Witnesses Before the Special March 1980 Grand Jury, Matter of, No. 83-1611

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: Before CUDAHY, ESCHBACH and COFFEY; CUDAHY
• Citation: 729 F.2d 489
• Parties: 15 Fed. R. Evid. Serv. 295 In the Matter of WITNESSES BEFORE THE SPECIAL MARCH 1980 GRAND JURY. Appeal of UNITED STATES of America.
• Docket Number: No. 83-1611
• Decision Date: 02 March 1984

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729 F.2d 489 15 Fed. R. Evid. Serv. 295 In the Matter of WITNESSES BEFORE THE SPECIAL MARCH 1980 GRAND JURY.
Appeal of UNITED STATES of America. No. 83-1611. United States Court of Appeals,
Seventh Circuit. Argued Dec. 7, 1983.
Decided March 2, 1984.

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William C. Bryson, Dept. of Justice, Washington, D.C., for appellant.

John J. Jiganti, Harris, Burman, Sinars & Jiganti, Chicago, Ill., for appellee.

Before CUDAHY, ESCHBACH and COFFEY, Circuit Judges.

CUDAHY, Circuit Judge.

In this appeal we consider the application of the attorney-client privilege to a grand jury's subpoena of information about a known client's fees. The district court found that the subpoenaed fee information was privileged because it might tend to incriminate the client. We conclude that the attorney-client privilege does not protect all of the subpoenaed materials, and we therefore reverse the judgment of the district court.

I

In 1982 a federal grand jury in the Northern District of Illinois served subpoenas duces tecum on three attorneys: John J. Jiganti, George Cotsirilos and Charles O. Farrar, Jr. The subpoenas demanded that the attorneys produce for the grand jury all records relating to money received from or on behalf of one Sam Sarcinelli. ¹ The attorneys informed the government that they would not comply with the subpoenas on the grounds that the subpoenas asked for information protected by the attorney-client privilege. The attorneys have all acknowledged that they represented Sarcinelli during the time covered by the subpoenas.

When the attorneys refused to comply with the subpoenas, the government petitioned the district court for orders compelling the attorneys to comply and produce the documents. The government claimed that the information regarding Sarcinelli's fees was relevant for its investigation of continuing criminal enterprises. The attorneys argued that the fee information could be used against their client Sarcinelli in prosecutions for failure to file income tax returns or for violations of narcotics laws. ² Because production of the records might tend to incriminate their client, they argued, the information was protected by the attorney-client privilege. The district court denied the government's petition and held that because the fee information might become a link in a chain of evidence which might incriminate the client, the attorney-client privilege prevented the government from compelling production of the information. This appeal followed. ³

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II

The general rule is well established that information regarding a client's fees is not protected by the attorney-client privilege because the payment of fees is not a confidential communication between the attorney and client. E.g., Matter of Walsh, 623 F.2d 489, 494 (7th Cir.), cert. denied, 449 U.S. 994, 101 S.Ct. 531, 66 L.Ed.2d 291 (1980). However, courts have recognized that in exceptional circumstances, fee information may nevertheless be privileged. This case requires us to decide whether the fee information sought here falls within an exception to the general rule that fee information is not privileged. In so doing, we must choose between two alternative rationales supporting the application of the privilege to fee information in exceptional cases.

The district court and the attorneys take the approach that the attorney-client privilege applies to any fee information in an attorney's possession which might tend to incriminate the client. As the district court explained:

When because of the surrounding circumstances, the fact of the payment of a fee or the date or form of payment becomes the basis of a factual inference to be drawn concerning the activities of the client, or becomes a link in a chain of evidence affecting the client, logic would dictate the conclusion that the simple fact of the payment of a fee or the date of payment or the mode of payment has become a form of communication and the privilege is extended to it.

In the Matter of Witnesses Before the Special March 1980 Grand Jury, No. 81 GJ 413, memorandum opinion at 2 (N.D.Ill. Mar. 3, 1983) (emphasis supplied). Thus the district court took the approach that fee information becomes a protected "communication" whenever it might be relevant to a criminal investigation or prosecution of the client. The government's theory is that the privilege applies only to confidential communications, that fees are not "communications" and that fee information is protected only when its disclosure would amount to a disclosure of other information involving confidential communications between attorney and client. There is apparently little doubt that the fee information sought in this case would be relevant to criminal investigations. Thus, the resolution of this case depends upon a choice between the incrimination rationale and the confidential communication rationale for the exceptional cases where fee information may be privileged.

The district court's approach to the privilege question in this case is inconsistent with decisions of the Supreme Court and this circuit. In Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976), the Supreme Court considered the application of the attorney-client privilege to documents transferred by a client to an attorney in order to obtain legal advice, and the Court concluded that the privilege would apply if the documents could not be obtained from the client. 425 U.S. at 405, 96 S.Ct. at 1578. The analysis of the privilege in Fisher is highly relevant for our disposition of this case. The Court identified a single purpose for the privilege: "to encourage clients to make full disclosure to their attorneys," 425 U.S. at 403, 96 S.Ct. at 1577, and the Court limited its application to the fulfillment of that purpose:

As a practical matter, if the client knows that damaging information could more readily be obtained from the attorney following disclosure than from himself in the absence of disclosure, the client would be reluctant to confide in his lawyer and it would be difficult to obtain fully informed legal advice. However, since the privilege has the effect of withholding relevant information from the factfinder, it applies only where necessary to achieve its purpose. Accordingly it protects only those disclosures--necessary to obtain informed legal advice--which might not have been made absent the privilege.

425 U.S. at 403, 96 S.Ct. at 1577. Thus, the Supreme Court's analysis of the privilege

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in Fisher focused only on the protection of confidential communications. Whether the information sought amounted to a protected "communication" was not made to depend on whether disclosure of the information would have incriminated the client.

In deciding the applicability of the attorney-client privilege to fee information, this circuit has consistently focused its analysis on whether the information would disclose confidential communications between the attorney and client. For example, in United States v. Jeffers, 532 F.2d 1101 (7th Cir.1976), vacated in part on other grounds, 432 U.S. 137, 97 S.Ct. 2207, 53 L.Ed.2d 168 (1977), the government introduced evidence of the defendant's payment of attorneys' fees as evidence of substantial income from a continuing criminal enterprise. This court held that the attorney-client privilege did not apply to the fee information. Although evidence of the fees was certainly incriminating, the court said, "the crucial question is whether such disclosure violates the substance of a confidential communication between attorney and client." 532 F.2d at 1115. Because the fee information in Jeffers disclosed only an element of the defendant's expenditures in a given year, the disclosure violated no confidential communication:

Like any other expenditure, attorney's fees are a legitimate subject of inquiry, unless other factors are present which make an answer to such an inquiry a disclosure of a fundamental communication in the relationship. The testimony here, however, elicited no more than would have been elicited by introducing evidence that the defendant had bought a Rolls-Royce for cash (i.e., a substantial expenditure).

532 F.2d at 1115. The fact that the fee information might incriminate the client did not transform the information into a "confidential communication."

Similarly, in Genson v. United States, 534 F.2d 719 (7th Cir.1976), this court held that the client's transfer of cash to an attorney in payment of a fee was not privileged because it was not a confidential...