Supreme Court Considers Test For Application Of Attorney-Client Privilege To So-Called “Dual-Purpose” Communications
Securities Litigation
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  • Supreme Court Considers Test For Application Of Attorney-Client Privilege To So-Called “Dual-Purpose” Communications

    On January 9, 2023, the United States Supreme Court heard oral argument in In re Grand Jury, No. 21-1397, a case with potentially far-reaching implications concerning the application of the attorney-client privilege to so-called “dual-purpose” communications, i.e., communications that reflect both legal and non-legal advice.

    The appeal arises from a grand jury proceeding in the Central District of California.  An unnamed law firm and a company were served with subpoenas related to a criminal investigation; in response, they asserted that various communications that provided a combination of legal and non-legal tax advice were privileged.  The District Court held that about 50 communications were not privileged because it concluded that the “primary purpose” of the communications was not to provide legal advice.  When the law firm and company continued to withhold the disputed documents, they were held in contempt.

    On appeal, the United States Court of Appeals for the Ninth Circuit affirmed.  In re Grand Jury, 23 F.4th 1088 (9th Cir. 2022).  In doing so, the Ninth Circuit held that the “primary purpose” test, rather than the “because of” test, applies to dual-purpose communications.  Id. at 1091–92.  The Ninth Circuit explained that the primary purpose test requires the court to look to whether the primary purpose of the communication was to give or receive legal advice, as opposed to business (or tax) advice.  In contrast, the broader “because of” test (typically applied in the work product context) affords protection if it can be said the document was created because of anticipated litigation, and looks only at causal connection, not a “primary” reason.  Id.  The Ninth Circuit also expressly left open whether “a primary purpose” or “the primary purpose” test should apply.  Id. at 1094.  The Ninth Circuit appeared to acknowledge the validity of the reasoning of the D.C. Circuit in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014), a decision authored by then-Judge Kavanaugh, which effectively considered the primary purpose test to require an analysis of whether the request for legal advice constituted a “significant” purpose of the communication, reasoning that assessing whether “a” primary purpose of the communication was to seek legal advice would save courts the trouble of having to identify a predominant purpose among two or more potentially equal purposes.  However, the Ninth Circuit determined that which test to apply would only make a difference in truly close cases where the legal purpose is just as significant as a non-legal purpose.  Here, however, the Ninth Circuit held that because the District Court did not clearly err in finding that the predominant purpose of the disputed communications was not to obtain legal advice, those communications could not fall within the narrow universe where the Kellogg test would change the outcome of the privilege analysis.

    In the Supreme Court, petitioner’s opening merits brief argued that a communication should be privileged if a significant purpose of the communication was to obtain legal advice (it appears that the documents in question mostly concern communications from the client to the lawyer, as opposed to communications from the lawyer to the client).  In petitioner’s reply brief and at oral argument, however, petitioner urged adoption of a test that simply asked whether there was a bona fide, or legitimate, legal purpose to the communication.  Petitioner contended that requiring a finding regarding “the” primary purpose of a communication could result in chilling attorney-client communications that touched on both legal and non-legal matters, and that assessing whether there was simply a legitimate legal purpose would be easier than weighing different purposes to determine which predominated.  Amici briefs before the Court uniformly advocated for the petitioner’s approach.  The government argued that application of the primary purpose test has not been problematic for courts, that the test should be whether “the” primary purpose was legal, and that adoption of petitioner’s proposed test would vastly expand attorney-client privilege to communications that are currently available to grand juries and courts.

    The Court appeared to acknowledge that a “primary purpose” test has generally been adopted by most federal and state courts.  The questioning at oral argument seemed primarily intended to explore whether modifying that test—in one direction or another—was necessary and what was involved as a practical matter for the courts in applying any particular test.

    For example, some Justices appeared concerned that adopting a test focused on determining whether legal advice was “the” primary purpose for the communication is not a sufficiently concrete standard for trial courts working to resolve privilege disputes.  Justice Alito asked whether the government thought the primary purpose test was “easy to administer” when the reviewing judge is asked to determine what the predominant purpose of a communication was.  Chief Justice Roberts noted that it was “important to keep in mind what judges have to do here, which is go through these documents,” and expressed concern that the primary purpose test “really puts a lot of work on the [document reviewing] judge.”  The government argued that courts administering “the” primary purpose test are not engaged in the sort of precise weighing of competing purposes suggested by petitioner, noting agreement with Justice Barret’s observation that reviewing judges do not weigh specific percentages of the contents of a communication to determine if it is privileged, but rather apply “a range of discretion” that they are afforded under the primary purpose test to determine whether a communication is privileged.  Justice Kavanaugh seemed particularly interested in ensuring communications arising in internal investigations, the subject of the privilege assertions in Kellogg, remain privileged where the primary purpose of a communication is “often intertwined” as between legal and non-legal advice.  Justice Jackson noted that trial judges are required to “make a judgment call … about what this particular communication relates to, what its point was, what its purpose is,” and appeared potentially interested in wanting to provide more clarity about what expressly should be weighed in that analysis.

    But some Justices also seemed concerned about the possible reach of petitioner’s proposed test.  For example, Justice Thomas questioned whether there was any “non-trivial role” that an attorney could play that would not satisfy petitioner’s proposed test; and petitioner explained that under its proposed test communications with an attorney would not be privileged only if the attorney’s role was purely “mechanical.”  Justice Jackson appeared concerned about what would happen with respect to the records of a business meeting where all the participants agreed a business decision would be made but counsel was present and “adds a point,” noting that under petitioner’s proposed test “as long as it’s a legitimate point, that is good enough to require that the entire [communication] be privileged.”  And Justice Kagan pointedly asked petitioner to “comment on, you know, the ancient legal principle, if it ain’t broke, don’t fix it.”

    A decision is expected before the Court’s term ends in June.  Depending on whether the Court explicitly endorses a test regarding “the” or “a” primary purpose, or some other test, and the type of guidance it offers in how trial courts should apply any such test in making document-by-document privilege assessments, the Court’s opinion in In re Grand Jury could have far-reaching implications for the conduct of discovery in cases arising under federal law.  And even though the Court’s decision would not be binding on state courts or necessarily govern privilege determinations in state law claims, the Justices appeared to recognize the possibility that any test they announce might also affect the development of state law respecting the application of privilege claims to dual-purpose communications.