The U.S. Supreme Court is poised to resolve a circuit split concerning the proper test federal courts should apply when assessing whether the attorney-client privilege protects communications that serve a “dual-purpose.” The Court recently granted certiorari in In re Grand Jury, 23 F. 4th 1088 (9th Cir. 2022), where the Ninth Circuit upheld a district court’s application of the so-called “primary purpose” test as the governing standard for assessing privilege in this context under federal common law. The Court’s rare foray into privilege issues may yield important guidance not just for white collar practitioners, but also for commercial litigators and in-house counsel.
Issues related to attorney-client privilege may be critical during the discovery portion of civil or criminal cases. During this phase attorneys should focus on the application of privilege to oral or written communications that discuss both legal advice and business guidance before producing documents.
The case arose from a grand jury investigation into the law firm’s (unnamed) client. In the underlying Department of Justice investigation, the law firm, which specializes in international tax issues, received a grand jury subpoena for materials related to the client. The law firm produced over 20,000 pages of non-privileged documents pursuant to the subpoena. The law firm also withheld certain documents on privilege grounds, some of which pertained to the preparation of the client’s tax returns (which are typically not privileged). In this case, the law firm asserted that these communications also contained privileged legal advice. The documents were therefore “dual-purpose” in nature, made for the provision of both legal and non-legal advice.
The district court concluded that the documents at issue were not privileged. The court applied the “primary purpose” test, meaning that the primary purpose of the communication must be to render legal advice. The court found the primary purpose concerned “the procedural aspects” of tax return preparations, did not comprise legal advice, and ordered the documents be produced. When the law firm did not comply, the court held the firm in contempt. While interlocutory appeals of disclosure orders adverse to the attorney-client privilege are not permitted in federal court after Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100 (2009)(Sotomayor, J.), an order holding a party in contempt is an exception to the general rule that only final orders are immediately appealable. The Ninth Circuit affirmed the contempt order on appeal and required the law firm to produce the subject documents containing the dual-purpose communications.
The Ninth Circuit’s opinion in In re Grand Jury focused on a choice between two different tests used in that circuit to assess privilege in dual-purpose communications: the “primary purpose” test and the “because of” test. When using the “primary purpose” test, courts “look at whether the primary purpose of the communication is to give or receive legal advice, as opposed to business or tax advice. ... The natural implication of this inquiry is that a dual-purpose communication can only have a single ‘primary’ purpose.” In re Grand Jury, 23 F. 4th 1088, 1092 (9th Cir. 2022) (referring to In re County of Erie, 473 F.3d 413, 420 (2d. Cir. 2007). In contrast, the “because of” test, typically applied in the context of attorney work-product protection, “‘does not consider whether litigation was a primary or secondary motive behind the creation of a document’” and instead “‘considers the totality of the circumstances and affords protection when it can fairly be said that the document was created because of anticipated litigation, and would not have been created in substantially similar form but for the prospect of that litigation.’” Id. at 1092-93 (citing In re Grand Jury Subpoena, 357 F.3d 900, 908 (9th Cir. 2004). The Ninth Circuit adopted the “primary purpose” test in its opinion.
The specific question accepted for review by the Supreme Court in October is as follows:
Whether a communication involving both legal and non-legal advice is protected by attorney-client privilege where obtaining or providing legal advice was one of the significant purposes behind the communication.
The Supreme Court will address a split among three federal appellate circuits. Through its In re Grand Jury decision, the Ninth Circuit has adopted its “primary purpose” test. The D.C. Circuit employs a standard (from an opinion authored by then-Judge Kavanaugh) that requires a legal purpose to be a primary purpose (but not necessarily the primary purpose) of the communication, as it asks, “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?” In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014). While recognizing the difference between these two formulations of the “primary purpose” test, the Ninth Circuit declined to adopt the D.C. Circuit’s formulation of this test in its In re Grand Jury opinion and instead left open the question of which formulation is appropriate. The Seventh Circuit has held that attorney-client privilege does not apply to “dual-purpose” communications, at least in the tax context. United States v. Frederick, 182 F.3d 496, 501 (7th Cir. 1999). Rather, the same communication is not privileged if any purpose of the communication was non-legal.
The U.S. Chamber of Commerce submitted an amicus brief in support of the petition, arguing that the case is a “golden opportunity” to resolve the split and provide much needed clarity to the district courts where litigation on privilege usually occurs. The Chamber explained in its brief in support of the petition that “the Ninth Circuit’s single purpose standard does not reflect the modern role that lawyers play in advising businesses. Businesses frequently call on lawyers to tackle problems that have both legal and non-legal elements. … When legal and business issues are discussed in the same communication, the reasons for protecting the confidentiality of legal communications do not suddenly evaporate.” The Chamber cautioned that the practical import of the Ninth Circuit’s standard will be to discourage communication of relevant information by employees of the client to corporate counsel seeking to render legal advice out of fear that a non-legal purpose primarily motivated the communication.
The American Bar Association will also submit an amicus brief in the case, urging greater clarity and uniformity of treatment of dual-purpose communications for privilege purposes. The ABA contends that the primary purpose test applied by the Ninth Circuit is unworkable. To ensure a client’s lawful conduct, it is essential that “the attorney and client … be able to predict with some degree of certainty whether the particular discussion will be protected.” Upjohn v. United States, 449 U.S. 383, 393 (1981). The ABA explained in its brief that, while In re Grand Jury arises in the tax context, the Court’s ruling will impact every area of legal practice, since it is common for client communications to involve mixed purposes. Courts should not be required to divine whether particular communications present “primary” or “significant” or just “important” or “minor” purposes. The ABA recommended that the Court avoid endorsing any specific “test” that will create “a new and undefined exception to the otherwise broad and well-understood attorney-client privilege and its already well-established exceptions.” In sum, clients and attorneys should have a right to expect their communications to be protected by privilege “so long as any purpose of the communication was to solicit or provide legal advice.”
An opinion from the Supreme Court that resolves the current split among federal judicial circuits regarding the proper test for assessing attorney-client privilege in “dual-purpose” communications may provide greater uniformity and reduce confusion in the process of document reviews for privilege, particularly in cases involving voluminous electronic discovery. As the Supreme Court noted in the seminal Upjohn case over 40 years ago, “An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.” 449 U.S. at 393.