BY MICHAEL BERMAN, ESQ.
THE SUPREME COURT’S RECENT dismissal of In Re Grand Jury, 598 U.S. , 143 S.Ct. 543 (2023), leaves the Ninth Circuit’s “primary purpose” analysis of so-called “dual purpose” communications intact as the test for privilege.
For a good analysis, see GreenbergTraurig’s blog, ‘If It Ain’t Broke, Don’t Fix It’:
The issue presented in petitioner’s brief was: “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.” 2022 WL 17327250.
In opposition, the United States framed the issue as: “Whether the district court permissibly denied petitioner’s general claim of attorney- client privilege over communications, related to the preparation of a tax return, that did not have obtaining legal advice as their primary purpose, while instructing that all legal advice contained in the communications be redacted.” 2022 WL 17833093.In its brief, the government wrote: “Petitioner is a law firm that both prepares tax forms for its clients and provides clients with tax advice…. A federal grand jury conducting a criminal investigation of one of petitioner’s clients subpoenaed petitioner for the production of certain documents, which petitioner refused to produce The client, an early promoter of bitcoin, expatriated from the United States in early 2014 . . . The client retained petitioner in 2012 to provide advice on the expatriation process. The client also retained petitioner to prepare the client’s 2014 tax return, which was filed in mid-2016, along with other tax filings.”
The government continued:
The district court recognized that “although communications that are only about tax return preparation are not covered by the attorney-client privilege, communications seeking legal advice about what to claim on tax returns or other tax-related legal advice may be privileged” when “the primary purpose of the communication was to obtain or provide such legal advice”
Applying that framework, the district court permitted petitioner to withhold in full various documents, including a memorandum analyzing tax-related legal questions for the year of the client’s expatriation and all related communications. As relevant here, the court ordered disclosure of 54 documents “where the primary or predominate purpose [of the documents] was about the procedural aspects of the preparation of [the client’s] tax return” or where a certified public accountant “provided advice as an accountant” rather than as an agent assisting the attorneys in providing legal advice . . . . In so doing, the district court directed petitioner to redact the portions of the documents that “concern communications about tax-related legal advice,” while ordering petitioner to disclose the portions that are “only about tax return preparation.”
The law firm refused to produce any of the documents and was held in contempt. The Ninth Circuit applied the primary purpose test. In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021), cert. granted sub nom. In re Jury, 214 L. Ed. 2d 16, 143 S. Ct. 80 (2022), and cert. dismissed as improvidently granted, 143 S. Ct. 543 (2023). It wrote:
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.
The Ninth Circuit explained:
When dual-purpose communications are involved, there are two potential tests that courts have adopted: the “primary purpose” test and the“because of” test. Under 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…. On the other hand, the “because of” test—which typically applies in the work-product context—“does not consider whether litigation was a primary or secondary motive behind the creation of a document.” [citation omitted]. It 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.” [citation omitted]. It is a broader test than the “primary purpose” test because it looks only at causal connection, and not a“primary” reason.
The court left open whether “a primary purpose test” should apply.
Id. at 1094–95.
Michael Berman, Esq., is the owner of E-Discovery LLC and Of Counsel to Rifkin Weiner Livingston. He has published extensively, including as the editor-in-chief and a contributing author in “Electronically Stored Information in Maryland Courts” (Maryland State Bar Ass’n. 2020). The opinions expressed are solely those of the author.