Schafer Law Firm
Rust Building, Suite 1050
950 Pacific Avenue
P.O. Box 1134
Tacoma, Washington 98401-1134
(253) 383-2167 (Fax: 572-7220)
December 7, 1999
Lawrence R. Mills, Attorney-Hearing Officer
Mills Meyers Swartling
30th Floor, Key Tower
1000 Second Ave.
Seattle, WA 98104-1046Re: Washington State Bar Association Disciplinary Board Proceeding:Dear Mr. Mills:
In re Douglas A. Schafer, Bar No. 8652
This letter is to present arguments supporting my request to you last Wednesday, December 1, 1999, that you as the Hearing Officer in this proceeding allow me to engage in discovery of, and to establish a record of, evidence of the criminal, fraudulent, or other serious misconduct that my former client, William L. Hamilton, and persons who conspired with him for such purposes, including former Pierce County Superior Court Judge Grant L. Anderson, were intending in 1992 when he used my services to further such ends. He engaged me in August of 1992 merely to form a corporation for him as a vehicle to further his improper goals related to his bargain purchase of Pacific Lanes bowling center from Mr. Anderson as court-appointed executor of the Estate of Charles C. Hoffman.
Thank you for suggesting that I present these arguments to you in letter form. I proceed upon the assumption that you have carefully read my Answer and its three exhibits, and have carefully read Discipline of Anderson, 138 Wn.2d 830 (1999), by which the Washington State Supreme Court removed Mr. Anderson from his elected judicial office for a "pattern of dishonest behavior" that included accepting $31,000 in Cadillac payments from Mr. Hamilton. Graciously, the Office of Disciplinary Counsel ("ODC") has stipulated that in this proceeding it is not contesting the facts set forth in the Supreme Court's opinion about Mr. Anderson's misconduct. It is noteworthy, however, that ODC has never charged Mr. Anderson for any misconduct (though I provided it the same evidence of it in February 1996 that I provided to other authorities). That perhaps explains why ODC so vigorously objects to the presentation in this proceeding of any evidence of crime, fraud, or other misconduct that Messrs. Anderson and Hamilton and others appear to have conspired to commit.
At last week's deposition of Mr. Anderson's 25-year law partner, David R. Tuell, Jr., when I questioned him about 1992-era misconduct, his counsel Larry J. Couture (who became his law partner in 1993 when Mr. Anderson became a superior court judge) instructed Mr. Tuell not to answer, claiming my questions were not relevant to my defense in this proceeding. We phoned you without warning, and you spontaneously heard brief arguments, recorded by the court reporter, on the discovery dispute. Disciplinary Counsel Christine E. Gray argued, along with Mr. Couture, that the only factual evidence relevant to this proceeding is that which I possessed when I, in February 1996, reported to ODC and other authorities Mr. Hamilton's alleged 1992 confidences or secrets. I argued that I am entitled to discover additional evidence relating to Mr. Hamilton's 1992 wrongful objectives when he used my services to further them, for one of my defenses is that his use of my legal services to further his wrongful objectives prevented any judicially recognizable umbrella of confidentiality from covering our attorney-client communications as a result of the "crime-fraud exception." You initially ruled as requested by Mr. Couture and Disciplinary Counsel, subject to change after you consider briefs on the matter by the parties.
I agree that several of the defenses that I asserted in my Answer logically rest upon the factual information that I possessed at the time of my 1996 reports to authorities, namely Defense 1.1 (A Lawyer's Moral Duty to Report Judicial Corruption), Defense 1.3 (A Lawyer's Moral Duty to Rectify or Mitigate Fraud), Defense 1.4 (A Lawyer's Duty to Report Misconduct by Court-Appointed Fiduciary), Defense 1.5 (Whistleblower Protection Policies), and Defense 1.8 (Advice of Counsel). I vigorously assert, however, that two of my defenses rest logically upon the factual information possessed by, and the subjective intentions of, Mr. Hamilton in 1992, namely Defense 1.2 (Crime-Fraud Exception to Attorney-Client Confidentiality) and Defense 1.6 (Information from Mr. Hamilton Not a Confidence or Secret).
Part 1. Range of Permissible Lawyerly Argument.
The threshold question, at this discovery and hearing stage of this proceeding, is whether you, as the Hearing Officer, may properly bar me from presenting those defenses that I do, and others reasonably may, regard as relevant to the charges. This entails examination of accepted standards for permissible lawyerly argument and examination of your role as Hearing Officer in this multi-stage disciplinary process.
The Civil Rule 11 Standard. Civil Rule 11 provides that a lawyer submitting any pleading, motion, or legal memoranda in a civil case certifies by his or her signature that "it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law." (Emphasis added.) I assert that no sound reason exists why I should not be permitted, in this proceeding, to present a good faith argument for the extension, modification, or reversal of the existing law governing lawyers that ODC argues is embodied solely in the black letter rules of our state's current version of the Rules of Professional Conduct ("RPC").
