Shortly after oral arguments on the correct standard for assessing the application of mixed-purpose communications in In re Grand Jury, the U.S. Supreme Court dismissed its writ of certiorari as improvidently granted.
To recap, the Ninth Circuit upheld the district court's finding that certain communications and workpapers made by a law firm to prepare a client's tax returns and certify compliance with tax requirements did not qualify for the attorney-client privilege, even though the law firm also provided legal advice on related tax issues. The Ninth Circuit found that, where communications involve mixed purposes – both legal advice and more routine accounting advice, in this case – attorney-client privilege does not protect the communications from disclosure when the primary purpose of the communication is not for the purposes of providing legal advice. The question before the Supreme Court was whether this articulation of the "primary purpose" test was correct.
What can I read into this dismissal? Although the Court did not offer any explanation for dismissing the case, many of the Justices expressed skepticism at oral argument that the Court could offer guidance that improves upon what district judges and magistrates already do when confronting close privilege questions. For example, Justice Jackson remarked, "It seems to me that district courts are not doing math. They have a lot of experience not only in this area but in other document-related, privilege-related contexts, where they make a judgment call, as judges do, about what this particular communication relates to, what its point was . . . ." Justice Sotomayor who, along with Jackson is the only former trial judge on the Court, added, "You make this claim that it's so difficult [for lower courts to apply the primary purpose test], but I really haven't seen much to say that it's difficult to administer. I don't see a rounding number of courts in states or even federal courts saying, I can't figure this out."
The Justices did not appear comfortable with a broad expansion of the attorney-client privilege. No Justice seemed willing to entertain the broad standard proposed by the petitioner and some amici, which would have granted privilege protection for any communication that had any degree of "bona fide" legal purpose. Justice Jackson reflected other Justices' concerns when she cautioned the petitioner: "In the new world, you wouldn't be arguing . . .because you would win them all because you would say I have a lawyer there and that's all the court had to care about. And that's what I'm concerned about."
Where does this leave the "primary purpose test?" The primary purpose test will likely remain the dominant method courts use to assess privilege. Both the parties' counsel and the Justices emphasized that determining a document's primary purpose is a contextual, rather than rigid, formulaic exercise. Several Justices, along with both the respondent and petitioner, emphasized that courts do not (and cannot) apply the primary purpose test with mathematical precision to determine a fifty-one percent purpose of a communication that has multiple purposes. Justice Roberts said, "I think it's important to keep in mind what the judges have to do here, which is go through these documents."
Although this case did not end in an Opinion from the Court, the initial grant of certiorari brought attention to this issue, and the commentary by the Justices during oral arguments may prompt lower courts to reconsider any temptation to apply an overly formulaic approach to privilege. The questions from Justices across the length of the bench made clear that they appreciate, in the real world, legal advice is provided and consumed in the context of other important considerations and that there is room to expect the protection of the attorney-client privilege even in those complex situations.
Does the Court's dismissal mean that companies must strictly silo attorney-client communications to maintain privilege? Neither the Justices' questions nor the facts of the Ninth Circuit decision they were reviewing suggest that communications with lawyers about broader business, tax, or regulatory discussions will be unprotected by the privilege. Indeed, in the opinion under review, the Ninth Circuit rejected such a cabined approach to privilege.1
What are the Practical Takeaways?
- Know your wheelhouse. While nothing in the Court's questions indicate that privilege cannot apply to legal advice about important tax, business or regulatory decisions, judges remain free to find privilege inapplicable where lawyers provide advice or do tasks that a non-lawyer professional might be equally (or better) qualified to do. Lawyers should be attuned to when their role and advice strays outside of assessing the applications of laws and legal strategy.
- Understand (and document) why a lawyer is involved. Given the range of matters in which lawyers sometimes advise, particularly in-house company lawyers, predicting privilege protection involves first determining whether a lawyer's involvement in a matter is in furtherance of legal services; namely, is the lawyer providing advice on the application of a law or regulation, or in connection with a matter before a court or other tribunal? Clients (and their lawyers) should document the legal purpose once it is identified. When the legal purpose is unclear or peripheral, understand that privilege may not apply.
- Avoid ambiguity. Nearly all of the Court's discussion focused on the narrow band of truly difficult cases, where legal and non-legal purposes are muddled in a manner that makes evaluating or teasing out the legal portion difficult. When the client and lawyer are conscious that work—and associated communications—is being undertaken for mixed purposes (e.g., an investigation on behalf of the Audit Committee but also at the request of the auditor or working with communications professionals while responding to litigation and investigations), it is important/essential to document the legal purpose clearly and unequivocally (e.g., in the engagement letter and/or in a Board resolution).
- Clearly mark and, where feasible, segregate materials that seek, provide or memorialize legal advice from a lawyer. While such markings do not guarantee a finding in favor of privilege where legal advice is not at least a significant purpose of the communication, this practice goes a long way towards providing contemporaneous evidence of the parties' intent. It also allows privileged materials to be easily identified and segregated from other materials, thereby preventing unintended disclosure.
1. "The government suggests that dual-purpose communications in the tax advice context can never be privileged, but we reject that argument." Grand Jury, 22 F.4th 1088, 1095. "'[A]attorney-client privilege might apply to legal advice about what to claim on a tax return, even if it does not apply to the numbers themselves.'" Id. (citing and quoting United States v. Abrahams, 905 F.2d 1276, 1284 (9th Cir. 1990).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.