to be seen whether Cohen might face criminal charges, or whether any of his three clients might be implicated in any of Cohen’s possible criminal activities.
The FBI seized materials that included communications between Mr. Cohen and Mr. Trump, and others. After the records were seized, Cohen’s attorneys appeared before Kimba Wood, Federal Judge in the Southern District of New York, and argued that they should have the right to review the materials and redact or withhold any information they believe is protected by the attorney-client privilege before Federal law enforcement officials could review any of the seized materials.
Instead, Judge Wood appointed a Special Master to review the seized materials and render decisions regarding privilege issues. Judge Wood gave Cohen and his attorneys the right to identify the information that they claim is privileged and therefore protected from disclosure. The Special Master is entitled to confer with the Government on privilege issues without disclosing information that Cohen claims to be privileged. The Special Master is required to issue a report of her privilege determinations to the Court, giving the parties the right to object to the determinations, with the Court making the final decision as to any information that is privileged and therefore cannot be reviewed by Federal prosecutors. Judge Wood specifically directed the parties to focus on the “crime/fraud” exception to the attorney-client privilege in assessing privilege issues.
The Court’s determination of privilege issues will undoubtedly have a major impact on Mr. Cohen’s future, and could very well affect the Trump presidency, and the future of our nation.
Attorney-client communication and work-product privileges are frequently raised in litigation, and it is important to understand how these privileges operate in practice. Michael Cohen’s privilege claims will be determined under New York law, but we believe that an understanding of the application of attorney-client privileges under California law will help our readers understand how those principles will likely be applied in Mr. Cohen’s case.
Attorney-Client privilege applies to a communication made in confidence in the course of the lawyer-client relationship. Evid. Code section 917. A lawyer-client relationship begins when a person consults an attorney for legal advice. The client is the holder of the privilege and can prevent another from disclosing a confidential communication between the client and lawyer. Evid. Code section 954. The lawyer who received or made a communication subject to the privilege shall claim the privilege whenever he is present when the communication is sought to be disclosed and is authorized to claim the privilege under Evidence Code section 954(c). Evid. Code section 955.
The attorney-client privilege has been a hallmark of Anglo-American jurisprudence for almost 400 years. The privilege authorizes a client to refuse to disclose and to prevent others from disclosing, confidential communications between attorney and client. The fundamental purpose behind the privilege is to safeguard the confidential relationship between clients and their attorneys so as to promote full and open discussion of the facts and tactics surrounding individual legal matters. The public policy fostered by the privilege seeks to ensure “the right of every person to freely and fully confer and confide in one having knowledge of the law, and skilled in its practice, in order that the former may have adequate advice and a proper defense.”
Although exercise of the privilege may result in the suppression of relevant evidence, the Legislature has determined that these concerns are outweighed by the importance of preserving confidentiality in the attorney-client relationship. “The privilege is given on grounds of public policy in the belief that the benefits derived therefrom justify the risk that unjust decisions may sometimes result from the suppression of relevant evidence.” Mitchell v. Superior Court (1984) 37 Cal.3d 591, 601.
Scope of the Privilege
The attorney-client privilege includes oral and written statements, actions, signs and other means of communicating information to the client. The privilege covers the transmission of documents which are available to the public, and not merely information in the sole possession of the attorney or client. The actual fact of the transmission to the client merits protection since discovery of the transmission by an attorney of specific public documents to the client might very well reveal the transmitter-attorney’s intended strategy. Mitchell v. Superior Court (1984) 37 Cal.3d 591, 601.
Attorney Work-Product Privilege
“The work product of an attorney shall not be discoverable unless the court determines that denial of discovery will unfairly prejudice the party seeking discovery in preparing his claim or defense or will result in an injustice, and anything in writing that reflects an attorney’s impressions, conclusions, opinions, or legal research or theories shall not be discoverable under any circumstances.” Civil Procedure section 2018.030.