Relative Weight Afforded a Hearing Officer's Legal Conclusions. Under the Rules for Lawyer Discipline, determinations of law, including determinations on the relevance and admissibility of evidence, are made by a hearing officer, then made independently by the Disciplinary Board, then possibly made again independently by the Supreme Court. In Discipline of Heard, 136 Wn.2d 405 (1998), the Supreme Court indicated that it attaches greater weight to determinations of law by the Disciplinary Board than to those by a hearing officer. Of course, the ultimate arbiter of issues of law is the Supreme Court itself. Accordingly, a hearing officer should be extraordinary reserved about making early dispositive legal rulings upon legal issues about which higher authority may later conclude that the law is otherwise, or should be extended, modified, or reversed to be otherwise.
Guidance Provided in WSBA Hearing Officer's Handbook. The Disciplinary Board provides to hearing officers a Hearing Officer's Handbook to guide them in the fulfillment of their important duties. I refer below to the edition dated February 1998 that the Disciplinary Board's clerk/counsel, Julie Anne Shankland, provided to me just last spring. At page C-7, it states:"The Hearing Officer may admit and give probative effect to evidence which possesses probative value commonly accepted by reasonably prudent persons in the conduct of their affairs. The Hearing Officer may exclude incompetent, irrelevant, immaterial, and unduly repetitious evidence (RLD 4.11(c)(11)). However, the party receiving the unfavorable ruling has the right to put the evidence in by way of an offer of proof. Therefore, in a disciplinary proceeding, all evidence generally is place in the record directly or indirectly (offer of proof). This is required since it could ultimately be the Supreme Court that determines the legal issue of admissibility. If the evidence is not in the record, the court may have to remand the case for further evidentiary proceedings."At page D-2, it states:"Evidence ruled inadmissible should be allowed in by way of an offer of proof, thereby making a complete record and obviating the need to remand the case for further evidentiary proceedings."At pages F-1 and F-2, a suggested opening statement script for Hearing Officers is provided, which states:"A party offering evidence ruled inadmissible has the right to put the evidence in by way of an offer of proof." (Emphasis added.)In the event that you continue to feel, after considering this and responsive submissions, that evidence of Mr. Hamilton's 1992 intentions is inadmissible, then I request that you permit me to fully discover and admit such evidence by way of an offer of proof.
What is the Existing Law Governing Lawyers? My understanding is that ODC's principal charge against me springs merely from a simplistic and literal application of the black-letter rules of our RPC. I did not attend law school 24 years ago merely to learn how to look up codes, but instead to learn to "think like a lawyer"--which includes considering relevant and sometimes conflicting policies underlying any codified laws. I submit that the law governing me and other lawyers is broader than the current version of the RPC--that it includes substantial case law that reflects a wise weighing of competing policies and continual interpretations, extensions, and modifications of the "rules" by the Supreme Court. The ODC's 1999 Washington Lawyer Discipline Manual includes, at pages 68-72, a listing of 200 Washington cases that, in many cases, do just that. The Supreme Court has the inherent power to promulgate rules of discipline for lawyers, to interpret them, and to enforce them. In re Stroh, 97 Wn.2d 289 (1982).
Law Professor James R. Elkins (Univ. of W. Virginia College of Law) teaches his law students:"[R]ule-following is only one aspect, and by no means the most significant, of a lawyer's ethical conduct. Indeed, such a recognition would simply have been an extension of the idea that the practice of law itself is always more than knowing and applying rules. Scholars of moral philosophy and legal ethics teachers agree that an ethics devoted to rules is an impoverished ethics."J. Elkins, "Practical Moral Philosophy for Lawyers/Course Biography" posted on the Internet at http://www.wvu.edu/~lawfac/jelkins/course/coursebio.htm.
An example of the type of policy balancing that wise judges, and wise lawyers, routinely engage in is found in Dike v. Dike, 75 Wn.2d 1 (1968), wherein the Court, at page 14, said:"The court is faced with the task of balancing society's interest in the free and open flow of communications between attorney and client, which the privilege promotes, against society's interest in the administration of justice . . . . The necessity for unhindered communication between attorney and client is outweighed, not so much by society's interest in having the truth disclosed as to crimes already completed, but rather by society's interest in protecting the present and future victims of the client. In other words . . . we will not allow the shield of silence constructed by the privilege to aid the client in continuing his wrongdoing at the expense of other members of society."
Part 2. Emerging Policies in the Law Governing Lawyers.
I acknowledged above that the application of my Defense 1.3 (A Lawyer's Moral Duty to Rectify or Mitigate Fraud) turns upon the evidence that I, myself, possessed in 1996. But, (1) because of the importance to all responsible lawyers, and to society at large, of the re-emergence of the doctrine that a lawyer may disclose a client's confidence or secret to aid non-clients that were harmed by the client's use of the lawyer's services, and (2) because the public policy underlying that re-emerging doctrine is the same policy that underlies the crime-fraud exception to attorney-client confidentiality discussed below, I have included in the appendix to this letter selected important materials that discuss that re-emerging doctrine and its underlying policy.
