On January 23, 2023, the United States Supreme Court dismissed as improvidently granted (“DIG”) the appeal in In re Grand Jury, Docket No. 21-1397. The appeal presented the issue of whether a communication involving both legal and non-legal advice is protected by the lawyer-client privilege when obtaining or providing legal advice was only one of the significant purposes behind the communication. After hearing oral arguments on January 9, 2023, the Supreme Court dismissed the appeal as improvidently granted two weeks later.
An unnamed law firm provided legal advice to its client, a company, on the tax consequences of an anticipated expatriation. The law firm prepared tax returns for the individual owner as well as a form that certified compliance with the expatriation tax requirements. Later, the law firm and the company were served with grand jury subpoenas seeking documents related to a criminal investigation of the owner of the Company and client of the law firm, including communications and other materials related to the client’s expatriation and tax return preparation. The law firm produced over 1,700 records exceeding 20,000 pages. The client, however, withheld many documents citing the lawyer-client privilege and the work-product doctrine. The government files a motion to compel.
The district court held that the “primary purpose test” would apply to analyze the dual-purpose communications. The court looked to whether the primary or predominate purpose of the communication was to seek legal advice or to provide corresponding legal advice. The court found to be privileged the documents which were made for the primary purpose of receiving or providing legal advice. The court declined to find privileged the documents where the primary or predominate purpose waws about procedural aspects of preparing the tax returns for the client. The court held the Company client and the Law Firm in contempt for refusing to produce the documents. The company and the law firm appealed to the Ninth Circuit Court of Appeals.
On appeal, the Ninth Circuit affirmed the district court’s ruling. Said the court:
Given our increasingly complex regulatory landscape, attorneys often wear dual hats, serving as both a lawyer and a trusted business advisor. Our court, however, has yet to articulate a consistent standard for determining when the attorney-client privilege applies to dual-purpose communications that implicate both legal and business concerns.
In this case, the grand jury issued subpoenas related to a criminal investigation. The district court held Appellants—whom we identify as “Company” and “Law Firm”—in contempt after they failed to comply with the subpoenas. The district court ruled that certain dual-purpose communications were not privileged because the “primary purpose” of the documents was to obtain tax advice, not legal advice. Appellants argue that the district court erred in relying on the “primary purpose” test and should have instead relied on a broader “because of” test. We affirm and conclude that the primary-purpose test governs in assessing attorney-client privilege for dual-purpose communications.
See In re Grand Jury, No. 21-55085 (9th Cir. 2022). The company and the law firm filed certiorari with the United States Supreme Court.
The Supreme Court granted certiorari on appeal from the Ninth Circuit decision on May 2, 2022. The issue presented in the appeal was whether a communication involving both legal and non-legal advice is protected by the lawyer-client privilege when obtaining or providing legal advice was only one of the significant purposes behind the communication. The court held oral argument On January 9, 2023. On January 23, 2023, the Supreme Court issued an opinion stating: “The writ of certiorari dismissed as improvidently granted.”
Current Circuit Split
The Supreme Court’s order dismissing the appeal as improvidently granted leaves in place the circuit split among the lower courts. In the D.C. Circuit, a dual communication is privileged whenever it has a significant legal purpose. On the other hand, in the Ninth Circuit, courts apply the “primary purpose” test. This test requires courts to weigh all of the purposes for a communication and will find that a communication is privileged only where a legal purpose is at least as significant as any non-legal purpose. The Second, Fifth, Sixth, and Ninth Circuits apply the “primary purpose” test. And, in the Seventh Circuit, dual purpose communications when a document is prepared for use in preparing tax returns and for use in litigation are never privileged no matter how significant the legal purpose.
In-house counsel must be diligent in how they communicate with their business clients when providing legal, as well as non-legal, advice. Here are some best practices and take-aways for lawyers working as in-house counsel:
- A communication will not be privilege just because a lawyer is included in the communication.
- Label Communications Appropriately. You should clearly denote when a communication is legal in nature. This can include using the label in email subject lines, in the header/footer of documents, and by using your title in the signature block so there is no doubt that the communications originated from, or were directed to, a lawyer.
- Refrain from overusing the “privileged and confidential” label. Overusing or misusing the label can raise questions about whether the label is appropriate on the properly marked documents. This can lead to ethical troubles and sanctions.
- Keep legal discussions separate from business discussions by starting a new email chain with the correspondents.
- Avoid including many recipients in the “cc’s” of emails. Companies and lawyers should carefully evaluate whether an individual needs to receive the communication and should limit the distribution accordingly. Employees must remain cognizant about the implications of repeating legal advice including forwarding legal communications or copying/restating legal advice on Teams chats, text messages, or other forms of chat (WhatsApp, Slack, IMessage) which can be discoverable.
- Always remember that some things are better said than written.