The effect of section 2018.030 is to create two privileges: “a qualified privilege against discovery of a general work product and an absolute privilege against disclosure of documents containing the attorney’s `impressions, conclusions, opinions, or legal research or theories.” American Mut. Liab. Ins. Co. v. Superior Court (1974) 38 Cal. App.3d 579, 594. The attorney is the holder of work-product protection and has the right to assert the privilege.
Prima Facie Privilege Claim
The party claiming the privilege must establish the preliminary facts essential to the claim, namely, that the communication was made in the course of an attorney-client relationship. When that showing has been made, then the communication is presumed to have been made in confidence, and the opponent has the burden of proof to establish that the communication was not confidential, that an exception applies or a waiver occurred. Evid. Code section 917, Wellpoint Health Networks, Inc. v. Superior Court (1997) 59 Cal.App.4th 110, 123-24.
No Attorney Work-Product Privilege: Attorney acting solely as a client’s business agent/negotiator
Where the attorney acts merely as a business agent for the client in conveying the client’s position to a contracting party, there is no justification for protecting the attorney’s notes concerning the conversation. However, in doubtful cases or those in which the legal work and work performed as an agent are inextricably intertwined, the privilege will be sustained. Watt Industries, Inc. v. Superior Court (1981) 115 Cal.App.3d 803. Similarly, there is no attorney work-product privilege where the attorney merely gave business advice to the client. Estate of Perkins 195 Cal. 699, 710. The work-product privilege applies to documents related to legal work an attorney performs for a client, not to notes memorializing acts an attorney performs as a mere agent.
No Attorney-Client Privilege: The Crime/Fraud Exception
The attorney-client privilege does not exist if the client sought or obtained the attorney’s services to enable or aid anyone to commit or plan to commit a crime or fraud. Evid. Code section 956; BP Alaska Exploration, Inc. v. Superior Court (1988) 199 Cal.App.3d 1240, 1262–1270. The issue is whether the services of the firm were used to enable the client to commit a crime or fraud and whether there is a reasonable relationship between the crime or fraud and the attorney-client communication. State Farm Fire & Cas. Co. v. Superior Court (1997) 54 Cal.App.4th 625, 645. The lawyer does not have to be aware of the fraud for the crime-fraud exception to apply. Instead, “it is the intent of the client upon which attention must be focused and not that of the lawyers.” Id.
In State Farm Fire & Cas. Co. v. Superior Court (1997) 54 Cal.App.4th 625, the Court held that that evidence that an insurance company, aided by its attorneys, instructed its employees to forge signatures, lie, and destroy documents related to the handling of certain earthquake insurance claims was sufficient to support a prima facie case establishing the crime/fraud exception to the attorney-client privilege.
A prima facie case for the crime/fraud exception is made where the proponent of the exception demonstrates sufficient evidence to show that the fraud or crime has some foundation in fact. State Comp. Ins. Fund v. Superior Court (2001) 91 Cal.App.4th 1080, 1090-1091. However, mere issuance of a search warrant to seize files from an attorney’s office does not, in itself rise to the level of a prima facie showing to establish the crime/fraud exception. Geilim v. Superior Court (1991) 234 Cal. App. 3d 166.
Work product or communications between Michael Cohen and his clients made in furtherance of a crime or fraud perpetrated by one of Cohen’s clients would not be subject to the attorney-client privilege, and would, therefore, be subject to disclosure to Federal prosecutors.
Michael Cohen had a long-standing close professional relationship as Donald Trump’s attorney, and Cohen used his access to Trump secure several lucrative “consulting contracts” with companies such as Time/Warner and Novartis. Cohen had separate business interests outside of his law practice and at this point, we do not know whether the FBI search warrants were based on suspected criminal activity involving Cohen’s law practice and clients, or business activities unrelated to Cohen’s law practice. The FBI raid made headlines, but at this point, it would be pure speculation to conclude that it had anything to do with possible criminal activity involving the President.