Included are relevant portions of the American Law Institute's Restatement of the Law Third, The Law Governing Lawyers, Section 117B and its official comments, hardbound volumes of which Restatement I'm told will be available in early 2000. Also included are the text, comments, and reporter's explanation to the American Bar Association's Commission on the Evaluation of the Rules of Professional Conduct (commonly called "Ethics 2000 Commission") Public Discussion Draft (March 23, 1999) of Proposed Rule 1.6. Both organizations recognize that a client's use of a lawyer's services in furtherance of a crime or fraud is such a serious abuse of the attorney-client relationship that the client forfeits the protection of the rule of confidentiality.
Part 3. The Crime-Fraud Exception.
Statement of the Exception. The crime-fraud exception most frequently is considered in the context of the attorney-client privilege. A classic expression of the underlying principle is that made by Justice Cardozo in Clark v. United States, 289 U.S. 1, 15 (1933):"The privilege takes flight if the relation is abused. A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law."More recently, the United States Supreme Court, in United States v. Zolin, 109 S. Ct. at 2626, stated the principle as follows:"The attorney-client privilege must necessarily protect the confidences of wrongdoers, but the reason for that protection--the centrality of open client and attorney communication to the proper functioning of our adversary system of justice --ceases to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing. It is the purpose of the crime/fraud exception to the attorney-client privilege to assure that the "seal of secrecy" between lawyer and client does not extend to communications made for the purpose of getting advice for the commission of a fraud or crime." (Citations and internal quotation marks are omitted).The Federal Court of Appeals for the Second Circuit, in In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983, 731 F.2d 1032 (2nd Cir., 1984), explained the rationale for the crime-fraud exception as follows:"Whereas confidentiality of communications and work product facilitates the rendering of sound legal advice, advice in furtherance of a fraudulent or unlawful goal cannot be considered 'sound.' Rather advice in furtherance of such goals is socially perverse, and the client's communications seeking such advice are not worthy of protection."The Washington Supreme Court, in State v. Richards, 97 Wash. 587, 591 (1917), expressed the crime-fraud exception as follows:"The rule [of confidentiality] does not extend to communications respecting proposed infractions of the law, and so there is no privilege as to communications made in contemplation of the future commission of a crime, or perpetration of a fraud, in which, or in avoiding the consequences of which, the client asks the advice or assistance of the attorney."Recognition of the Crime-Fraud Exception in Washington. The crime-fraud exception appears first to have been recognized by the Washington Supreme Court exactly 100 years ago. In Hartness v. Brown, 21 Wash. 655, 668 (1899), the Court stated:"The rule, however, is well settled that communications made to counsel in contemplation of fraud or a criminal act are not privileged."The application in 1917 of the crime-fraud exception in Richards, above, flowed from a client's use of an attorney to prepare papers and give advice in furtherance of the client's attempt at extortion. Almost sixty years later, the Court of Appeals, Div. II, applied the crime-fraud exception in State v. Metcalf, 14 Wn. App. 232, 239-40 (1975), saying:"[T]he attorney-client privilege is not applicable when the advice sought is in furtherance of a crime or fraud. It does not matter that the attorney was unaware of his client's purpose for seeking the advice. If the defendant was indeed consulting the attorney about the use of a false affidavit which he planned to procure from Suzanne Satiacum, then it was in furtherance of a crime, and the attorney-client privilege was inapplicable." (Citations omitted.)In 1986, the same Court of Appeals, in Whetstone v. Olson, 46 Wn. App. 308, 310 (1986), expressed the exception and the policies underlying it as follows:"It is well established that the attorney/client privilege does not extend to communications in which the client seeks advice to aid him in carrying out an illegal or fraudulent scheme.Lastly, the Washington Supreme Court recently reasserted the crime-fraud exception in State v. Hansen, 122 Wn. 2d 712, 720-21 (1993), saying:
"Although the exception was at one time limited to criminal activity, it also is now well settled that this exception is applicable to advice or aid secured in the perpetration of a civil fraud. The rationale for excluding such communications from the attorney/client privilege is that the policies supporting the existence of the privilege are inapplicable where the advice and aid sought refers to future wrongdoing rather than prior misconduct.
