harris management, inc., et al. paul coulombe et al ... · harris management, inc., et al. v. paul...
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MAINESUPREMEJUDICIALCOURT ReporterofDecisionsDecision: 2016ME166Docket: BCD-15-363Argued: May4,2016Decided: November8,2016Panel: SAUFLEY,C.J.,andALEXANDER,MEAD,GORMAN,JABAR,HJELM,andHUMPHREY,JJ.
HARRISMANAGEMENT,INC.,etal.v.
PAULCOULOMBEetal.SAUFLEY,C.J.
[¶1] PaulCoulombeand twoLLCsunderhis control—PGC1,LLC,and
PGC2, LLC1—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
protectedbytheattorney-clientprivilege.Coulombecontendsthatthecourt
erred indetermining that (A)Coulombe’scommunicationswithhisattorney
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
1 According to the complaint, TPI, LLC, is the solemember of PGC1 and PGC2, and the sole
memberofTPIisthePaulG.CoulombeTrust,ofwhichCoulombeisatrusteeandbeneficiary.
2
judgment except with respect to one communication that we conclude the
trialcourtmustconsiderfurtheronremand.
I.BACKGROUND
[¶2]InJanuary2014,HarrisManagement,Inc.,andJJRAssociates,LLC
(collectively,“Harris”),filedacomplaintagainstCoulombe,PGC1,andPGC2in
the Superior Court (Sagadahoc County). Although Coulombe and his LLCs
removedthecaseto federalcourtbasedondiversity jurisdiction, theUnited
States District Court for the District of Maine (Singal, J.) concluded that
diversitywaslackingandgrantedHarris’smotiontoremandthemattertothe
Superior Court. The parties then successfully applied to have the case
transferredtotheBusinessandConsumerDocket.
[¶3] AsamendedeffectiveMarch11,2015,Harris’scomplaintalleged
seven causes of action arising primarily from allegations that, in January,
February,andMarch2013,Coulombehadmisrepresentedhiscommitmentto
hireHarrisManagement,ownedandoperatedbyJeffreyHarris,tomanagethe
golfcourseattheBoothbayCountryClub,whichCoulombewaspreparingto
purchase at auction. Harris alleged that Coulombe made these
misrepresentationsinanefforttoobtainnearbypropertyfromJJRAssociates2
2Accordingtothecomplaint,JJRAssociateshasthreemembers—JeffreyHarris,hisbrother,and
hisfather.
3
atadiscount, topreventHarris frompurchasing theClub itself, and tohave
Harrisassistininitiallysettingupthegolfcourse.Harrisallegedthefollowing
causesofaction:(I)fraudulentinducement,(II)fraudulentmisrepresentation,
(III)negligent misrepresentation, (IV) breach of contract, (V) promissory
estoppel,(VI)unjustenrichment,and(VII)quantummeruit.
[¶4]Relevanthere,HarrisallegedthatCoulombe,withassistancefrom
his attorneys, Hawley Strait and John Carpenter, was secretly seeking a
differentgolfcoursemanagerwhileCoulombewassimultaneouslyreassuring
HarristhatHarriswastomanagethegolfcourse.Harrisallegedthatitdidnot
learn until March 2013—after ceasing independent efforts to purchase the
Club,sellingnearbyJJRpropertytoCoulombeatadiscount,andbeginningto
manage Coulombe’s golf course after Coulombe purchased the Club—that
someoneelse,DanHourihan,wouldbehiredasthemanagerofthecourse.
[¶5] In April 2015, the parties provided notices to the court of
discovery disputes that required court resolution. The court (Murphy, J.)
requestedmemoranda on the issue now on appeal—the applicability of the
attorney-client privilege, seeM.R. Evid. 502, to Coulombe’s communications
with his attorneys, some of which also included Coulombe’s business
associates. One such business associate was John Suczynski, a previous
4
long-time employee of Coulombe’s former companywhowas later hired by
PGC2 to be the general manager of the new Club. The parties filed
memorandawithvoluminousexhibits.
[¶6]Harrisarguedthatitwasentitledtodiscoverthecommunications
because the crime-fraud exception to attorney-client privilege applied. See
M.R.Evid.502(d)(1).HarrisfurtherarguedthatCoulombe’scommunications
involving both counsel and Suczynski were not privileged because the
inclusionofSuczynski,whowasnotarepresentativeofCoulombeduringthe
relevanttime,destroyedtheprivilege.
