The attorney-client privilege protects confidential communications between clients and their attorneys made for the purpose of obtaining or providing legal advice. In Upjohn Co. v. United States, a seminal 1981 decision addressing this topic in the corporate context, the Supreme Court of the United States noted: “[i]n light of the vast and complicated array of regulatory legislation confronting the modern corporation, corporations … ‘constantly go to lawyers to find out how to obey the law.’” This reality in part led the Supreme Court in Upjohn to reject a narrow view of the persons within a corporation to whom communications with an attorney are privileged.
The world of business has become exponentially more complex during the forty-plus years that have passed since Upjohn. In addition, companies now make extensive use of technology to communicate with their internal and external lawyers in a multitude of ways that were uncommon or did not exist at the time of Upjohn. Unfortunately, cases addressing the federal common law of privilege rarely make their way to the Supreme Court, which can create uncertainty and inconsistency in how business-related privilege questions are addressed by the courts. In 2023, the Supreme Court will have the opportunity to provide greater clarity as to one such question.
Dual Purpose Communications and Their Primary Purpose
On Monday, January 9, 2023, the justices are scheduled to hear arguments addressing the thorny issue that arises when clients communicate with their lawyers not merely to secure legal advice, but also to obtain business advice. Such communications often are referred to as having a “dual purpose.” In the employment arena, for example, whether to discharge an employee is a business decision, not a legal one; however, legal advice may be sought related to the risks of discharging the individual, e.g., contract issues or potential discrimination claims.
In such situations, the courts have historically applied a “primary purpose” test to determine whether the communication is privileged. But what does this mean, i.e., can there be only one primary purpose of a communication?
Notably, two of the leading opinions addressing this topic were authored by Supreme Court Justice Brett Kavanaugh while a judge on the United States Court of Appeals for the District of Columbia Circuit. In the first of these opinions, In re Kellogg Brown & Root, Inc., then-judge Kavanaugh explained that “trying to find the one primary purpose for a communication motivated by two sometimes overlapping purposes (one legal and one business, for example) can be an inherently impossible task,” because, often, “[i]t is not useful or even feasible to try to determine whether the purpose was A or B when the purpose was A and B.” Rather, courts should determine “whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication.” If so, then the communication is privileged. Applied “[i]n the context of an organization’s internal investigation, if one of the significant purposes of the internal investigation was to obtain or provide legal advice, the privilege will apply … regardless of whether an internal investigation was conducted pursuant to a company compliance program required by statute or regulation, or was otherwise conducted pursuant to company policy.”
In re Grand Jury
The case scheduled for oral argument before the Supreme Court on January 9, 2023, is an appeal from a decision issued by the U.S. Court of Appeals for the Ninth Circuit captioned In re Grand Jury, 13 F.4th 710 (9th Cir. 2021). This case concerns a company that refused to produce documents based on the attorney-client privilege where its attorneys provided not only legal advice on the tax consequences of the company’s anticipated expatriation but also prepared tax returns in preparation for expatriation. The district court ordered production of the disputed documents finding their predominant purpose was tax advice, not legal advice. On appeal, the Ninth Circuit saw “the merits of the reasoning in Kellogg,” but affirmed the district court because Kellogg’s “reasoning does not apply with equal force in the tax context,” “the universe of documents in which the Kellogg test would make a difference is limited,” and “the district court did not clearly err in finding that the predominant purpose of the disputed communications was not to obtain legal advice.” (Emphasis in the original.)
Potential Impact of a Supreme Court Ruling
Depending on whether the Supreme Court adopts a test for attorney-client privilege in multiple business contexts, or instead limits the decision to the tax context, the Court’s decision could have significant ramifications on the manner in which attorneys advise clients when there are business and legal issues. For instance, if the Court holds the attorney-client privilege applies where the primary purpose was to provide legal advice, lawyers may have to separate, or more carefully circumscribe, the legal advice they provide. In addition, courts more often will become embroiled in sorting out the “inherently impossible task” of determining whether the legal or business purpose was primary. Worse yet, such a narrow construction of the attorney-client privilege may make businesses “less likely to disclose facts to their attorneys and to seek legal advice,” which would “limit the valuable efforts of corporate counsel to ensure their client’s compliance with the law.”
If, on the other hand, the Supreme Court adopts the D.C. Circuit’s approach, attorneys will more readily and efficiently be able to provide legal (and business) advice within the same communication. Indeed, multiple business and legal associations have filed amicus briefs in this case asking the Supreme Court to adopt the Kellogg approach. While courts will continue to be called upon to resolve the applicability of the attorney-client privilege to particular communications, Justice Kavanaugh seems to have struck a chord when he described the “significant purpose” approach as “clearer, more precise, and more predictable to articulate.” This, in turn, will foster the primary purpose of the attorney-client privilege, i.e., it will promote the sharing of facts and information candidly so proper legal advice may be provided.