"It does not matter that the attorney was unaware of his client's purpose for seeking the advice. His knowledge or participation is not necessary to application of the exception. However, the exception applies only when the client knows, or reasonably should know, that the advice is sought for a wrongful purpose. Good faith consultations with attorneys by clients who are uncertain about the legal implications of a proposed course of conduct are entitled to the protection of the privilege even if that action should later be held improper." (Citations omitted.)"The attorney-client privilege is not applicable to a client's remarks concerning the furtherance of a crime, fraud, or to conversations regarding the contemplation of a future crime." (Citations omitted.)Application of the Crime-Fraud Exception to the Duty of Confidentiality. While admittedly the Washington case law to date appears only to have applied the crime-fraud exception in cases involving compelled testimony by an attorney, some authority exists for its application also to the lawyer's duty of confidentiality. In Illinois State Bar Association Advisory Opinion on Professional Conduct No. 93-16, issued May 1994, the advisory body states, under the heading "Exceptions to the Rule of Confidentiality:""An exception to the attorney-client privilege and the attorney's fiduciary duty of confidentiality under Rule 1.6 is the "Crime Fraud" exception. If the client seeks or obtains the services of an attorney in furtherance of criminal or fraudulent activity, the communications to the attorney with respect to such activity would not be privileged nor would the attorney be bound by a fiduciary duty of confidentiality toward them." (Citations omitted; emphasis added.)Additional similar precedent and authority may already exist elsewhere around the country, but my limited resources have not yet permitted a full nationwide search. I do know, from the ALI's Restatement and the ABA's Ethics 2000 Commission materials that the trend is distinctly moving toward the recognition of the crime-fraud exception's application to the duty of confidentiality.
Law professor are among the most prominent leaders urging the greater recognition of the crime-fraud exception. Professor Roger C. Cramton of Cornell Law School is notable among them. He and a colleague recently authored a very scholarly and persuasive law review article urging such an expansion of the law governing lawyers. In the article, R. Cramton and L. Knowles, Professional Secrecy and Its Exceptions: Spaulding v. Zimmerman Revisited, 83 Minn. L. Rev. 83 (Nov. 1998), they wrote, at pages 106-07:"The very policies and purposes that justify the professional duty of confidentiality in the first place argue strongly for a permissive exception to that duty corresponding to the client-fraud exception to the attorney-client privilege. If a lawyer is required to testify to client communications, otherwise privileged, when the client has sought the lawyer's advice and services to perpetuate or continue a fraud, a concomitant discretion to disclose without testimonial compulsion should be recognized under the professional duty of confidentiality. Neither the legal profession nor society as a whole should tolerate a regime in which lawyers may be used by clients as a means of carrying out a crime or fraud."Because of the great importance--both to our profession and to our society (that has grown cynical of its lawyers)--that I place upon eliciting our Supreme Court's recognition of this role that lawyers fill in a law-abiding society, and because of the thoroughness of the arguments presented, I have included in the appendix to this letter the Introduction and Part II (Reforming the Law of Lawyer Secrecy) from Prof. Cramton's and Ms. Knowles' excellent article cited above. I most strongly urge you to read it carefully.
I observe that the Washington Supreme Court's passage, quoted above from Dike v. Dike, 75 Wn.2d 1, 14 (1968), would be just as persuasive and wise if the internal references to "privilege" were replaced by "duty of confidentiality," as follows:"The court is faced with the task of balancing society's interest in the free and open flow of communications between attorney and client, which the [duty of confidentiality] promotes, against society's interest in the administration of justice . . . . The necessity for unhindered communication between attorney and client is outweighed, not so much by society's interest in having the truth disclosed as to crimes already completed, but rather by society's interest in protecting the present and future victims of the client. In other words . . . we will not allow the shield of silence constructed by the [duty of confidentiality] to aid the client in continuing his wrongdoing at the expense of other members of society."
Part 4. Recent Developments in the Crime-Fraud Exception.
The crime-fraud exception, though over 100 years old, has received considerable judicial attention in the ten years since the U.S. Supreme Court's Zolin case, cited above. It was used as an effective tool to extract from the tobacco industry and its co-opted industry lawyers the long-secret truth about the public health hazards of cigarettes. Because of its recent vintage (April 8, 1997) and thoroughness, and its availability on the Internet, I quote in the next section great passages (without double-indenting or using quote marks for the entire section) from the Memorandum of Law filed by the State of Minnesota's Attorney General, Hubert H. Humphrey, III, in Minnesota's Ramsey County District Court, Second Judicial District, against Philip Morris, et al. (Court File No. C1-94-8565). [Web note--other links to the Memo: HTML PDF ]
Minnesota AG's 1997 Memo on the Crime-Fraud Exception.
[D]efendants have engaged in a decades-long campaign to suppress scientific knowledge about the dangers of smoking, manipulated evidence of their knowledge of those dangers to conceal it from the public and the courts, and intentionally breached their duties--and voluntary undertakings--to the public to truthfully research and report these dangers. This evidence creates a prima facie case of crime/fraud. Thus, any alleged protection from either the attorney-client or the work product privileges is removed from any document containing information closely related to this "crime or fraud." Craig v. A.H. Robins, 790 F.2d 1, 4 (1st Cir. 1986). The crime/fraud exception also negates any protection for "opinion" work product, In re Antitrust Grand Jury, 805 F.2d 155, 168 (6th Cir. 1986), and destroys any joint defense privilege. SeeHaines, 975 F.2d at 94-95, Sackman, 927 F. Supp. at 365-66.