[¶7] Coulombe and his LLCs argued that the crime-fraud exception
cannotapplybecauseHarrisfailedtoestablishanecessaryelementoffraud—
that Harris, led by an experienced businessperson who had the advice of
counsel, justifiably reliedonCoulombe’s representations. Coulombeand the
LLCs further argued that the communications involving Suczynski were
privileged because Suczynski was a representative of Coulombe or his
businessesinspeakingwithcounsel.
[¶8] The parties’ exhibits included an affidavit from Coulombe
explaining Suczynski’s role in working with and for Coulombe; the parties’
privilegelogs;andsomecommunicationsamongCoulombe,Harris,Suczynski,
5
Hourihan, Carpenter, Strait, and Stephen Malcom, the president of the
KnickerbockerGroup—anarchitectureandconstructionfirmallegedtohave
done businesswith Coulombe—from before and after Coulombe purchased
theClub.
[¶9]ThecourtenteredanorderonJuly1,2015,providing,inrelevant
part, that Coulombe must permit Harris to discover the communications
amongCoulombe,hiscounsel,andSuczynski.Thecourtfoundthat,although
CoulombeandSuczynskihadworkedtogetherformanyyears,“Suczynskidid
notbecomeinvolvedwithCoulombe’sgolfcoursedealuntilMarchof2013,”
withhis role becomingmuchmore clear after the termsof his employment
werenegotiatedonMarch14,2013.Thecourtfoundthat,becausenoterms
ofemploymenthadbeendecidedbeforethatdate,andbecausetherewasno
otherevidencethatSuczynskihadauthoritybeforeMarch14,2013,tomake
decisions as a representative of Coulombe or his companies, the
communications among Coulombe, Suczynski, and Coulombe’s attorneys
before thatdatewerenotsubject to theattorney-clientprivilege. Thecourt
orderedthatothercommunications thatweresolelybetweenCoulombeand
hiscounsel,identifiedasprivileged,wouldbereviewedincamera.
6
[¶10]InearlySeptember2015,thecourtruledthatspecifieditemsthat
it had reviewed in camera were discoverable because the crime-fraud
exception to the attorney-client privilege applied. Exercising caution
regarding the release of those documents pending the possibility of appeal,
the court noted that it was “reluctant to make specific reference to the
documents” that persuaded it of the exception’s applicability because of the
possibility thatCoulombeandhisLLCswouldappealbeforedisclosure. The
court found that the crime-fraud exception applied because there was
sufficient evidence that (a)Coulombe had intentionally kept his plans for
management secret from Harris until he had completed transactions that
benefitted Coulombe and were detrimental to Harris, and (b) the
attorney-clientcommunicationsatissuewereintendedtofacilitateorconceal
thisactivity.
[¶11] Coulombe appeals from both of the court’s decisions requiring
thedisclosureofcommunications.3
3AlthoughHarrisarguesthattheappealfromtheJuly2015ordershouldbedismissedbecause
no final judgment has been entered, we consider the interlocutory appeal because the orderrequiringthedisclosureofpotentiallyprivilegedinformationhereproduces“aresultthatcannotbeundoneondirectappealfollowingafinaljudgment,”andthereforethedeathknellexceptiontothefinaljudgmentruleapplies. InreMotiontoQuashBarCounselSubpoena,2009ME104,¶11,982A.2d330.
7
II.DISCUSSION
[¶12]Theissuesraisedonappealare:(A)whetherCoulombemadethe
necessaryshowingthatSuczynskiwasa“representative”ofhimoroneofthe
LLCs such that the attorney-client privilege remained intact despite
Suczynski’sinclusionincommunications,and(B)theextenttowhichproofof
theelementsoffraudisnecessaryforthefraudcomponentofthecrime-fraud
exception to apply. These issues require us to review the court’s factual
findings as well as its interpretation of legal standards, see In re Motion to
QuashBarCounsel Subpoena, 2009ME104,¶¶18-20,982A.2d330, and to
review the “court’s determination of whether the crime-fraud exception
appliestodisputeddocumentsforanabuseofdiscretion,”Bd.ofOverseersof
the Bar v.Warren, 2011ME 124, ¶ 23, 34 A.3d 1103. We review the legal
issues regarding the nature and scope of the privilege and the crime-fraud
exceptiondenovoandreviewthe factual findings forclearerror.4 See Inre
MotiontoQuashBarCounselSubpoena,2009ME104,¶20,982A.2d330.“A
finding of fact is clearly erroneous if there is no competent evidence in the
record tosupport it; if the fact-finderclearlymisapprehends themeaningof
the evidence; or if the finding is so contrary to the credible evidence that it
4Becausethereisnofinaljudgment,amotionforfindingsoffactandconclusionsoflawwasnotnecessary toprevent theassumptionofallnecessary findings thathaveevidentiarysupport. SeeM.R.Civ.P.52;cf.Lyonsv.BaptistSch.ofChristianTraining,2002ME137,¶13,804A.2d364.
