A crucial question raised by many lawyers' clients is whether their statements are covered by the attorney-client privilege. That question – within the context of communications containing both legal and non-legal advice – was recently raised by an unnamed law firm when it petitioned the U.S. Supreme Court to clarify the bounds of the privilege in the case of In Re Grand Jury.
BACKGROUND
The petitioner, a law firm specializing in tax law, prepared tax filings and provided legal advice to a corporate client that decided to expatriate. A federal grand jury subsequently subpoenaed documents from the law firm in connection with a criminal tax investigation of the corporate client. The law firm produced thousands of records, but withheld some documents based on the attorney-client privilege and work product doctrine. The documents withheld on the basis of the attorney-client privilege involved both legal advice concerning compliance with tax laws and preparation of the client's tax returns, or "dual purpose" communications.
In evaluating the withheld "dual purpose" communications, the U.S. District Court applied the "primary purpose" test. The court held that "the relevant consideration was whether the primary or predominant purpose of the communication was to seek legal advice, or to provide the corresponding legal advice." In applying this test, the court held that 54 of the withheld documents involved communications for which the "primary purpose" concerned the procedural aspects of tax return preparation rather than legal advice. Therefore, despite the fact that the documents also contained legal advice, the court ordered that the documents be produced (with courtordered redactions). The law firm declined, was held in contempt and appealed the court's decision. The District Court's decision was upheld by the Ninth Circuit Court of Appeals. The law firm then appealed to the U.S. Supreme Court, which granted certiorari.
ARGUMENTS AT THE U.S. SUPREME COURT
The petitioner argued that the D.C. Circuit's approach in the case of In re Kellogg Brown & Root, Inc. should be embraced for dual-purpose communications, and contended that a "significant" purpose test should be adopted. In Kellogg, according to the petitioner, the D.C. Circuit embraced a test that assesses whether obtaining or providing legal advice is one of the significant purposes of the communication rather than the "primary purpose." The petitioner argued that this test would preserve the privilege and provide more predictability.
On the other hand, the United States argued that the Kellogg approach was distinct from tax preparation cases and emphasized that an accountant's privilege should not be created for advice typically provided by a non-lawyer. The United States further argued that advice about tax preparation is not privileged unless it requires an attorney's legal expertise, and that intertwined communications should be privileged only when the predominant purpose is to provide or receive legal advice. In essence, it argued that the attorney-client privilege should not be expanded.
Several organizations, including the American Bar Association and Chamber of Commerce, submitted amicus briefs in support of the law firm. However, the U.S. Supreme Court declined to weigh in, dismissing the case as improvidently granted. While it is unclear why this case was dismissed as improvidently granted, the one point that is clear is that the current standard for "dual purpose" communications remains unchanged for now.
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