The guiding principle of the crime/fraud exception is that communications that abuse privileges are not worthy of protection. As the United States Supreme Court stated in the seminal case of Clark v. U.S., 289 U.S. 1, 15 (1933):"The privilege takes flight if the relation is abused. A client who consults an attorney for advice that will serve him in the commission of a fraud will have no help from the law. He must let the truth be told."[A passage here about Minnesota law was omitted by D. Schafer.]
"Crime/fraud" is somewhat of a misnomer as courts throughout the country have found that both law and policy require that the exception be applied beyond those circumstances where the technical definition of "crime" or "fraud" is met. See In re Sealed Case, 754 F.2d 395, 399 (D.C. Cir. 1985) ("crime, fraud or other misconduct"); United States v. AT&T, 86 F.R.D. 603, 624-25 (D.D.C. 1979) ("crime, fraud or tort," including anti-trust violations); Cooksey v. Hilton Int'l Co., 863 F. Supp. 150, 151 (S.D.N.Y. 1994) ("intentional torts moored in fraud"); Volcanic Gardens Management Co. v. Paxson, 847 S.W.2d 343, 347 (Tex. App. 1993) (for purposes of the exception, "fraud" is "much broader" than common law and criminal fraud, and can include "false suggestions" and "suppression of truth"). As the court stated in Central Constr. Co. v. Home Indemnity Co., 794 P.2d 595, 598 (Alaska 1990):"Acts constituting fraud are as broad and as varied as the human mind can invent. Deception and deceit in any form universally connote fraud. Public policy demands that the 'fraud' exception to the attorney-client privilege ... be given the broadest interpretation."Id. (holding that the exception applies to communications "in aid of any crime or a bad faith breach of a duty").
Importantly, the party seeking discovery under the crime/fraud exception need make only a "prima facie" showing of one of these categories of wrongdoing that constitutes "crime/fraud." Levin, 469 N.W.2d at 515. This showing is less than is required to substantively prove a crime or a cause of action for fraud. In re Berkley & Co., 629 F.2d 548, 553 (8th Cir. 1980) (party "is not required to prove existence of crime or fraud" as a prima facie showing is sufficient); Matter of Feldberg, 862 F.2d 622, 625-26 (7th Cir. 1988) ("the question here is not whether the evidence supports a verdict but whether it calls for inquiry"); Duplan Corp. v. Deering Milliken, 540 F.2d 1215, 1220 (4th Cir. 1976) (while a prima facie showing need not be such as to actually prove the disputed fact, it must be such as to subject the opposing party to the risk of non-persuasion if the evidence as to the undisputed fact is left unrebutted). Other courts have phrased the "prima facie" requirement differently. See Haines, 140 F.R.D. at 694 (noting use of the words "probable cause" or "reasonable basis to believe that a party's objective was fraudulent"). Essentially, "all these proposed standards amount to the same basic proposition--has the party seeking discovery presented evidence which, if believed by the fact-finder, supports plaintiff's theory of fraud?" Id. Requiring a stricter showing "may not be possible at the discovery stage, and would result in an overzealous protection of the attorney-client privilege in a context where the rationale for that privilege may be inapplicable." Caldwell v. District Court, 644 P.2d 26, 32-33 (Colo. 1982). Thus, a showing of "some foundation in fact is sufficient to invoke the crime exception." Id. There is a split of authority as to the degree to which the party withholding documents has a right to rebut the prima facie showing made by the party seeking discovery under the crime/fraud exception. See In re A.H. Robins, 107 F.R.D. at 6-7 (no evidentiary hearing required). Haines holds that defendants have an absolute right to be heard, but doesn't fully describe the scope of that right. Haines , 975 F.2d at 97. In any event, any right of rebuttal should not turn into a series of mini-trials.
This lessened standard is reflected in the consequences of a holding that "crime/fraud" exists. A finding of "crime/fraud" in the discovery context does not constitute a substantive finding that a party is guilty of a crime, or liable under the tort of fraud. In re A.H. Robins, 107 F.R.D. at 16-17. A minority of courts have held that, to prove the crime/fraud exception in discovery, a party has to prove every element of a substantive cause of action for fraud. See Laser Industries, Ltd. v. Reliant Tech. Inc. , 167 F.R.D. 417 (N.D. Cal. 1996). This is not the law in Minnesota. Levin, 469 N.W.2d at 515, establishes that the standard is a "prima facie" showing, less than proving every element of a substantive cause of action. Furthermore, requiring proof of each element of a cause of action for fraud would negate the principle that the crime/fraud exception applies where a crime or fraud is intended or attempted, even if never completed. BP Alaska Exploration, Inc. v. Superior Court (Nahama & Weagant Energy Co.) , 245 Cal. Rptr. 682, 697 (Cal. App. 1988); In re Grand Jury Proceedings, 87 F.3d 377, 381 (9th Cir. 1996) (crime/fraud exception does not require proof of elements of a crime or fraud as it does not require a completed crime or fraud but only client's consultation with attorney), cert. denied, 117 S. Ct. 333 (1996).