8
doesnotrepresentthetruthandrightofthecase.”Youngv.Lagasse,2016ME
96,¶8,143A.3d131(quotationmarksomitted).
[¶13] “[W]henthepartywiththeburdenofproof isappealing . . . the
appellantmustshowthattheevidencecompelsacontraryfinding.”Id.Here,
CoulombeandhisLLCsboretheburdenofestablishingtheapplicabilityofthe
privilegebyapreponderanceoftheevidence.SeePiercev.GroveMfg.Co.,576
A.2d196,199(Me.1990);seealsoMapleWoodPartners,L.P.v.IndianHarbor
Ins. Co., 295 F.R.D. 550, 592 (S.D. Fla. 2013); PSE Consulting, Inc. v. Frank
Mercede&Sons,Inc.,838A.2d135,167(Conn.2004).Harris,inturn,borethe
burden of establishing the applicability of the crime-fraud exception to the
attorney-clientprivilegebyapreponderanceoftheevidence.SeeInreMotion
toQuashBarCounselSubpoena,2009ME104,¶19,982A.2d330.
A. Attorney-ClientPrivilegeandCommunicationsInvolvingaThirdParty
[¶14] We are guided in our analysis by the language and purpose of
Rule502. “A clienthas aprivilege to refuse todisclose, and toprevent any
otherpersonfromdisclosing,thecontentsofanyconfidentialcommunication
[b]etween the client or client’s representative and the client’s lawyer . . . .”
M.R.Evid.502(b)(1).ForpurposesofM.R.Evid.502,a“‘representativeofthe
client’ is a person who has authority on behalf of the client to: (A) Obtain
9
professional legal services; or (B)Act on advice rendered as part of
professional legal services.” M.R. Evid. 502(a)(2). We discuss the legal
meaning of the term “representative of the client” and the court’s findings
aboutSuczynski.
1. WhatIsa“RepresentativeoftheClient”?
[¶15] Coulombe argues that communications in which his attorney
includedSuczynskiareprivilegedbecauseSuczynskiwasanemployeeanda
representative of Coulombe and his LLCs, and therefore the attorney-client
sealwasnotbroken.TheAdvisers’NotetoformerM.R.Evid.502(February2,
1976)5providesthat,tobea“representative”ofaclient,apersonmustbein
the“controlgroup”oftheclient:
Subsection (a)(2) defines “representative of the client” asonehavingauthoritytoobtainlegalservicesandtoactonadvicerendered pursuant thereto on behalf of the client. This is anadoption of the so-called “control group” test. It narrows theprivilege, confining it to communications bypersons of sufficientauthority to make decisions for the client. It would not protectcommunicationsfromlower-levelemployeestolawyerstoenablethemtoadviseadecision-makingsuperior.
(Emphasisadded.)Afterconsideringwhethertoabandonthe“controlgroup”
testfollowingthedecisionoftheSupremeCourtoftheUnitedStatesinUpjohn
5 TheMaineRulesofEvidencewererestyledeffective January1,2015. Therestylingdidnot
affectthemeaningofM.R.Evid.502.SeeM.R.Evid.502,MaineRestylingNote(November2014).
10
Co. v. United States, 449 U.S. 383 (1981),6 the Advisory Committee on the
Maine Rules of Evidence “recommended retention of the control group test
without change.” M.R. Evid. 502, Advisory Committee Note (Feb. 1, 1983).
The still-applicable control group test therefore includes as corporate
representatives only “those officers, usually top management, who play a
substantial role in deciding and directing the corporation’s response to the
legaladvicegiven,”UnitedStatesv.UpjohnCo.,600F.2d1223,1226(6thCir.
1979), rev’d, 449 U.S. 383, and other individuals who have “sufficient
authoritytomakedecisionsfortheclient,”Advisers’NotetoformerM.R.Evid.
502(Feb.2,1976).
