For the first time in some time, the United States Supreme Court agreed to hear a case involving the corporate attorney–client privilege. The issue is the proper standard courts should use to determine whether the attorney–client privilege protects dual-purpose communications—those created for legal and non-legal purposes. In re Grand Jury, No. 21–1397 (U.S.). The specific question presented is—
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.
In a series of posts, I’ll follow and comment on the case and final decision. I previously (1) examined the Court of Appeals’ decision, (2) reviewed the appellant’s petition for writ of certiorari, the government’s opposition, and the supporting amici positions, (3) examined the petitioner’s merits arguments, and (4) reviewed the briefs of the fourteen amicus parties. The government has now filed its opposition brief, available here, so let’s explore what privilege standard it seeks and why.
Every Man’s Evidence
With the petitioner and fourteen amicus parties arguing for privilege protection of a communication where one of its purposes is nonlegal (so long as another, significant one is legal), the federal government reminded the Court that its starting baseline is that “the public has a right to every man’s evidence.” Evidentiary privileges inherently shield otherwise relevant information and courts should treat them as exceptions to this long-held “fundamental principle.” This principle compels courts to neither “lightly create” nor “expansively construe” privileges, including existing privileges such as the attorney–client privilege:
An existing privilege must be recognized only within the narrowest limits required by principle because every step beyond these limits helps to provide, without any real necessity, an obstacle to the administration of justice.
And, the government argued, this limiting principle is particularly critical in grand-jury proceedings because a grand jury’s investigative function is best served by making available all evidence needed to determine whether the target committed a criminal offense.
The Primary Purpose Test is Inherently Sound
The federal government emphasized that the narrow question before the Court is how to apply the attorney–client privilege to communications where segregation of legal and non-legal portions is not possible. When courts can readily isolate a communication’s legal segment, they will permit that segment’s redaction and compel production of the rest.
For those communications where legal and nonlegal purposes are inextricably intertwined, however, the primary purpose test best serves the privilege’s rationale. The attorney–client privilege encourages clients to communicate freely with their lawyers and the lack of privilege protection undesirably chills those communications. “The privilege is not intended to encourage clients to seek business or accounting advice from lawyers,” the government stated, and the primary purpose test is “the best measure of whether that particular communication would have been made absent the privilege.”
The petitioner and its amici expressed great concern that the primary purpose test discourages clients from seeking legal advice, but the government said that the threshold steps of segregation and redaction means that, “at most, clients will be discouraged from ‘intertwining’ a request for legal advice within a single portion of the communication.”
The government highlighted that a majority of states apply the primary purpose test, including two recent decisions from the supreme courts of Minnesota, In re Polaris, Inc., 967 N.W.2d 397 (Minn. 2021), and North Carolina, Buckley, LLP v. Series 1 of Oxford Ins. Co., NC, LLC, 876 S.E.2d 248 (N.C. 2022), which I reviewed and criticized in this blog post. The government argued that this majority rule of state courts “has proved to be a sensible test for reining in aggressive claims of privilege,” and concluded:
Overturning the consensus would destabilize courts, engender uncertainty in the application of a new approach, and impede the justice system’s search for truth.
Neither Logic nor Precedent Supports the Kellogg Significant Purpose Test
This “new approach,” of course, is the significant purpose test adopted and applied by the D.C. Circuit in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (2014) (Kavanaugh, J.) that I discussed in this blog post and further explored in this blog post. The government identified this test as “relatively novel” with “little foundation in the animating principle of the attorney–client privilege.” The test, as—according to the government—the petitioner and amici would apply it, “appears to be shepherding in a vast expansion of the privilege.” And while the petitioner and amici argued that the significant purpose test would “provide clarity and predictability,” “it would in fact do the opposite,” the government claimed.
The privilege predictability falters because the term “significant” is “an amorphous concept.” The government argued that “any proffered definition would be unlikely to provide the concrete guidance that this context requires,” noting that the amicus briefs of the U.S. Chamber and DRI Center for Law and Public Policy Merits Stage Amicus Brief define significant as “legitimate or genuine” and “not incidental,” respectively. Moreover, two other amici, the ABA and APRL, argued for a less-stringent standard because determining whether a communication has a significant legal purpose is “susceptible to differing results” and “could likewise be difficult and unpredictable.”
Yet, for all its criticism, the government echoed the Ninth Circuit’s recognition of the merits of the significant purpose test by admitting that the test “might be easier to apply” “in some cases,” such as internal investigations. And, while effectively recognizing that the Court may find that the significant purpose test “would increase certainty for clients and lessen privilege-related litigation,” the government argued that the test would inappropriately expand the privilege, particularly for highly regulated industries and in-house counsel:
Given the reality of widespread regulation … and the broad participation by in-house counsel in “regular business matters,” … petitioner’s novel and expansive “significant purpose” standard would open the gates to a flood of attorney–client privilege claims colorably asserting that at least some non-insignificant purpose of a communication was related to legal advice.
Let’s Focus on the Tax Documents at Issue
The government argued that dual-purpose tax-related communications—the communications at issue here—exacerbate the problematic issues associated with the significant purpose test. Federal common law does not recognize an accountant–client privilege and courts typically reject the attorney–client privilege for tax-preparation communications. Adopting the significant purpose test, the government claimed, would raise to privileged status tax-preparation communications that would otherwise be subject to government review.
Tax-return preparation advice that an accountant could give is therefore not legal advice for purposes of the attorney–client privilege, even when performed by an attorney. … And a client may not buy a privilege by retaining an attorney to do something that a non-lawyer could do just as well.
As for the documents at issue, the government asserted, the district court got it right. It ordered production of only communications solely related to tax-return preparation, and most of these communications were between the client and an accountant. In fact, the at-issue communications are “so far from legal advice” that the privilege would not protect them even if the Court adopted and applied the significant purpose test. In the end, regardless of the test adopted, “the grand jury is entitled to these documents.”