One analogous case--also involving the safety of a product--establishes that the crime/fraud exception applies to documents related to the defendants' knowledge and misrepresentations regarding health hazards. In In re A.H. Robins, supra, a case involving the Dalkon Shield IUD, the court found that the crime/fraud exception applied to documents relating to the following categories of behavior by the defendant:"[Robins] failed to adequately test the Dalkon Shield before marketing it; attempted to develop hard evidence that misrepresented the nature, quality, safety and efficacy of the Dalkon Shield; ignored the mounting evidence against the Dalkon Shield, with knowledge of the potential harm caused by the product; relied upon invalid studies in an effort to refute or ignore the dangers potentially caused by the Dalkon Shield; and attempted, with the assistance of counsel, to devise strategies to cover up Robin's responsibilities and lessen its liabilities with respect to the Dalkon Shield."In re A.H. Robins Co., 107 F.R.D. at 14-15. Additionally, attempts by Robins to "neutralize adverse publicity and comment" was found to constitute "crime/fraud." Id. at 15. [Emphasis here was added by D. Schafer.]
Dilatory discovery tactics also was a factor in the In re A.H. Robins decision. The court surveyed various Dalkon Shield personal injury cases, finding a pattern by defendant A.H. Robins of delaying discovery "with stalling tactics, such as motions for reconsideration, requests for stays or attempted appeals of discovery orders." Finding that the ultimate goal of this pretrial posturing was to avoid producing documents, the court held that "the repeated delays and instances of nonproduction provide support for the application of the crime/fraud exception." In re A.H. Robins, 107 F.R.D. at 14. See also Geoffrey C. Hazard, "An Historical Perspective on the Attorney-Client Privilege," 66 Cal. L. Rev. 1061, 1064 (1978) (illegitimate litigation tactics may constitute "crime/fraud"). The court in In A.H. Robins Co. applied Kansas law and, with respect to Minnesota law, stated: "Minnesota law does not differ substantially from the law applied in the present case. In fact, Minnesota law appears to be more stringent than Kansas law regarding the crime or fraud exception." 107 F.R.D. at 10. It is not clear, however, in which particular respects, if any, Minnesota law is more stringent than Kansas law. [Discussion here comparing Kansas with Minnesota law is omitted by D. Schafer.]
In another case involving the Dalkon Shield IUD, a federal court of appeals similarly found "a pervasive picture of covering up a defective product and continuing to merchandise it by misrepresenting both its efficacy and its safety," and stated that "this kind of continuing fraudulent misrepresentation and cover-up vitiates not only any attorney-client privilege but also any work product immunity." Craig v. A.H. Robins Co., 790 F.2d at 2-4.
Similarly, in Owens-Corning Fiberglass Corp. v. American Centennial Ins. Co., 660 N.E.2d 812 (Ohio Com. Pl. 1995), the defendant claimed privilege over a memorandum prepared by its medical director for in-house counsel essentially informing counsel that asbestos causes asbestosis. Nevertheless, Owens denied in an interrogatory answer that it had any knowledge that its products caused health problems. Id. at 818. Finding that the answer represented a fraud on the court "perpetrated by the officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudging cases that are presented for adjudication," the court found that the underlying memo had lost its privilege. Id.
A breach of a fiduciary duty relationship also can be a basis for applying the crime/fraud exception. Steelvest, Inc. v. Scansteel Service Ctr., 807 S.W.2d 476 (Ky. 1991) ("breach of a fiduciary relationship [is] on an equal par with fraud and deceit" and "equivalent to fraud"); see also Central Constr. Co. v. Home Indemnity Co., 794 P.2d 595 (Alaska 1990) (holding, in bad faith insurance case, that exception applies to communications "in aid of any crime or a bad faith breach of a duty."). [Emphasis here was added by D. Schafer. This ends the Minnesota AG's 1997 Memo.]
Recent Federal Court of Appeals Cases. The federal courts have provided numerous very recent cases recognizing, or expanding, the crime-fraud exception. Perhaps appointed U.S. Attorneys and their assistants are more free than locally-elected county prosecutors to pursue criminals in "white collars" (who often are locally well-connected individuals) that are more prone to use their attorneys to further their crimes, frauds, and other lawless conduct.