2. FindingsRegardingSuczynski’sRole
[¶16] AccordingtoCoulombe’saffidavit,Suczynski’srolewithrespect
toCoulombeandhisLLCswasinitiallyas“atrustedadvisor”andlaterasthe
generalmanageroftheClub.CoulombeauthorizedSuczynskitospeaktohis
lawyers, and Suczynski “in many instances was authorized to act on
[Coulombe’s] behalf with respect to information and advice received from
6TheCourtheldthattheattorney-clientprivilegesetforthintheFederalRulesofEvidencemay
extend to communications with counsel by corporate employees outside the “control group” ofpeoplewhoplayasubstantialroleindecidinganddirectingthecorporateresponsetolegaladvice.UpjohnCo.v.UnitedStates,449U.S.383,395-97(1981).Thus,federalcourtsmustdetermine,onacase-by-casebasis,whethertheprivilegeextendstospecificinternalcommunicationswithcounsel,whichmayhavetakenplaceatthedirectionofcorporatesuperiors.Id.at396-97.
11
[Coulombe’s]lawyers.”Suczynskialso“participate[d]inthedecision-making
regarding the golf course.” The affidavit did not specify what matters
Suczynskihadbeenauthorizedtoactonor indicatewhenorhowCoulombe
hadgivenhimsuchauthorization.
[¶17] As the court found, there isnoevidence that, beforeMarch14,
2013,SuczynskihadbeenexpresslyhiredbyCoulombeoreitherLLC,orwasa
memberofeitherLLC.Theaffidavitsubmitteddoesnotdemonstratethathe
undertookordirectedanyspecificactiononbehalfofeitherLLC. Given the
limitedfactssetforthinCoulombe’sconclusoryaffidavit,thecourtdidnoterr
indeterminingthatCoulombehadfailedtoestablish,byapreponderanceof
the evidence, the existence of a privilege for communications that included
Suczynskibefore Suczynskiwas hired asmanager of the Club onMarch 14,
2013.SeeM.R.Evid.502(a)(2).Thecourtwasnotcompelledtofind,forthat
initial period of time, that Suczynski was Coulombe’s legally authorized
personalrepresentative,imbuedwiththeauthoritytomakedecisionsrelated
toCoulombe’s legalservices,or thatSuczynskiwas in the“controlgroup”of
either of Coulombe’s LLCs. See id.; Advisers’ Note to formerM.R. Evid. 502
(Feb.2,1976).
12
B. NecessitytoProvetheElementsofFraudfortheFraudExceptiontotheAttorney-ClientPrivilegetoApply
[¶18] We turn then to the application of the crime-fraud exception.
Preliminarily,wenote that theprocess employedby the court to assess the
applicability of the crime-fraud exception was prompt and effective. The
partiesdonotdisputetheprocessortheproprietyof thecourt’sdecisionto
undertake incamera reviewofattorney-clientcommunicationsbasedonthe
evidence presented, which met the standard of establishing a “reasonable
belief that in camera reviewmayyieldevidence that establishes the [crime-
fraud]exception’sapplicability.” UnitedStatesv.Zolin,491U.S.554,574-75
(1989).
[¶19] Rather, the argument on appeal concerns whether the court
erred in itssubstantiveapplicationof the law inorderingdisclosureafter in
camerareview.Specifically,CoulombeandhisLLCsarguethatallelementsof
fraud must be present—and established by a preponderance of the
evidence—for the crime-fraud exception to apply, and that the evidence is
insufficienttoshowthatHarris’srelianceonCoulombe’srepresentationswas
justifiable.
13
[¶20] We first summarize theexisting lawofattorney-clientprivilege
and the crime-fraud exception to the privilege, and next review the
applicabilityoftheexceptioninthematterbeforeus.
1. LawofAttorney-ClientPrivilege
[¶21] The attorney-client privilege is a venerable privilege, well
established in the law and available to individuals, corporations, and other
entities.SeeM.R.Evid.502(a)(1);InreMotiontoQuashBarCounselSubpoena,
2009ME 104, ¶ 13, 982 A.2d 330. When relied on by businesspeople and
corporateentities, theprivilege serves thepublicbenefitof encouraging full
and candid communication with counsel, and enabling compliance with
business-related lawsandregulations. See InreRegentsofUniv.ofCal.,101
F.3d1386,1390-91(Fed.Cir.1996).
