Update: How Safe Are Your Attorney-Client Communications?

January 2023

Update: How Safe Are Your Attorney-Client Communications?

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The Supreme Court recently heard oral argument to decide whether attorney-client privilege protects communications that contain both legal and non-legal advice.  This case, In re Grand Jury, No. 21-1397, could have significant implications for attorney-client relationships across every field of law.

I.           Update: After Oral Argument

On January 9, 2023, the Supreme Court held oral argument in this case.  The justices seemed hesitant to fully adopt the arguments advanced by either side, posing difficult questions to both attorneys.  First, several justices inquired whether a “significant purpose test” — as advocated by the law firm — would be over-inclusive, applying privilege to far more communications than necessary.  For example, could corporations create privilege by adding a lawyer to an email chain or a conference call and asking just one legal question?

On the other hand, several justices worried that a “primary purpose” test would be unworkable in difficult cases, and counsel for the government fielded several questions like how to characterize communications that are 49% legal advice and 51% non-legal advice.  Ultimately, the government emphasized that courts should not be in the business of doing math, and it appeared to concede that in close cases a “predominant,” rather than “primary,” purpose might suffice.

After oral argument, the outcome is unclear.  It does, however, seem possible the Court will articulate the rule at a high level of generality while emphasizing deference to district courts, which have been making these decisions for decades based on the facts of each case.

II.        In re Grand Jury

Clients routinely have multiple goals when seeking legal advice, so lawyers naturally provide advice that is both legal and non-legal in nature.  This case arises from a circuit split about how to evaluate those “dual-purpose” communications.  Specifically, when should a multi-purpose communication be protected by the attorney-client privilege?

The facts.  A law firm in California received grand-jury subpoenas for documents relating to one of its clients, who was under criminal investigation.  The firm specializes in international tax issues, including the tax consequences of expatriation.  In this case, the firm had provided its client legal advice about potential tax consequences of an anticipated expatriation, and it had prepared tax returns and a certification that the client had complied with the expatriation tax requirements.

Through subpoenas, a grand jury demanded that the firm and two of its employees provide “communications and other materials” related to the client’s expatriation and tax return preparation.  In response, the firm produced more than 20,000 pages of records, but it withheld others based on attorney-client privilege and the work-product doctrine.

Some of those withheld documents were communications made with two purposes: first, to provide legal advice to the client, and second, to facilitate the firm’s preparation of tax returns for the client.  The firm reasoned that those communications were protected by attorney-client privilege because they had been “sufficiently motivated by the additional purpose of obtaining or providing legal advice.”  The Government filed a motion to compel, requesting production of the withheld records.

When evaluating that motion, the district court applied the primary purpose test, which evaluates the single primary purpose of each communication to determine whether it should be privileged.  The court declined to apply an approach that would instead consider whether legal advice is one of the material purposes of the communication.  Based on that decision, the court determined that certain communications were not privileged, issued an order holding the law firm in contempt for refusing to produce those documents, and agreed to stay sanctions while the firm appealed its decision.

The circuit split.  The federal circuits approach this issue in at least three distinct ways.  The Ninth Circuit focuses on the most significant purpose of each communication.[1]  The D.C. Circuit asks whether legal advice was a significant purpose of the communication, not whether it is more significant than any non-legal purpose.[2]  And the Seventh Circuit — at least in tax cases — grants no privilege to dual-purpose documents prepared for use in both litigation and the preparation of tax returns.[3]  The Supreme Court appears poised to resolve that circuit split.

The case’s significance.  Three groups (the U.S. Chamber of Commerce, the Washington Legal Foundation, and the California Lawyers Association) filed amicus briefs asking the Court to accept this case.  As one put it, this issue “has widespread significance, affecting attorneys in nearly every conceivable area of practice.”  The Ninth Circuit’s “most significant purpose” test will lead to “haphazard and counterintuitive” decisions, they argue, which will lead to “greater uncertainty for those relying on the confidentiality of attorney-client communications.”  As the law firm has argued, “lawyers and trial court judges must navigate privilege questions every day,” so the Supreme Court can “provide needed guidance and resolve the circuit conflict over dual-purpose communications.”

III.           Moving Forward

We are optimistic the Supreme Court will agree that communications between attorneys and clients should be privileged if solicitation or provision of legal advice is a significant purpose of the communication.  A contrary ruling could have a chilling effect, leading clients to provide less information and lawyers to provide less legal advice for fear of later disclosure during litigation.

There is, however, a possibility that the Court adopts the “most significant” test.  Until the Court decides this case, lawyers might do well to split their legal and non-legal advice into separate communications.  While the non-legal advice would receive no privilege protection, attorneys could be more certain their legal advice would be protected against future compelled disclosure.

[1] In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021).

[2] In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).

[3] United States v. Frederick, 182 F.3d 496 (7th Cir. 1999).

KHALIL & LAKE is a white-collar litigation boutique focusing on federal criminal law, appeals, and complex investigations in a variety of business sectors. If you have any questions about these issues, or if you would like a copy of any materials mentioned here, please let us know.