In In re Grand Jury Subpoenas (Roe and Doe), 144 F.3d 653 (10th Cir. 1998), in support of a federal investigation into health care fraud, the court enforced grand jury subpoenas upon two respected attorneys who had represented a hospital and its Chief Executive Officer. At page 660, the court said:"To invoke the crime-fraud exception, the party opposing the privilege must present prima facie evidence that the allegation of attorney participation in the crime or fraud has some foundation in fact. Motley, 71 F.3d at 1551; In re Grand Jury Proceedings (Vargas), 723 F.2d at 1467. The evidence must show that the client was engaged in or was planning the criminal or fraudulent conduct when it sought the assistance of counsel and that the assistance was obtained in furtherance of the conduct or was closely related to it. See In re Grand Jury Investigation (Schroeder), 842 F.2d 1223, 1226 (11th Cir. 1987). The exception does not apply if the assistance is sought only to disclose past wrongdoing, see Zolin, 491 U.S. at 562, 109 S.Ct. 2619, but it does apply if the assistance was used to cover up and perpetuate the crime or fraud. See In re Grand Jury Proceedings (Company X), 857 F.2d at 712; see also In re Grand Jury Proceedings (Doe), 102 F.3d 748, 749-51 (4th Cir. 1996) (applying exception where client used lawyers, without their knowledge, to misrepresent or to conceal what the client had already done); In re Richard Roe, Inc., 68 F.3d 38, 40 (2d Cir. 1995) (noting that exception applies where "communication with counsel or attorney work product was intended in some way to facilitate or to conceal the criminal activity"); In re Sealed Cases, 754 F.2d 395, 402 (D.C. Cir. 1985) ("To the limited extent that past acts of misconduct were the subject of the cover-up that occurred during the period of the representation, however, then the past violations properly may be a subject of grand jury inquiry." [Bolded emphasis added here by D. Schafer.]A mere three months ago, the First Circuit Federal Court of Appeals applied the crime-fraud exception to otherwise confidential communications between a psychotherapist and his patient. In re Grand Jury Proceedings (Gregory P. Violette), Fed. Ct. of App., 1st Cir., Docket No. 99-1734. In discussing the now well-established crime-fraud exception, the court stated:"To bring the crime-fraud exception to bear, the party invoking it must make a prima facie showing: (1) that the client was engaged in (or was planning) criminal or fraudulent activity when the attorney-client communications took place; and (2) that the communications were intended by the client to facilitate or conceal the criminal or fraudulent activity. See United States v. Jacobs, 117 F.3d 82, 87-89 (2d Cir 1997). It is sometimes suggested that the exception follows as a matter of logic from the principle that motivates the privilege itself. After all, the Supreme Court has stated that the purpose of the attorney-client privilege is "to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice." Upjohn Co. v. United States, 449 U.S. 383, 389 (1981). Using the privilege to hinder proof of fraudulent or criminal activity would, as the suggestion goes, undermine this core purpose. See United States v. Gordon-Nikkar, 518 F.2d 972 (5th Cir. 1975); Diamond v. Stratton, 95 F.R.D. 503, 505 (S.D.N.Y. 1982); 3 Weinstein & Berger, [Weinstein's Federal Evidence] § 503.16; see also In re Richard Roe, Inc., 68 F.3d 38, 40 (2d Cir. 1995) ("Although there is a societal interest in enabling clients to get sound legal advice, there is no such interest when the comminations or advice are intended to further the commission of a crime or fraud."
. . .
"To summarize, the attorney-client privilege exists as a matter of policy, not as a matter of logic. The benefits of full and frank communication between clients and attorneys generally have been deemed to outweigh the costs of probative evidence foregone. The balance shifts, however, when a client communicates for the purpose of advancing a criminal or fraudulent enterprise. Because such communications do not create a net benefit to the system, the rationale that underpins the privilege vanishes (or, at least, diminishes markedly in force.)
. . .
"The case law dealing with the crime-fraud exception in the attorney-client context makes it transparently clear that the client's intentions control. See, e.g., Clark, 289 U.S. at 15 ("The attorney may be innocent, and still the guilty client must let the truth come out."); United States v. Ballard, 779 F.2d 895, 909 (5th Cir. 1975) (explaining that "[i]t is the client's purpose which is controlling, and it mattes not that the attorney was ignorant of the client's purpose"). We see no credible basis for applying a different rule in the psychotherapist-patient context." (Emphasis added.)
Part 5. Application of Crime-Fraud Exception to this Proceeding.
Application of Crime-Fraud Exception to Mr. Hamilton's Communications. I believe that the evidence will establish that Mr. Hamilton was using my legal services in 1992 to further his intended criminal, fraudulent, or other serious misconduct. If so, his communication to me would not be deemed to be a "confidence" under RPC Rule 1.6 as that term is defined in the Terminology section immediately preceding RPC Rule 1.1 ("Confidence" there being defined as information protected by the attorney-client privilege.). The policy reason for that result is that the well-established public policy underlying the crime-fraud exception to confidentiality overrides Mr. Hamilton's subjective expectation or desire of the communication remain in confidence.
The same well-established public policy should be viewed as applying to remove that same communications by Mr. Hamilton from any duty of confidentiality afforded under the law governing lawyers to a "secret"--particularly when his co-conspirator was a lawyer then breaching his fiduciary duty as a court-appointed executor and was then becoming, and indeed became, a superior court judge! As the term "secret" is defined in the RPC, it--"refers to other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client." (Emphasis added.)The analysis underlying the crime-fraud exception holds that a client's use of a lawyer services to further an unlawful purpose does not establish an attorney-client relationship that will be recognized by our justice system, for an attorney is not permitted knowingly to assist in unlawful activities. A client who uses an attorney without fully revealing to him or her the true criminal, fraudulent, or other unlawful purposes for which the attorney's services are being used has not established a professional relationship with that lawyer that our system of justice recognizes. As a consequence, communications for such unlawful purposes are neither "confidences" nor "secrets" as defined in RPC.