Procedure to Establish Privilege: In Camera Review
California’s discovery statutes enable a party to obtain relevant documents and electronically stored information in an adverse party’s possession, custody or control. The party responding to a request for production may withhold documents and other information claimed to be privileged but must provide sufficient factual information for other parties to evaluate the merits of the privilege claim. Code of Civ. Proc. Section 2031.240. A person questioned under oath is entitled to refuse to answer if the question requires the disclosure of information protected by the attorney-client privilege.
Where a dispute over privilege issues arise during litigation, the parties are required to first meet and confer and attempt to resolve the dispute. If the dispute cannot be resolved voluntarily through negotiation, the requesting party may file a motion with the Court to compel the other party to disclose or produce the disputed documents or other information.
Where a dispute concerning the attorney-client privilege arises in litigation, the court may conduct in-chambers review of the materials allegedly subject to the privilege and determine whether the privilege applies and whether the documents or other information should be provided to the requesting party.
In United States v. Zolin (1989) 491 U.S. 554, the United States Supreme Court addressed the issue of disclosure of privileged materials under the federal rules of evidence. The IRS sought to obtain two tapes of a church, which were held under seal in the custody of the California state court clerk. The IRS argued that the tapes fell within the crime/fraud exception to the attorney-client privilege claimed by the church. The Supreme Court held that the material should be provided to the trial court for in-camera review and that disclosure to the court for purposes of determining the merits of a claim of privilege does not have the legal effect of terminating the privilege.
Waiver of the Attorney-Client Privilege
The attorney-client privilege “is waived if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone.” Evid. Code section 912(a). The attorney-client and work-product privileges can be waived by: 1) failing to assert the protection; 2) tendering certain issues; or 3) by conduct inconsistent with claiming the protection. BP Alaska Exploration, Inc. v. Superior Court (1988) 199 Cal.App.3d 1240, 1254, 1261.
Work-product protection “is not waived except by a disclosure wholly inconsistent with the purpose of the privilege, which is to safeguard the attorney’s work product and trial preparation.” Raytheon Co. v. Superior Court (1989) 208 Cal.App.3d 683, 689. Mere disclosure in deposition of the fact that a communication between client and attorney had occurred does not amount to disclosure of the specific content of that communication, and as such does not necessarily constitute a waiver of the privilege. Mitchell v. Superior Court (1984) 37 Cal.3d 591, 601-602. The attorney-client privilege is not waived by sharing documents during contract negotiations where the disclosure of documents was reasonably necessary to further the interests of both parties in finalizing negotiations. STI Outdoor v. Superior Court (2001) 91 Cal.App.4th 334, 341.
Implied Waiver – The “In Issue” Doctrine: There is an implied waiver of the privilege when the client tenders an issue involving the substance or content of a protected communication. Implied waiver is limited to situations where the client has placed into issue the decisions, conclusions, and mental state of the attorney who will be called as a witness to prove such matters. A client’s deliberate injection of the advice of counsel into a case waives the attorney-client privilege as to communications and documents relating to the advice. Mitchell v. Superior Court (1984) 37 Cal.3d 591, 606.
Conclusion: Judge Wood appears to have instituted procedures to enable Federal prosecutors to complete their investigation while protecting the legitimate privilege and privacy interests of Mr. Cohen and his clients.
The rest of us should keep in mind certain principles concerning the nature and scope of the attorney-client privileges in business dealings and in litigation. First, merely hiring an attorney to represent you in business negotiations will not necessarily guarantee that your communications with your attorney will be privileged. Second, communications with an attorney made in furtherance of a fraudulent or criminal scheme will not be protected from disclosure. Third, attorneys and their clients should exercise caution in sharing their communications with third parties. Unnecessary or gratuitous disclosure of communications between an attorney and his or her client can be deemed a waiver of the privilege under certain circumstances. Finally, where a party in litigation refuses to provide documents or testimony based on the attorney-client privilege, a judge may be the final arbiter of the dispute if the parties are unable to resolve it by agreement.