In its December 11, 2012 opinion, the US Court of Appeals for the Third Circuit held that reasonable basis is the standard for applying the crime-fraud exception to overcome attorney-client privilege.

In an ongoing grand jury investigation, the government investigated an unnamed corporation and individuals for fraudulent business transactions in an alleged criminal tax scheme. The government served grand jury subpoenas for documents and testimony on three former in-house counsel of the corporation. The attorneys, however, withheld certain documents and refused to testify on attorney-client privilege grounds. The government moved the court to enforce the subpoenas on the basis that the crime-fraud exception gives the government access to otherwise privileged communications when they are used in furtherance of a crime. The district court agreed with the government and ordered the disclosure of the documents at issue because it found that the requested documents either were not privileged or the privilege was invalidated by the crime-fraud exception.

The corporation appealed the disclosure order. Although disclosure orders are not immediately appealable, the Third Circuit determined that the appeal was appropriate under an exception set out in Perlman v. United States, which enables a privilege holder to immediately appeal an adverse disclosure order when the order is directed at a disinterested third party who is unlikely willing to risk being held in contempt.

The Third Circuit clarified the standard for the crime-fraud exception and held that the attorney-client privilege may be broken when there is a reasonable basis of suspicion of an intended crime, regardless of intent. The standard is intended to be reasonably demanding yet prevent mere speculation from breaking the privilege.