How to Turn the Table on Privilege Claims in Fraud Cases

Few accusations raise the hackles of clients more than claims that they defrauded someone.  Understandably, the client accused of fraud wants his or her attorney to prove that he or she was honest and forthright in the parties’ dealings.  When you win a summary disposition motion dismissing a fraud claim, you will certainly have one happy client.
However, when you take discovery in a fraud case, you will likely be met with your opponent’s stonewalling on the grounds that the production of certain documents or the answers to certain deposition questions would reveal either privileged communications between the plaintiff and his or her attorney or the attorney’s trial strategy, a/k/a work product.  Your initial reaction will be one of frustration.  But sometimes you can actually vindicate your client with use of another defense to a fraud claim.  This centers on the element of justifiable reliance, namely, the requirement that a plaintiff show that he or she reasonably relied on the defendant’s alleged misrepresentations.  Let’s see how that can work.
There is a fair amount of case law holding that when a party injects his/her/its state of mind into the case, it waives the attorney-client and work product privileges.  The rationale is that the party’s consultations with his/her/its attorneys might bear upon the issue of the party’s justifiable reliance on the alleged misrepresentations and/or fraudulent omissions.
For example, suppose that a bank decides to restructure a loan because the borrower convinces it that he/she/it is close to insolvency.  The bank later learns that the borrower had made gross misrepresentations about his/her/its financial status.  After the bank sues the borrower for rescission and damages, it withholds some documents containing attorney-client communications prepared during the negotiations with the borrower.  The latter’s attorney argues that the documents should be produced because they are relevant to the issue of whether the bank justifiably relied on the borrower’s representations.  There is case law requiring disclosure of the withheld documents on that ground, because they might reveal that the bank reached its own conclusions about the borrower’s solvency without relying entirely on the latter’s representations.  You may be able to use this argument successfully when you are defending your client.
You may also be able to use your opponent’s work product claims against the plaintiff.  You should always demand a detailed privileged log from your opponent.  Besides providing you with information needed to challenge the privilege claims, a detailed privilege log can undermine a fraud claim.  Suppose that the log contains a reference to a pre-lawsuit document that is being withheld as attorney work product.  From that designation alone, you can argue that the plaintiff was considering suing your client and could not possibly have justifiably relied on your client’s representations.  This may also give you ammunition to convince the judge that the document should be produced and/or that the judge should review it in camera and then decide if it is privileged.
In short, you can turn your opponent’s privilege claims into a formidable weapon against the plaintiff under the right circumstances. Contact us to learn more.