[¶22]“Theattorney-clientprivilege...istheoldestoftheprivilegesfor
confidential communications known to the common law.” In re Motion to
Quash Bar Counsel Subpoena, 2009ME 104, ¶ 13, 982 A.2d 330 (quotation
marks omitted). The privilege is designed “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.” Id.(quotationmarksomitted). “Tofulfillthatpurpose,clientsmust
14
be free tomake full disclosure to their attorneys of past wrongdoings.” Id.
(quotationmarksomitted).Thissalutarypurposeiscritical.
[¶23] Thepublicpolicies servedby theattorney-clientprivilegemust
be counterbalanced, however, with the “broader public interests in the
observance of law and administration of justice” served by the crime-fraud
exceptiontotheattorney-clientprivilege.Id.¶14(quotationmarksomitted).
Thatexceptionallowsthedisclosureofotherwiseprivilegedcommunications
by a party who consults with an attorney in order to facilitate the party’s
commissionorconcealmentof“ongoingorfuturewrongdoing.”Id.
[¶24]Thepartyassertingtheexistenceoftheattorney-clientprivilege
hastheinitialburdenofdemonstratingitsapplicability. SeePierce,576A.2d
at199.Anopposingpartyseekingtoshowthatthecrime-fraudexceptionto
the attorney-client privilege applies then has the burden to prove, by a
preponderance of the evidence, that (1) “the clientwas engaged in (orwas
planning) criminal or fraudulent activity when the attorney-client
communications tookplace”and (2) “thecommunicationswere intendedby
the client to facilitate or conceal the criminal or fraudulent activity.” In re
MotiontoQuashBarCounselSubpoena,2009ME104,¶¶18,19,982A.2d330
(quotationmarksomitted).Whentheseelementsaremet,theexceptionwill
15
applywhetherornottheattorneyisawareoftheclient’spurposetousethe
attorneyinfurtheranceofafraud.Seeid.¶17.Thefocusoftheinquiryison
theactionsandmotivationsoftheclient.Id.
2. ApplicabilityoftheCrime-FraudException
[¶25] To analyze the issues that Coulombe raiseswith respect to the
crime-fraudexception,we (a) reviewdenovo the legal questionofwhether
every element of a completed fraud must be demonstrated for “fraudulent
activity” tohavebeenengaged inorplanned, and (b) review for clearerror
the court’s findings of fact regarding the elements of the crime-fraud
exception and determine whether the court abused its discretion in its
ultimateorderrequiringdisclosure.
a. ExtentofProofofElementsofFraud
[¶26]Beforereviewingthecourt’sactions,wemustdeterminewhether
apartyseekingtheapplicationofthecrime-fraudexceptionislegallyrequired
to establish actual, justifiable reliance on the client’s representations.7
7 To prevail in a cause of action for fraud, a party must prove five elements by clear and
convincingevidence:
(1)Apartymadeafalserepresentation,(2)Therepresentationwasofamaterialfact,(3) The representation was made with knowledge of its falsity or in recklessdisregardofwhetheritwastrueorfalse,
16
Neither we nor the courts of Massachusetts—the other jurisdiction that
applies the standard of proof by a preponderance of the evidence for the
crime-fraudexceptiontoapply,seeInreAGrandJuryInvestigation,772N.E.2d
9,21-22(Mass.2002)(citingPurcellv.Dist.AttorneyfortheSuffolkDist.,676
N.E.2d 436, 439 (Mass. 1997))—have directly addressed this issue. Other
jurisdictions,however,thatrequireonlyaprimafacieshowingthatthecrime-
fraud exception applies, have addressed the question.8 For instance, the
UnitedStatesCourtofAppealsfortheD.C.Circuithasheldthataprimafacie
showing of misconduct—not full proof of a realized crime or fraud—is
contemplated for overcoming the privilege: “Communications otherwise
protected by the attorney-client privilege are not protected if the
communications are made in furtherance of a crime, fraud, or other
(4)Therepresentationwasmadeforthepurposeofinducinganotherpartytoactinrelianceuponit,and(5)Theotherpartyjustifiablyreliedupontherepresentationastrueandacteduponittotheparty’sdamage.
Barrv.Dyke,2012ME108,¶16,49A.3d1280(emphasisomitted).
