Nevada Supreme Court Clarifies Procedure to Obtain Disclosure of Privileged Documents Under Crime Fraud Exception - The Writ

Deciding a matter of first impression, the Nevada Supreme Court recently denied writ relief from a district court order that required disclosure of attorney-client communications under the crime fraud exception. Seibel, et al. v. Eighth Jud. Dist. Ct., 138 Nev. Adv. Op. 73 (2022). Looking to persuasive federal cases, the Court adopted a two-part test and determined the district court followed the necessary steps in concluding the exception applied. The Seibel decision provides a clear road map to district judges and litigants regarding the procedure for compelling the disclosure of privileged communications under the crime-fraud exception.

 Factual Background

The Petitioners, which included two individuals (Rowan Seibel and Craig Green) and affiliated entities, entered into agreements with Caesars Entertainment, Inc. to operate restaurants for various Caesars properties. Under their terms, Caesars could terminate the agreements if the contractual relationship might jeopardize Caesars’ gaming licenses. When Caesars later learned that Seibel had been convicted of tax fraud, it terminated the agreements.

In consolidated suits and countersuits, Seibel contended he had cured any potential risk to Caesars’ gaming licenses by creating an irrevocable family trust and assigning his contractual rights and interests under the Caesars agreements to newly formed business entities with which he was no longer affiliated and that were owned and managed by independent trustees. Caesars contended that Seibel had fraudulently attempted to hide his unsuitability to conduct business with a gaming licensee.

During discovery, Caesars obtained a prenuptial agreement that Seibel contemporaneously executed with the trust and that allowed Seibel to benefit from the trust. Based on the theory that Seibel had used legal counsel to create the trust and prenuptial agreement so he could serendipitously retain the benefits of the Caesars agreements, Caesars moved to compel the production of over 100 documents from Seibel’s privilege log under the crime-fraud exception.

 The district court determined that Caesars met its burden of showing that Seibel sought to deceive Caesars when he had counsel create the trust and prenuptial agreement. As a result, the Court conducted an in camera review of the disputed documents, found they were sufficiently related to and made in furtherance of Seibel’s attempted fraudulent scheme, and ordered their disclosure.

Seibel petitioned the Supreme Court for a writ of prohibition or mandamus to prevent disclosure of the documents.

The Court’s Analysis

NRS 49.115(1) contains Nevada’s crime-fraud exception to the attorney-client privilege, allowing disclosure when “the services of the lawyer were sought or obtained to enable or aid anyone to commit or plan to commit what the client knew or reasonably should have known to be a crime or fraud.” The statute is silent as to a procedure or burden of proof.

In the absence of statutory guidance, the Court looked to federal caselaw that interprets federal common law, specifically adopting the Ninth Circuit’s two-part test. See In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1090 (9th Cir. 2007). First, the party moving to compel privileged documents must show that “the client was engaged in or planning a criminal or fraudulent scheme when it sought the advice of counsel to further the scheme.” Second, the movant must demonstrate that the sought-after attorney-client communications are “sufficiently related to” and were made “in furtherance of the intended, or present, continuing illegality.” Id. The moving party bears the burden of proving both of these prongs by a preponderance of the evidence. Id. at 1094-95.

Quoting United States v. Zolin, 491 U.S. 554, 572 (1989), the Court concluded that the movant must show “a factual basis adequate to support a good faith belief by a reasonable person, that in camera review of the materials may reveal evidence to establish the claim that the crime fraud exception applies.” Once that has occurred, the district court has discretion whether to conduct in camera review. When the privileged communications are documents, however, the district court must do an in camera review and determine which documents should be subject to step two of the test.

Applying this framework, the Court determined the district court got each step right. Deferring to the district court’s findings, the Court concluded the in camera review was proper. And having conducted its independent review, the Court concluded that the district court properly exercised its discretion in ordering disclosure because the documents supported the district court’s finding that “they were sufficiently related to and made in furtherance of Seibel’s ongoing scheme.” As a result, the Court denied writ relief.