Earlier this month, reports emerged of a massive leak of documents that appear to have been stolen from a non-U.S. law firm. This is only the latest instance of confidential attorney files leaking into the public arena. Reports alleged that the documents show evidence of a global system of tax evasion and numerous instances of corruption, money laundering, and sanctions violations. The U.S. Department of Justice has already announced that it is investigating potential violations of law.
Current and former clients of the law firm subject to the leak now face the potential exposure of their confidential documents and conversations spanning nearly 40 years. Whenever confidential attorney files are leaked, innocent clients — as well as those who may have been seeking to cover up wrongdoing — face the potential of their personal information and confidential files being reviewed by reporters, members of the public and government investigators. In addition to firm clients, fiduciaries, beneficiaries and other third parties may have legal exposure based on the contents of these files. Even when only a subset of the stolen documents are publicized, the DOJ can often obtain additional, nonpublic material through grand jury subpoenas served on the entities or individuals that now possess the stolen files or through mutual legal assistance treaties to foreign authorities. This raises the question of whether U.S. government investigators are able to make use of these privileged materials that appear to have been hacked from an overseas law firm.
U.S. Case Law and Leaked Attorney Files
The Fourth Amendment prohibits the government from breaking the law to obtain evidence against a suspect. Courts typically “suppress” evidence taken through an illegal government seizure. However, in this instance, any violation in obtaining the privileged files likely occurred abroad, not in the United States, and the U.S. government was not, at least based on what we know at this stage, itself involved in the hacking incident. The U.S. Supreme Court has ruled that the Fourth Amendment “is wholly inapplicable to a search or seizure, even an unreasonable one, effected by a private individual not acting as an agent of the Government or with the participation or knowledge of any government official.”[1] Thus, the fact that the DOJ has access to the documents because of the illegal acts of others is unlikely to prevent the DOJ from using the evidence against subjects named in the stolen files.
Many — if not all — of the documents obtained in a leak of attorney files would be the type of document or communication traditionally protected under U.S. laws by attorney-client privilege and/or the attorney work product doctrine. Whether a U.S. court would recognize these protections is a difficult and fact-specific question.
Under the Federal Rules of Evidence, the privileged nature of the documents would likely not be waived by the theft of the documents.[2] But documents that indicate that a client was committing or intending to commit a fraud or crime and the attorney-client communications were in furtherance of that alleged crime or fraud would likely lose their privileged status under the crime-fraud exception to attorney-client privilege.[3]
When the attorneys at issue are foreign-registered attorneys, the situation is further complicated. Indeed, it is not immediately apparent whether the attorney-client privilege law in the United States would even extend to communications between U.S. residents and an attorney or members of a law firm in Panama. U.S. courts apply various factors to determine which jurisdiction’s laws should govern such a situation.[4] When a law firm has offices around the world, the outcome would depend in part on which office was involved in the communications, as well as where the communicating clients were located. Most countries do recognize some type of attorney-client privilege, but few are as protective of the privilege as the United States.[5] All of this means that legal rulings on the admissibility of evidence from leaked attorney files would be fact-intensive and may reach different results in different cases.
Next Steps for U.S. Investigators
The complexity of the privilege rules in this area will mean that the DOJ must proceed carefully. Typically, “taint teams” of attorneys and agents uninvolved in a case will first review potentially privileged documents to make an initial decision regarding whether the documents should be provided to the investigation team. Sometimes, the DOJ will need to seek court rulings on the application of attorney-client privilege to certain documents such as an order in a grand jury proceeding that the materials are covered by crime-fraud or otherwise are not privileged. It will likely take the DOJ months to sift through the reams of documents for potentially incriminating evidence that can actually be used in court.
Considerations for Law Firm Clients
Individuals with potential exposure should consult with U.S. and local counsel and consider their legal options now. Any arguments to preserve privilege should be presented as promptly as reasonably possible to minimize the potential for a judicial finding of waiver of privilege. Further, the IRS offers various self-disclosure programs for individuals with outstanding offshore tax liability, and the DOJ grants significant mitigation credit to individuals and entities that self-disclose their wrongdoing (particularly if those individuals and entities can help advance the DOJ’s investigation in other ways). It may take months or even years for the full implications of such leaks to be clear, but for those who anticipate potential legal exposure, the time for them to assess their legal options is now.
[1] United States v. Jacobsen, 466 U.S. 109, 113 (1984).
[2] See F.R.E. 502(b). Since the attorney-client privilege is a creation of common law, some states have handled the waiver question differently regarding inadvertently disclosed documents.
[3] See In re. Grand Jury, 705 F.2d 133, 151 (3d Cir. 2012).
[4] See, e.g., § 139 Restatement (Second) of Conflict of Laws.
[5] Even in the United States certain common lawyer-client activities, such as setting up a company or assisting with money transfers, are not covered by attorney-client privilege.
