Third Circuit: crime-fraud exception can apply to attorney-client privilege in sham-litigation case

In a ruling with significant implications for companies facing sham-litigation claims, such as those that can arise in the Hatch-Waxman context for pharmaceutical manufacturers, the Third Circuit recently refused to vacate a district court order compelling the production of certain documents generated by in-house counsel under the crime-fraud exception to the attorney-client privilege.  Finding no binding precedent on whether "sham litigation is a type of fraud which may form the basis for a party to invoke the crime-fraud exception to the attorney-client privilege,” the Third Circuit denied the defendants’ request for a writ of mandamus, stating that while not all frivolous litigation falls within the crime-fraud exception, the crime-fraud exception was triggered because of the baselessness of the underlying patent-infringement lawsuits, “combined with the client’s subjective intent to interfere with administrative and judicial procedures associated with patent rights.”1


Plaintiffs alleged that patent-infringement lawsuits filed by Defendants delayed market entry of a generic version of a branded drug.2 Early in the litigation, the district court granted Plaintiffs’ motion for partial summary judgment, finding that (based on the same court’s rulings in earlier, related litigation) the Defendants’ underlying patent-infringement lawsuit was objectively baseless.  Because a sham-litigation claim also requires a showing of a subjective intent to use the lawsuit itself—rather than the outcome of the lawsuit—as an “anticompetitive weapon,”3 Plaintiffs moved to compel production of certain documents from Defendants’ in-house counsel, arguing that the documents showed a “subjectively baseless motivation and improper purpose”4 for the litigation.  Given that alleged purpose, Plaintiffs argued that any communication by in-house counsel “concerning whether to file that suit constituted a communication in furtherance of fraud”5 that is not protected by the attorney-client privilege under the crime-fraud exception. 

The district court ordered Defendants to produce nineteen of the 211 contested documents on the basis that “it is reasonable to conclude that the attorneys used their own legal research and analysis—the documents at issue here—in furtherance of fraud.”6 Defendants filed a writ of mandamus seeking to vacate the district court’s order to produce the documents.

Third Circuit’s Decision

In an opinion unsealed on March 11, 2024, the Third Circuit denied the mandamus petition, finding that Defendants did not meet the “high bar set for granting a petition for writ of mandamus,” which includes a showing that (1) the district court committed a clear and indisputable abuse of discretion; (2) Defendants had no other adequate remedy available to them; and (3) Defendants will suffer irreparable injury if the petition is not granted.  Nonetheless, the Third Circuit addressed the Defendants’ argument that the district court committed a “clear and indisputable abuse of discretion or error of law” by finding that sham litigation triggers the crime-fraud exception.

Crime-Fraud Exception to Attorney-Client Privilege

The crime-fraud exception provides that communications made between an attorney and a client that are “in furtherance of future illegal conduct” are not protected by attorney-client privilege.7 The Third Circuit analyzed whether documents prepared by counsel in the course of what has been found to be a “sham litigation” should be stripped of attorney-client privilege under the crime-fraud exception.   The court held that “sham litigation” entails a “ ‘wrongdoing’ that involves “a client’s intentional ‘misuse’ of the legal process for an ‘improper purpose,’” and triggers the crime-fraud exception.8

Acknowledging that there was no binding precedent in the Third Circuit on the question of whether sham litigation is a “type of fraud which may form the basis for a party to invoke the crime-fraud exception to the attorney-client privilege,” the court found that it is “the [patent infringement] lawsuit’s baselessness, combined with the client’s subjective intent to interfere with administrative and judicial procedures associated with patent rights, that triggers the crime-fraud exception” in this case. 

