Inside and outside counsel should know that the way they guide clients through legal and business issues may need to change based on a recent Ninth Circuit case governing the protections afforded to those communications.[1] The following update and insights will help you mitigate against the risk of attorney-client emails being produced in litigation:
- Legal and Non-Legal (“Dual-Purpose”) Communications are Common and Potentially Problematic
- There is a Circuit-Split on What Test Applies to Dual-Purpose Communications
- The Supreme Court Balks and the Ninth Circuit Reinforces the Primary Purpose Test
- Five Practical Tips
- Closing Thoughts
(A) Dual-Purpose Communications are Common and Potentially Dangerous
Communications between attorneys and clients must be for the purpose of giving or receiving legal advice for the attorney-client privilege to apply. A dual-purpose communication is one that has both a legal and a business purpose – they are perilous because the inclusion of the business angle might eviscerate the attorney-client protection.
(B) There is a Circuit-Split on What Test Applies to Dual-Purpose Communications
What Test Applies Depends on What Circuit You’re in:
- The Primary Purpose Test: Whether the primary purpose of the communication is to give or receive legal advice, as opposed to business or tax advice—the narrowest test and adopted in some form by the Second, Fifth, Sixth, and Ninth Circuits.[2]
- The Because Of Test: Whether 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- applied by the Ninth Circuit with respect to work product privilege.[3]
- The Significant Purpose Test: Whether obtaining or providing legal advice was a primary purpose of the communication, meaning one of the significant purposes of the communication—the broadest test adopted by the D.C. Circuit and some District Courts in at least the corporate internal investigation context.[4]
(C) The Supreme Court Balks and the Ninth Circuit Reinforces the Primary Purpose Test
Many had hoped the Supreme Court would resolve the circuit split and provide clarity for dual-purpose communications when it agreed to review the Ninth Circuit’s decision in In re Grand Jury.[5] But on January 23, 2023— just two weeks after oral arguments—SCOTUS dismissed the writ of certiorari as improvidently granted.
The scenario presented by In re Grand Jury is a law firm specializing in tax law was held in contempt for refusing to comply with grand jury subpoenas targeting documents related to a client’s tax expatriation. The district court ruled that certain withheld documents were not protected by the attorney-client privilege because the primary purpose of the communications was to obtain tax advice, not legal advice.
On appeal to the Ninth Circuit, the law firm argued for the broader “because of” test, typically applied to work-product protection. In considering this test, the Ninth Circuit noted the separate policy goals of each doctrine: work-product protection aims to preserve fairness in the adversarial process and attorney-client privilege aims to promote open conversations between attorneys and clients. The Ninth Circuit declined to extend the test to attorney-client privilege and instead adopted the “primary purpose” test, reasoning that this test is better aligned with the policy goals of the attorney-client privilege and the common law understanding that the scope of the privilege is defined by the purpose of the communication.
While the Ninth Circuit adopted the primary purpose test where there is a clearly predominant purpose, it left open whether courts should ask if legal advice was the primary purpose or a primary purpose when communications present potentially equal legal and nonlegal purposes. For example, in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014), the D.C. Circuit adopted “a primary purpose” test to determine whether communications related to a company’s internal investigation were protected.
The Ninth Circuit acknowledged that it may be impossible to discern whether a communication was for legal or nonlegal purposes, like the internal investigation in Kellogg that sought legal and business advice (compliance with regulatory requirements).[6] However, it declined to reach that issue because the communications before the court were tax advice – a nonlegal purpose.
(D) Five Practical Tips
- Be Careful Mixing Communications: Separate legal advice and nonlegal advice whenever possible. This could mean sending two separate communications or clearly dividing the communication into parts with clear headings indicating each section’s purpose.
- Label Your Emails and Documents: Include “Attorney-Client Privilege” headlines on your communications providing legal advice, but avoid the label when communicating purely business advice. If there is any basis to believe litigation may be forthcoming, also include “Work-Product Protection.”
- Consider the Purpose of the Communication: Begin communications with “for the purposes of legal advice” or explain to your client the value in beginning their communications with the same characterization. Be mindful that you may need to later justify how at least a primary purpose of the communication was to get legal advice, if not the primary purpose.
- Set Up Work-Product Protection: Include references to and/or the basis for any belief of potential litigation in your communications to justify work-product protection.
- Avoid Sending a Written Communication Altogether: phone conversations may seem old-school, but they are well-suited to communicating guidance on sensitive issues.
(E) Closing Thoughts
Many are disappointed that SCOTUS failed to provide clarity on this important issue. The Ninth Circuit opinion leaves open the possibility that Kellogg’s significant purpose test might apply in some instances but offers little guidance as to when.
A trial court’s dilemma in deciding the scope of the attorney-client privilege in dual purpose communications was made clear during oral argument. There, the Supreme Court Justices appeared to be concerned with the potential for abuse under the significant purpose test. This makes sense considering the circumstances of In re Grand Jury: normal tax return preparation advice (which generally is not privileged even when it comes from an attorney) was mixed with legal advice on how to navigate certain tax laws.
Chief Justice Roberts asked about an accountant who completes a complicated return. His work would not be privileged. But then the form is shown to a lawyer who identifies items that are “kind of iffy.” Would it all then be privileged? Counsel for the law firm replied in the affirmative, prompting Justice Clarence Thomas to ask: “Is there any non-trivial role that a lawyer plays in the example the chief gave that doesn’t meet your test?” Justice Ketanji Brown Jackson described a meeting that everyone agrees is over “a business decision … but the lawyer [in the room] adds a point. And you say, as long as it’s a legitimate point, that is good enough to require that the entire thing be privileged. … Why shouldn’t I worry that using your test now, we are going from one extreme to the other?”
Gamesmanship appeared to be a major concern for both SCOTUS and the Ninth Circuit. To the extent any legal advice is provided with clearly non-legal advice, and the greater the amount or importance of the non-legal advice, the more a court will have no problem applying the primary purpose test to avoid abuse of the privilege. However, in instances like Kellogg where the two purposes are harder to untangle or fairly rank, a court may take the opportunity left open by In re Grand Jury to apply the significant purpose test.
FOOTNOTES
[1] This analysis addresses federal privilege and evidentiary considerations; state laws vary widely.
[2] In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021); Pritchard v. Cty. of Erie (In re Cty. of Erie), 473 F.3d 413 (2d Cir. 2007).
[3] United States v. Torf (In re Grand Jury Subpoena), 357 F.3d 900 (9th Cir. 2003); Visa U.S.A., Inc. v. First Data Corp., Nos. C-02-1786 JSW (EMC), 245, 248, 2004 U.S. Dist. LEXIS 17117 (N.D. Cal. Aug. 23, 2004).
[4] In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).
[5] In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021).
[6] In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).