On September 15, 2015, the United States District Court, District of Connecticut rejected most of the Government's challenges to privilege claims asserted by General Electric Company ("GE").38 The challenges related to nearly 9,000 documents on GE's privilege logs pertaining to GE's tax refund suit for approximately $660 million. While rejecting most of the Government's claims, the Court ordered the appointment of a special master to review nearly 1,000 documents that lacked identification on GE's privilege log of an author and recipient.


The privilege dispute stemmed from GE's suit against the Government for a tax refund of approximately $660 million including interest relating to a series of complex corporate restructuring/sale transactions that occurred more than 10 years prior. The Government challenged GE's privilege logs, of which the Government sought discovery in opposition of GE's refund suit. The Government raised three challenges to GE's privilege claims: (i) privilege does not relate to attachments of otherwise privileged email communications; (ii) privilege does not attach when the predominant purpose of the communication is for business advice, not legal or tax advice purposes, and (iii) privilege does not attach to documents where the privilege log lacks indication of the author or recipient of the correspondence in violation of Local Rule 26.39 The Court rejected the Government's first two challenges, but ordered the appointment of a special master to determine the privileged nature of documents that failed to identify an author and recipient.


GE's privilege claims involved the attorney-client privilege and related tax practitioner privilege found in Section 7525 of the Internal Revenue Code. The basic elements of attorney-client privilege are as follows: "A party invoking the privilege must show (1) a communication between client and counsel that (2) was intended to be and was in fact kept confidential and (3) was made for the purpose of obtaining or providing legal advice."40 Section 7525 recognizes a privilege with respect to tax advice, "the same common law protections of confidentiality which may apply to a communication between a taxpayer and an attorney shall also apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney."41

The Government claimed that GE improperly asserted privilege with respect to documents attached to email communications between GE and its counsel. According to the Government, "only confidential or secret facts . . . may be subject to the claim of privilege."42 The Court rejected the Government's challenge, noting that the Government's assertion mistakenly adds the requirement that the underlying information of a confidential attorney-client communication be non-public or confidential itself. The Court reiterated that the privilege is not forfeited due to the fact that the communicated information may be public in nature. This is because the privilege attaches to the communication itself, not its underlying information.43 In rejecting the Government's argument, the Court explained that the attachments within the GE email communications (e.g., board meeting minutes, presentations, spread sheet, etc.), although may be generally available to third parties not included in the privileged communication, does not render the documents "un-privileged" in the context of their inclusion of otherwise privileged communication.44

The Government further argued that certain privileged documents were predominantly for business purposes, rather than legal or tax advice purposes. GE explicitly describes the communications in its privilege logs as either "reflecting legal advice" or "reflecting tax advice."45 Despite this, the Government introduced a few examples to the Court where some communications in GE's production appeared in other parts of GE's production as unprivileged communications. However, referencing the isolated nature of these instances introduced by the Government and in light of the several thousands of documents subject to production and GE's privilege review quality-assurance process, the Court determined it would not conclude that there was systemic failure with GE's privilege designations. In addition, the Court noted the large number of privileged documents was not surprising given the complicated nature of the transactions and their substantial legal and regulatory overtones.

Lastly, the Government challenged GE's privilege assertion on approximately 1,000 "standalone" documents appearing on the privilege log without identifying an author or recipient. The Government asserted that this omission by GE violated Local Rule 26, requiring the identity of the author and recipient on a privilege log.46 The Court agreed and recognized the importance of Local Rule 26, which "preserves the integrity of the privilege in the ordinary course to a requisite and specific attorney-client communication."47 However, the Court explained that the absence of the author or recipient's name from the privilege log does not in all cases indicate that the document may never be subject to a proper claim of privilege. For example, the privilege claim may apply to client's notes of a prior conversation with counsel. GE asserted that while it was not always possible to determine the author and recipient, it is still possible to ascertain the "legal" or "tax" advice based on the content of the communication. In light of these two views, the Court ordered that the parties agree on a special master to review the category of documents missing an author and recipient to determine whether the privilege claim by GE was appropriate. While the Court ordered a special master, the Court made clear that the usual remedy for failure to designate author and recipient in accordance with Local Rule 26 should not be the appointment of a special master. Rather, the Court stated that in situations where a taxpayer may not have the author or recipient information available, that it provide reasonable explanation in advance of such a challenge on a document-by-document basis. Here, the Court ordered a special master "in light of the context, complexity and circumstances of this particular case."48


38 General Electric Co. v. United States, __F.Supp.3d __(D. Conn 2015), 2015 WL 5443479.

39 Id. at *2.

40 In re County of Erie, 473 F.3d 413, 419 (2d Cir. 2007).

41 IRC Section 7525(a)(1).

42 2015 WL 5443479 at *2.

43 See, United States v. Cunningham, 672 F.2d 1064 (2d. Cir. 1982).

44 Id.

45 Id.

46 D. Conn. L. Civ. R. 26(c)(4).

47 2015 WL 5443479 *2.

48 Id.

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