In In re Grand Jury, the Justices agreed to take up the question of how to apply the attorney-client privilege to “dual-purpose” communications—that is, communications between lawyers and clients that have both legal and non-legal purposes.  The Court will resolve a circuit split that Petitioner says has created uncertainty among lawyers nationwide.

Underlying Opinion for Review

Petitioner is an unnamed law firm specializing in international tax issues.  Petitioner provided legal advice to a client regarding the tax consequences of the client’s anticipated expatriation.  It also prepared several of the client’s income tax returns in accordance with expatriation tax requirements.  Petitioner was later served with a grand jury subpoena seeking documents related to a criminal investigation of the client, and Petitioner withheld certain documents on the basis of attorney-client privilege.  Some of those withheld documents contained communications in which Petitioner both provided legal advice to the client and facilitated preparation of the client’s tax returns in a non-privileged way.

The district court held that such dual-purpose documents were privileged only if the documents were made for the primary purpose of receiving or providing legal advice.  The Ninth Circuit affirmed the district court’s use of the primary purpose test for dual-purpose communications, upheld the trial court’s finding that legal advice was not the primary purpose of the communications at issue, and held that those communications were not privileged.  Importantly, although the Ninth Circuit’s opinion arose from a tax-law context, it is not limited to tax matters, and applies to all dual-purpose communications.

Competing Tests, Uneven Outcomes

The Ninth Circuit’s approach is fundamentally a balancing test.  A dual-purpose communication falls within the attorney-client privilege only if a legal purpose is the “primary purpose” of the communication, outweighing any non-legal purpose.  If the legal purpose predominates, the communication is privileged; if the primary purpose is non-legal, attorney-client privilege does not apply.

Other Circuits have taken a different approach.  The D.C. Circuit, for example, considers only whether the legal purpose was a material purpose of the communication, even if the communication contains a competing material non-legal purpose.  See In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014).  Under this test—set forth in a decision authored by then-Judge Kavanaugh—the “primary” purpose of the communication does not matter, so long as there is a material legal purpose at issue.  This allows courts to uphold an assertion of the attorney-client privilege even when the communication was equally motivated by legal and non-legal functions. 

Many district courts have adopted the D.C. Circuit’s approach, though no other circuit court has.  The Ninth Circuit distinguished Kellogg as applying only narrowly in “truly close cases,” a characterization Petitioner disputes as inharmonious.

The Seventh Circuit is the only other circuit court to have considered the issue, albeit in a narrow ruling limited to the tax context.  United States v. Frederick, 182 F.3d 496 (7th Cir. 1999).  There, any dual-purpose communication relating to preparing tax returns is never privileged, regardless of any legal purpose.

Practical Implications of the Supreme Court’s Review

Amicus briefs filed in support of the cert petition highlight the importance of dual-purpose communications for attorneys advising in insurance, health, environmental, real property, entertainment, and intellectual property matters, as well as internal compliance matters and crisis response.

Clients routinely come to lawyers with questions that result in both legal and non-legal advice.  This is especially true for attorneys practicing in-house and any lawyer that advises clients on complex issues involving both legal and business matters.  The split among circuit courts compounds uncertainty for businesses operating across several United States jurisdictions.  The Supreme Court’s reconciliation of the competing circuit courts tests hopefully will provide nationwide uniformity and clarity regarding the proper application of the attorney-client privilege to these dual-purpose communications. 

Oral argument is expected to be scheduled for early next year and the Supreme Court will issue its decision before the end of the term.

Authored by Adam Levin and Elizabeth "Liz" Och.