8 See, e.g., In re Berkley & Co., 629 F.2d 548, 553 (8th Cir. 1980) (holding that prima facieevidence of a realized crime or fraud is not necessary to overcome the privilege); see also In reGrand Jury Subpoena Duces Tecum, 731 F.2d 1032, 1039 (2d Cir. 1984) (holding that “the clientneednothave succeeded inhis criminal or fraudulent scheme for the exception to apply”); In reUSA Waste Mgmt. Res., L.L.C., 387 S.W.3d 92, 98 (Tex. App. 2012) (“A party who asserts thecrime/fraudexceptionmustshow:(1)aprimafaciecaseof thecontemplated crimeor fraud;and(2)anexusbetweenthecommunicationsatissueandthecrimeorfraud.”(emphasisadded)).
17
misconduct.” InreSealedCase,754F.2d395,399(D.C.Cir.1985)(emphasis
added). The court held that a party asserting the exception must provide
“evidencethatifbelievedbythetrieroffactwouldestablishtheelementsof
an ongoing or imminent crime or fraud,” without the requirement that the
partyproveallelementsofacompletedcrimeorfraud.Id.
[¶27]TheSupremeCourtofAlaskasimilarly“decline[d]toaccept[the]
argument that ‘crime or fraud’ should be narrowly defined, and h[e]ld that
servicessoughtbyaclientfromanattorneyinaidofanycrimeorabadfaith
breach of a duty are not protected by the attorney-client privilege.” Cent.
Constr. Co. v. Home Indem. Co., 794 P.2d 595, 598 (Alaska 1990) (emphasis
omitted).“Deceptionanddeceitinanyformuniversallyconnotefraud.Public
policydemandsthatthefraudexceptiontotheattorney-clientprivilege...be
giventhebroadestinterpretation.”Id.(quotationmarksomitted).“Thepolicy
of promoting the administration of justice would not be well served by
permitting services sought in aid of misconduct to be cloaked in the
attorney-clientprivilege.”Id.9
9SeealsoOfficialComm.ofUnsecuredCreditorsofSt.JohnsburyTruckingCo.v.BankersTr.Co.(In
reSt.JohnsburyTruckingCo.),184B.R.446,456(Bankr.D.Vt.1995)(“Precedentandauthorityalsorecognizethatnotjusttechnicalcrimesorfraudsareexcludedfromtheattorney-clientprivilege....[C]ommunications in furtheranceof somesufficientlymalignantpurposewillnotbeprotected.”);Fellerman v. Bradley, 493 A.2d 1239, 1245 (N.J. 1985) (giving the term “fraud” an “expansivereading”);VolcanicGardensMgmt.Co.v.Paxson,847S.W.2d343,347(Tex.App.1993)(“[A]lthough
18
[¶28]Inthiscontext,fraudmustbeunderstoodbroadly“as[a]generic
term, embracing all multifariousmeanswhich human ingenuity can devise,
andwhichareresortedtobyoneindividualtogetadvantageoveranotherby
false suggestionsorby suppressionof truth, and includes all surprise, trick,
cunning dissembling, and any unfair way by which another is cheated.”
VolcanicGardensMgmt.Co.v.Paxson,847S.W.2d343,347(Tex.App.1993)
(quotationmarksomitted).10 “Fromearlyon inspeakingof thecrime/fraud
exception,courtsdidnotandstilldonot limit theexception toprosecutable
crimes or to criminal and civil frauds,” I Edna SelanEpstein, Attorney-Client
PrivilegeandtheWork-ProductDoctrine§1.V.B.13(5thed.2012),and“there
has been a gradual, but steady expansion of the scope of the exception,”
EdwardJ.Imwinkelried,TheNewWigmore:EvidentiaryPrivileges§6.13.2.d.1
at966(2002);seealso IEpstein§1.V.B.13(“[T]here isnodoubt thatcourts
are recognizing a wider range of improper behavior” that will “vitiate the
availabilityoftheattorney-clientprivilege.”).
the‘fraud’referredtointheexceptioncertainlyincludescommonlawfraudandcriminalfraud,itismuchbroaderthanthat.”(footnoteomitted)).
10 Some courts have applied a stricter interpretation of the crime-fraud exception in patent
infringementcases,reasoningthateachoftheelements“mustbeestablishedbyatleastprimafacieevidence,”UnionCarbideCorp.v.DowChem.Co.,619F.Supp.1036,1052(D.Del.1985)—astandardof proof that differs from ours. See also Research Corp. v. Gourmet’s Delight Mushroom Co., 560F.Supp. 811, 820 (E.D. Pa. 1983) (requiring, in apatent infringement case, a showingof aprimafacie case of fraud because “for the privilege to take flight, unlawful conduct, notmere inequity,mustbedemonstrated.”).
