In recent years, courts throughout the country have ordered the disclosure of massive numbers of documents that tobacco companies claimed were protected under the attorney-client privilege. The courts have held that the tobacco companies failed to demonstrate that the documents, which included scientific and marketing studies, were sufficiently related to requested legal advice.

Last month, another trial judge, this time in Minnesota v. Philip Morris Inc., denied the attorney-client privilege for communications relating to the marketing of cigarettes to minors and the manipulation of nicotine levels. But in contrast to other courts, the Philip Morris judge based his decision on the crime/fraud exception to the attorney-client privilege.

That decision has since been affirmed by the state's highest appellate court. Last week, the Supreme Court refused to stay the disclosure order, and the tobacco company defendants turned over some 39,000 documents to the state of Minnesota.

What did the tobacco companies do to destroy so thoroughly their attorney-client privilege? And what are the implications of the decision in Philip Morris for counsel to the companies?

THE TEMPORAL FACTOR

The crime/fraud exception is based on the recognition that when the client seeks the lawyer's assistance to commit a crime or fraud, whether or not the lawyer is or becomes aware of the client's unlawful aim, the privilege serves no useful purpose and its protection should be withdrawn. The focus of the exception is on the client's intentions when the assistance is sought. Therefore, if the client seeks out the legal assistance in good faith and subsequently decides to commit the fraudulent act, the previous communications with legal counsel on the subject of that fraudulent act remain privileged.

Obviously, a client's state of mind when initially seeking legal assistance is a very difficult factual determination for judges to make. Because trial judges would naturally tend to assume that the client's previous intent was revealed in his subsequent conduct, appellate courts have imposed a stringent limitation on the use of conduct evidence in determining whether to apply the crime/fraud exception. The fact that the client consulted the attorney before committing an act cannot, alone, be a sufficient basis for concluding that the client's purpose was to misuse the attorney-client relationship.

To hold otherwise would unfairly assume that the client knew what was illegal before consulting with the attorney and was merely attempting by the consultation to shelter otherwise discoverable evidence. In addition, it would place the client in the position of always having to follow the advice of his attorney when the attorney counseled against a course of action.

To be sure, the temporal proximity of the consultation with the attorney and the illegal act is a factor that circumstantially tends to prove that the consultation was for the purpose of furthering the illegal end. Standing alone, however, it is insufficient evidence.

The fraud by the tobacco companies that destroyed their privilege was not the executives' lying in sworn statements in civil actions and to Congress and government agencies about (1) their knowledge of the health hazards posed by cigarettes, (2) their intentional manipulation of nicotine levels, or (3) their marketing to children. Many of the marketing efforts and studies that were lied about occurred long before industry members were subpoenaed and decided, individually or collectively, to lie to the government. Therefore, such lies, when told, did not retroactively eliminate the privilege protection for the communications that could prove the lies.

The tobacco companies certainly anticipated that the current investigations might be damaging to their commercial interests, but they did not seek the assistance of their attorneys in telling those lies. So how did fraud destroy the privilege? It was the tobacco industry's fraudulent manipulation of the attorney-client privilege itself that resulted in destruction of the privilege.

The fraud was the ploy of having potentially damaging studies and scientific experiments conducted through legal counsel, so they could be suppressed if they ultimately proved unfavorable to the companies' interests-even though the companies were representing to the public that their product was safe and that all such studies and experiments were being conducted by impartial scientists and fully disclosed, regardless of outcome.

This is a variation of the "funneling" ploy about which the Supreme Court expressed concern in Upjohn Co. v. United States (1981). Upjohn involved business communications that were addressed to in-house counsel to make them appear to be primarily related to the seeking of legal advice, when, in fact, the individuals receiving the copies of the communications were actually the principal recipients. Funneled through counsel, these business communications came under the umbrella of the attorney-client privilege.

In Philip Morris, the tobacco companies went a step further. They had their lawyers request and supervise these communications (reports, studies, etc.), thereby using the credibility of the attorneys to make it appear as though each communication were an instrumental part of the legal assistance being rendered.

Ferreting out this particular abuse of the attorney-client privilege poses very difficult factual questions for a trial judge. More often than not, the studies, investigations, and reports requested by attorneys relate, in some way, to the legal assistance that was sought from them. Unless the subject matter of the communications is facially beyond what a lawyer would need to know -- e.g., market studies of juvenile smokers -- the question of whether the privilege is being used as a ruse will depend on two factors.

The fast is whether the client also had a business need for the information generated by the attorney. If no need is found, there is, of course, no problem of funneling. If, however, a business need is demonstrated, and the same information has not been generated independent of the attorney (and produced in the course of discovery), a prima facie case has been made that the attorney served as camouflage for sensitive business communications.

Therefore, the second question must be addressed: Which purpose, legal or business, was the primary motivation behind the client's request for assistance? Because this practice was so pervasive among the tobacco company defendants in Philip Morris, this was not a difficult call for either the special master or the trial judge in the case.

At this point the court could have denied the privilege simply because the communications were not designed primarily for the purpose of obtaining legal assistance. However, it went further and denied the privilege because the communications were part of the tobacco companies' efforts to commit a fraud. Why? Although the answer is not certain, it appears to lie in the blatant and excessive nature of the abuse, coupled with the outrageous manipulation of the public debate with knowingly false statements and disingenuous denials.

(The Philip Morris court also held that the tobacco companies waived whatever privilege protection they may have held for their scientific studies on the effect of tobacco use by disclosing those studies that were favorable to their position. The court refused to permit the companies to use the attorney-client privilege as both a sword and a shield by selectively disclosing only certain confidential communications.)

ETHICAL IMPLICATIONS

The court's willingness to find fraud should have serious consequences for both the attorneys and their clients. For the clients, of course, this decision leads to the compelled disclosure of all communications that are found to be "in furtherance" of the fraudulent scheme. After finding such a scheme, judges naturally are inclined to construe the "in furtherance" standard quite broadly. While it means something more than "generally relevant to" the fraud, the standard lies somewhere between "reasonably related" and "closely related to." Each and every communication at issue, however, does not have to be proven to have helped the client in the successful completion of the fraud.

For the attorneys, this finding of fraud should have significant ethical implications. While a client could use a lawyer to pursue a fraudulent purpose without the lawyer's knowledge, the nature and scope of the fraudulent undertaking in Philip Morris make ignorance highly improbable. The very nature of the abuse suggests that it may have been the idea of the attorneys. Consequently, this finding of fraud is roughly the ethical equivalent for the participating attorneys of a finding of probable cause in a criminal action.

Further proceedings against the attorneys would be appropriate. The law cannot give such a broad, absolute, and unlimited privilege to communications between clients and officers of the court and then tolerate any knowing abuse of it by those officers. Ultimately, abuses like those apparently committed by the tobacco industry and their lawyers could prompt serious consideration of the persuasive arguments made for the complete elimination of the attorney-client privilege in the corporate context.