When the Second Circuit speaks, people listen. That court recently dealt with privilege and work product issues.
In Schaeffler v. United States, 806 F.3d 34 (2d Cir. 2015), the Second Circuit reversed a district court's holding that (1) a taxpayer waived his privilege protection by disclosing protected legal advice to his lenders, and (2) the work product doctrine did not protect documents the taxpayer prepared in anticipation of IRS litigation. First, the Second Circuit offered bad news on the privilege front — explaining that for privilege to apply "the purpose of the communications must be solely for the obtaining or providing of legal advice." Id. at 40 (emphasis added) This is a narrower approach than the majority "primary purpose" standard, and much narrower than the D.C. Circuit's one "significant" purpose standard. See In re Kellogg Brown & Root, Inc., 756 F.3d 754, 758-59 (D.C. Cir. 2014), cert. denied, 135 S. Ct. 1163 (2015). Second, in discussing the common interest doctrine, the Second Circuit offered good news — acknowledging that the taxpayer and his lenders shared a common legal interest rather than just a common financial interest. Schaeffler, 806 F.3d at 42. Third, the Second Circuit also offered good news on the work product front — essentially rejecting the district court's "construct of a hypothetical scenario" in which the taxpayer and his lenders faced the same business issues without a litigation threat. Id. at 44. The court explained that the enormous financial stakes and business complexity meant that the lower court's hypothetical was "at odds with reality." Id. This meant that the taxpayer by definition would not have created his documents in the same form absent an IRS litigation threat. Fourth, the Second Circuit offered no news on a key issue — whether the common interest doctrine can apply in the absence of anticipated litigation. The court acknowledged that "[p]arties may share a 'common legal interest' even if they are not parties in ongoing litigation," but did not take a position either way on the doctrine's applicability in a purely transactional setting. Id. at 40 (citation omitted).
The Second Circuit's off-handed description of the privilege standard may not represent a legal shift, so overall the Schaeffler decision represents primarily good news — on the common interest and work product fronts.