In United States v. Textron Inc., 577 F.3d 21 (1st Cir. 2009), the First Circuit, sitting en banc, issued an eagerly awaited decision that reversed the holding of the original appellate panel that first considered the case. In a 3-2 decision, the First Circuit held that tax accrual work papers are not shielded by the attorney work product doctrine from an Internal Revenue Service administrative summons.

The tax accrual work papers were prepared by Textron’s accountants with input from in-house and outside counsel, and were subsequently reviewed by the company’s independent auditors. The original First Circuit panel agreed with Textron that the work product privilege attached to the documents since they were prepared because of potential litigation with the IRS over Textron’s tax positions. Although the court also found that the work papers were prepared for an independent business purpose, it held that a dual business/litigation purpose did not undermine the protection. See the Winter 2009 issue of Day Pitney’s White Collar Quarterly for our coverage of the original panel decision.

Rejecting the dual purpose analysis, the en banc decision reversed that holding, finding that it was not enough to trigger work product protection that the subject matter of the document was one that “might conceivably” be litigated. Instead, the court held that the materials must have been prepared for “use” in “current or possible” litigation. The majority emphasized that work product protection does not extend to documents that would have been created in essentially the same form regardless of the prospect of litigation.

The dissenters contended that the majority misapplied the very test that it purported to employ, reasoning that the test did not require that the work papers be prepared for use in litigation, but rather only that it be prepared in anticipation of litigation, citing to the Second Circuit’s “because of” existing or anticipated litigation test, see United States v. Adlman, 134 F.3d 1194 (2d Cir. 1998). The Textron case has thrown into stark relief the issue of whether the attorney work-product doctrine protects documents that are prepared for both business and litigation purposes, creating a conflict with other circuit court decisions that may ultimately be resolved by the Supreme Court. For the full text of the First Circuit en banc decision, click here.