United States v. Chen - 99 F.3d 1495 (9th Cir. 1996)

Rule:

The attorney-client privilege protects confidential disclosures made by a client to an attorney in order to obtain legal advice, as well as an attorney's advice in response to such disclosures. The attorney-client privilege applies to communications between lawyers and their clients when the lawyers act in a counseling and planning role, as well as when lawyers represent their clients in litigation. Indeed, the axiom that every man knows the law presupposes that everyone can find it out by consulting a lawyer, before being hauled into court for violating the law. 

Facts:

Mr. Chen and his wife own Sunrider Corporation (collectively, “defendants”) and operate TF Chen Products, Inc., a subsidiary of Sunrider. The companies manufacture health food and skin care products and import from Taiwan, Hong Kong, Japan, and other countries. Defendants were indicted for conspiracy, tax evasion, and other crimes related to their alleged operation of a scheme to defraud the United States government of tariffs and taxes due on imported items. The government subpoenaed two of defendants' attorneys to testify before a grand jury. Defendants moved to quash the subpoenas based on the attorney-client privilege, and the district court denied the motion. Defendants sought review. 

Issue:

Did the former employee waive the attorney-client privilege when she made certain disclosures?

Answer:

No.

Conclusion:

The court affirmed and held that denial of the motion to quash was not an abuse of discretion because the government produced evidence that provided reasonable cause to believe that defendants had used their attorneys' services to conceal tax fraud, and therefore the crime-fraud exception to the attorney-client privilege applied. Further, the court held defendants' former employee did not waive the attorney-client privilege when she made certain disclosures, and that the prosecutor's failure to follow the proper two-step procedure for in camera review of privileged material was harmless error. In addition, the court held that the district court did not abuse its discretion when it refused to impose broad sanctions on the prosecution.