19
[¶29] Ultimately, in determining what must be proved for the
crime-fraudexceptiontoapplyinMaine,wemustbalancetheneedforclients
tohave theprotectionof privileged communicationswith their attorneys in
order to obtain effective representation regarding current legal concerns or
anypastwrongdoing,againsttheneedtopreventattorneysinthehonorable
practiceof lawfrombeingusedtoperpetrateongoingor futurewrongdoing.
Striking the proper balance is critical in assuring that attorneys can serve
theirclientseffectivelywithouthavingtheirlegalservicesusedforfraudulent
orcriminalpurposes.
[¶30] In order to strike that balance, and to maintain the high
standardsofthelegalprofession,thefocusindeterminingwhetherthefraud
portionofthecrime-fraudexceptionappliesmustbeontheelementswithin
thecontroloftheclientthatinvolveeithertheengagementinortheplanning
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
deceptiveandfraudulent,fallsshortofthefullyrealizedciviltortoffraud.11
11 Atthisstageintheproceedings, thesufficiencyoftheevidencetoprovefraudisnotbefore
thecourt. Rather, thesufficiencyoftheevidenceofHarris’sclaimsof fraudulent inducementandfraudulent misrepresentation will be resolved separately, after discovery is complete, eitherthrough a dispositive motion or through a trial at which the standard of proof by clear and
20
[¶31] Although proof of the complete tort is not necessary for the
exceptiontoapply,apartyseekingtoestablishthataclientwasengagedinor
planning fraudulentactivitymustofferevidenceof theclient’s intentionand
expectation that the party alleging injury would rely on the client’s
misrepresentations,omissions,orotherdeceptiveactions.SeeInreMotionto
QuashBarCounselSubpoena,2009ME104,¶18,982A.2d330; In reSealed
Case,754F.2dat399;Cent.Constr.Co.,794P.2dat598.Withoutproofofthe
intentionandexpectationof reliance, theclient’sengagement inorplanning
for“fraudulentactivity,”InreMotiontoQuashBarCounselSubpoena,2009ME
104, ¶18, 982 A.2d 330, which requires intentional deception, cannot be
established.SeeCent.Constr.Co.,794P.2dat598.Torequireproof,however,
ofactual,justifiablereliancebothplacesthecartbeforethehorseandmisses
thepointofthecrime-fraudexception—toallowdiscoveryofaclient’suseof
anattorney’sservicesintheplanningorconcealmentoffraudulentactivity.
[¶32]Here,thecourt’sfindingsdemonstratethatitappliedtheproper
legal test. It found, for purposes of the discovery motion, that Harris had convincingevidencewillbeapplied.SeeBarr,2012ME108,¶16,49A.3d1280;cf.BPAlaskaExpl.,Inc.v.SuperiorCourt,199Cal.App.3d1240,1262-63(1988)(holdingthatacourtis“notreviewingthemeritsof a fraudcauseof action”but is instead “reviewing themeritsof adiscoveryorder todetermine if [a party]will have access to communications between [the opposing party] and itsattorneystoaid[theparty]inprovingitscausesofaction.”). BecausethequestionatthisstageisnotwhetherHarriscanprovethetortoffraud,weneednotaddress(1)whetherafalsepromiseoffutureperformancecanconstituteafraudor(2)whethertheevidencepresentedwouldestablishtheelementofjustifiablereliancebyclearandconvincingevidence.
21
demonstrated by a preponderance of the evidence that (a) Coulombe was
engaged in or planning fraudulent activity when the attorney-client
communicationstookplaceand(b)Coulombe’scommunicationswithcounsel
wereintendedbyhimtofacilitateorconcealthefraudulentactivity.SeeInre
MotiontoQuashBarCounselSubpoena,2009ME104,¶¶18,19,982A.2d330.
Indoingso, thecourtmadefindingsaboutthenatureofCoulombe’sactions,
hisintentions,andhisexpectationofreliancebyHarris.Specifically,thecourt
found that thedocuments it concluded fellwithin thecrime-fraudexception
“corroborate or buttress the Plaintiffs’ claims that Defendants intentionally
keptPlaintiffHarris in thedark about their actual plans formanagement of
the [Club] long enough to complete certain transactions which were to the
benefit of the Defendants and to the detriment of Plaintiff Harris.” Having
determinedthatthecourtappliedtheproper legalstandard,wenowreview
thecourt’sfactualfindingsforclearerror.Seeid.¶20.
b. ReviewofFactualFindings
[¶33] We separately review the court’s findingswith respect to each
element required for the crime-fraud exception to the attorney-client
privilegetoapply.