Application of Crime-Fraud Exception to Other Attorney-Client Relationships.Several of the above-quoted judicial opinion passages, many which I specifically emphasized by bold text, establish that the crime-fraud exception applies when a wrongdoer uses a lawyer's services to assist in covering-up or concealing his or her prior unlawful acts. Given that, I believe that discovery should be permitted of information from various attorneys that former Judge Anderson and his co-conspirators have used over a period of several years to prevent the full public exposure of their past unlawful conduct.
As just one illustration, I include as the last page in the appendix a copy of the Letter to the Editor of the local daily newspaper, The News Tribune, that Mr. Tuell's present partner and personal lawyer, Mr. Couture, authored in August of 1997, within days after the Commission on Judicial Conduct announced its Cadillac-related charges against Judge Anderson. Apparently intending "to neutralize adverse publicity and comment" and to prevent the full exposure of the past unlawful conduct, Mr. Couture proclaimed that the Washington State Bar Association, the Pierce County Prosecutor, and the Washington Attorney General's Office had investigated and "found that Judge Anderson did nothing wrong." Other lawyers improperly obtained the sealing in early 1996 of the public court file from Judge Anderson's marital dissolution proceeding, which concealed from the public considerable financial information that might have permitted an earlier full exposure of his misconduct.
Part 6. Offer of Proof of Criminal, Fraudulent, and other Serious Misconduct.
Sworn testimony and documents signed under oath or penalty of perjury by Messrs. Anderson, Hamilton, and others, most of which were made public in connection with the Commission on Judicial Conduct proceeding that resulted the removal of Judge Anderson from his elected judicial office, establish reasonable cause to believe that they were involved in or intending, during the period in which my legal services were used, crimes in violation of Washington liquor, gambling, and tax laws, insurance fraud, and flagrant breaches of fiduciary duty. The deposition and hearing transcripts and exhibits from the CJC proceeding comprise about 1,385 pages, all of which I will be offering as part of the record in this proceeding. That ought not be unduly burdensome, for the Washington Supreme Court and its law clerks already spent 14 months studying those pages in connection with Judge Anderson's removal, and those documents should eventually become part of the record of WSBA discipline against lawyer Grant L. Anderson and some of the lawyers who conspired with him.
Part 7. Conclusion and Procedural Requests.
Based upon the foregoing arguments, I request a ruling permitting me to engage in discovery of, and to establish a record of, evidence of the criminal, fraudulent, or other serious misconduct that my former client, William L. Hamilton, and persons who may have conspired with him for such purposes, including former Judge Grant L. Anderson, were intending in 1992 when he used my services to further such ends.
Considering (1) the delay caused by your ruling of last week, (3) the reasonable uncertainty as to the course of this proceeding from the time that I submitted my Motion for Interlocutory Review to the State Supreme Court in early August until it was denied by the Court in early November, and (3) the entry just last week of an experienced trial lawyer, Shawn Newman, associated with the public-interest watchdog organization known as Citizens for Leaders with Ethics and Accountability Now (CLEAN) , who has volunteered to assist me as co-counsel in this proceeding, I respectfully request a continuance of the hearing to permit appropriate preparation by him and me.
As I have established an Internet web site (http://bigfoot.com/~d_schafer) to enable interested persons to monitor this proceeding, on which I have posted all material documents filed so far in this case and will be posting this letter, I request an order directing all parties to provide me (by disk or e-mail) an electronic version of their filed material documents in order that I might fairly present all parties' positions in this proceeding to the national and international Internet audience.
Thank you for taking the time to carefully review these materials and to consider the important issues that hold great significance for not just me, but for our entire profession and the society that we profess to serve.Very truly yours,
Douglas A. Schafer, WSBA No. 8652
cc: Christine E. Gray, Disciplinary Counsel
Larry J. Couture, Attorney
Shawn T. Newman, Attorney
1. Introduction (pages 63 - 68) and Part II (pages 101 - 127) of R. Cramton & L. Knowles, "Professional Secrecy and Its Exceptions: Spaulding v. Zimmerman Revisited," 83 Minn. L. Rev. 63 (1998) .
2. Section 117B, its Comments and Reporter's Notes in Proposed Final Draft No. 2, of American Law Institute, Restatement of the Law Third, The Law Governing Lawyers (pages 177 - 197).
3. Printed website pages http://www.abanet.org/cpr/e2k/rule16draft.html of the American Bar Association's Ethics 2000 Commission proposed March 23, 1999 draft changes to Model Rule 1.6, including the Reporter's Explanation of Changes.
4. Letter to the Editor printed in The News Tribune (Tacoma, Washington) on 8/18/97, authored by lawyer Larry J. Couture, partner in Tuell & Couture, P.S. with David R. Tuell, Jr., who was a partner before 1993 with Grant L. Anderson in their law firm Tuell, Anderson, Fisher, & Koppe).