The Third Circuit also rejected any requirement that the legal advice was actually relied on for the crime-fraud exception to apply. Instead, the Third Circuit said the exception applies so long as “the client was . . . intending to commit a fraud or crime, and [] the attorney-client communications were in furtherance”9 of the attempt.  The Third Circuit also refused to limit the crime-fraud exception to communications advising on how to commit or conceal a fraud, citing precedent holding that “[a]ll that is necessary [to trigger the crime-fraud exception] is that the client misuse or intend to misuse the attorney’s advice in furtherance of an improper purpose.”10

The Third Circuit found that the district court had effectively narrowed the scope of the documents for which it found the crime-fraud exception to be applicable to those “that provided ‘a reasonable basis to suspect that [Defendants] intended to file sham litigation for the purpose of preventing or delaying” the generic drug from entering the relevant market.  The Third Circuit determined that, even if it is not possible to know what the client was thinking when they received the correspondence, “so long as the correspondence itself ‘would lead logically’ to the client committing a wrongdoing,” the district court did not abuse its discretion in finding that the documents fell within the crime-fraud exception.  The court held that the pre-filing documents at issue “show in-house counsel’s focus on research relating to pursuing sham litigation,” and that the district court did not abuse its discretion in finding that the documents were in furtherance of a fraud. 

Takeaways for Clients

The Third Circuit’s ruling will likely encourage plaintiffs in sham-litigation cases to seek privileged documents from in-house counsel and to argue that the crime-fraud exception overcomes any privilege objections.

There are, however, some limitations on the precedential value of the court’s ruling.  First and foremost, the Third Circuit’s ruling must be viewed in the context of a petition for a writ of mandamus.  Mandamus relief is an “extraordinary” remedy,11 and the court’s actual holding is that Petitioners did not demonstrate that the district court “committed a clear error or abuse of discretion in concluding that sham litigation may trigger application of the crime-fraud exception.”12

Second, the district court proceedings were unusual in that the district court had already ruled that the underlying litigation was objectively baseless before the start of discovery.  Plaintiffs in sham-litigation cases going forward may similarly attempt to get early rulings on objective baselessness, but that will be difficult before discovery.

Going forward, in-house counsel and outside counsel alike should be mindful that their assessments and deliberations in advance of filing any lawsuit may not be protected under the attorney-client privilege if a court later determines their complaint to have been objectively baseless and filed for an anticompetitive or otherwise improper purpose. 



Authored by Chuck Loughlin, Ben Holt, Ilana Kattan, Mike Gendall , and Jill Ottenberg.

1 In re Abbott Lab'ys, No. 23-2412, 2024 WL 1040669 at *6 (3d Cir. Feb. 22, 2024).
2 King Drug Co. of Florence, Inc. et al. v. Abbott Lab'ys , et al., No. 2:19-cv-03565 (E.D. Pa.). 
3 City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 380  (1991).
4 Plaintiffs’ Reply in Further Support of Motion for in Camera Review of Documents not Subject to Privilege Pursuant to the Crime-Fraud Exception at 7, King Drug Co. of Florence, Inc. et al. v. Abbott Lab'ys, No. 2:19-cv-03565 (E.D. Pa.), ECF No. 264.
5 In re Abbott Lab'ys, 2024 WL 1040669 at *3.
6  King Drug Co. of Florence, Inc. et al. v. Abbott Lab'ys , 2023 WL 4670994 at *4 (E.D. Pa. July 20, 2023).
7  U.S. v. Zolin, 491 U.S. 554, 556 (1989).
8  In re Abbott Lab'ys, at *4 (citing In re Grand Jury Investigation, 705 F.3d 133, 151, 157 (3d Cir. 2012)).
9 Id. at *6 (citing In re Grand Jury Investigation, 445 F.3d 266, 274 (3d Cir. 2006)).
10 Id. at *5 (citing In re Grand Jury, 705 F.3d at 157).
12  Id. at *4.
12 Id. at *5
Chuck Loughlin
Washington, D.C.
Benjamin Holt
Washington, D.C.
Ilana Kattan
Washington, D.C.
Mike Gendall
Senior Associate
Washington, D.C.


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