22
(1) Client’s Involvement In, or Planning For, FraudulentActivity
[¶34] In thematerialsprovided to thecourt, there isevidence that, if
believed, could demonstrate that, during a time when Coulombe did not
intend to hire Harris to manage the golf course, Coulombe took actions to
convince Harris that it would be hired in order to prevent Harris from
competingtopurchasetheclub,induceJJRtosellpropertyforareducedprice,
and induce Harris to assist Coulombe in getting work on the golf course
started. Specifically, there isevidence that,during the timewhenCoulombe
wascommunicatingwithcounsel,hecommunicatedtoothersanintentionnot
tohireHarrisasgolfcoursemanagerbutalso(1)proposedaspecificrateof
paytoHarrisifHarrisagreedtomanagethecourse:“Youget5%ofgrossifI
don’tmakemoneyand8%ifIdomakemoney”;(2)reassuredJeffreyHarris,
“It’s done and you’remy guy,” when Harris’s counsel pressed for awritten
management agreement before land transactions occurred; (3)purchased
JJR’s nearby property for less than Jeffrey Harris’s initialminimum offering
price; and (4)had Harris begin work to get the golf course in order in
FebruaryandearlyMarch2013.
[¶35] This evidence was sufficient to support the court’s
discovery-related finding that, during the time when Coulombe was
23
exchanging the identified communicationswith his legal counsel, Coulombe
was engaged in or planning fraudulent activity that was expected and
intended to induce Harris’s reliance. See id. ¶¶ 18, 20. The court did not
commitclearerrorinmakingthisfinding.Thenextquestioniswhetherthere
is sufficient evidence in these communications that Coulombe intended to
facilitateorconcealthisfraudulentactivitythroughhiscommunicationswith
counsel.
(2) Client’s Intention to Facilitate or Conceal theFraudulent Activity Through the CommunicationswithCounsel
[¶36] After the court reviewed in camera a collection of Coulombe’s
communicationswithcounselrelated to thepurchaseof theClubatauction,
the purchase of JJR’s properties, and themanagement of the golf course, it
entered a specifically tailored order directing the release of identified
communications. When viewed along with the materials that Harris had
already submitted, the court did not commit clear error in finding by a
preponderance of the evidence that the identified communications with
counsel demonstrated Coulombe’s purpose to use counsel to facilitate or
conceal his deception of Harris through fraudulent activity. In particular,
these specific communications shed light on Coulombe’s planning and the
24
timing of his communications to Jeffrey Harris and his other legal and
business associates about his intentions. The court did not abuse its
discretion in ordering the release of specific communications between
Coulombeandhisattorneys.SeeWarren,2011ME124,¶23,34A.3d1103.
[¶37]Thereisonepossibleexceptiontoourdecisionaffirmingthetrial
court’s determination, however. Although Coulombe does not specifically
argue that any particular pages of the materials submitted for the court’s
reviewwere improperly included in the court’s disclosure order, one email
exchangeappearstobeunrelatedtoCoulombe’sdealingswithHarrisandmay
have been inadvertently ordered disclosed. We therefore remand for the
court to clarify whether it intended to include that email exchange, which
appearsatpages15626through15633ofthematerialssubmittedforreview,
initsorderrequiringdisclosure.
[¶38] Accordingly,with theexceptionof thosepages,which thecourt
willreconsideronremand,weaffirmthecourt’sjudgment.
Theentryis:
Judgmentaffirmed,exceptwithrespecttopages15626 to15633of thedocuments reviewed incamera. Remanded for the court todeterminewhether the crime-fraud exception applies tothosepages.
25
Onthebriefs:
Paul McDonald, Esq., and Eben M. Albert, Esq., BernsteinShur, Portland, for appellants Paul Coulombe, PGC1, LLC,andPGC2,LLCJamesD.Poliquin,Esq.,BenjaminN.Donahue,Esq.,NormanHanson & DeTroy, LLC, Portland, for appellees HarrisManagement,Inc.,andJJRAssociates,LLC
Atoralargument:
EbenM. Albert, Esq., for appellants Paul Coulombe, PGC1,LLC,andPGC2,LLCJames D. Poliquin, Esq., for appellees Harris Management,Inc.,andJJRAssociates,LLC
BusinessandConsumerDocketdocketnumberCV-2014-60FORCLERKREFERENCEONLY