In re Grand Jury: Supreme Court Considers the Scope of Attorney-Client Privilege for “Dual-Purpose Communications”

Update January 23, 2023: The Court today dismissed the writ of certiorari as improvidently granted. 

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The Supreme Court’s first oral argument of 2023 involved a grand jury subpoena to a law firm for records related to tax preparation and advice given to a client who wanted to expatriate and was therefore subject to an “exit tax” for departing citizens. The firm refused to produce certain documents, even with statements of legal advice redacted. The district court held the firm in civil contempt, and the firm appealed the contempt order. The Ninth Circuit, in an opinion by Judge Lee, joined by Judges Murgia and Bade, upheld the order, rejecting the law firm’s arguments that the documents were subject to the attorney-client privilege because obtaining or providing legal advice was a significant purpose of the communications.¹

The firm petitioned the Supreme Court for review, asserting a three-way split between the Ninth Circuit (which it described as applying a primary purpose standard), the D.C. Circuit (described as applying its preferred standard) and the Seventh Circuit (described as treating all dual purpose communications as unprivileged, at least in the tax context). Although the Ninth Circuit had explicitly declined to disagree with the D.C. Circuit, and the outcome would have been the same or less favorable to the law firm in the Seventh Circuit, making for a tenuous or at least shallow Circuit split, the petition found a receptive audience on a Court that includes the author of two significant D.C. Circuit opinions that the petition cast as inconsistent with the Ninth Circuit’s—Justice Brett Kavanaugh.

The petition pitched the case as presenting a choice between a “primary purpose” standard and petitioner’s “significant purpose” standard, but those verbal formulas did not hold up well at argument. The law firm’s counsel (Daniel Levin) acknowledged that under petitioner’s test, “significant” really meant a genuine and legitimate purpose, no matter how little effect that purpose may have had on making the communication. That is, a “significant purpose” is real, but not necessarily important to the decision to make the communication. And the government, for its part, characterized the “primary purpose” test as less concerned with exact comparisons of legal and non-legal purposes than with whether obtaining or rendering legal advice was an important motive for the communication, leaving considerable room for protecting communications made with a substantial purpose to obtain or give legal advice, without resolving the hypothetical scenario in which two purposes (one legal and the other not) are in equipoise or nearly so. 

The government’s position at oral argument (through Assistant to the Solicitor General Masha Hansford) approached the one Justice Kavanaugh staked out in his Kellogg and Boehringer opinions for the D.C. Circuit, which uses “primary” and “significant” interchangeably to refer to a purpose that is significant in ordinary parlance (not in petitioner’s sense of being bona fide), even if another purpose was equally or more significant.² It seems likely that the Court will settle somewhere close to there, likely without resolving how the standard should apply to edge cases not presented on the facts of the tax-related documents before it. 

The argument exposed as a principal drawback to the “significant purpose” test articulated by petitioner that it would encourage parties with the means to do so to hire lawyers to participate in communications that would take place anyway in order to shield the communications from disclosure, for example by cc-ing a lawyer on an email or inviting a lawyer to sit in on a business meeting. The government pointed to a recent decision of the D.C. Court of Appeals (the highest “state” court of the District) as an example of a problematic application of a “significant purpose” test.³ The concern about having lawyers participate in communications to shield them carries considerable force in the realm of tax preparation because there typically is no accountant privilege and courts have been unreceptive to treating a communication as privileged if made to a lawyer when it would ordinarily be made to an accountant. 

On the other hand, the principal drawback then-Judge Kavanaugh articulated to a standard that required some ex post judicial measurement of purposes against each other is 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. It is often not useful or even feasible to try to determine whether the purpose was A or B when the purpose was A and B.” Kellogg, 756 F.3d at 759.⁴ And the difficulty of predicting the outcome of a court’s ex post determination under such a comparative standard creates ex ante uncertainty about whether a communication is privileged, defeating the purpose of the privilege which is to encourage candor in communications made for the purpose of obtaining or rendering legal advice. As the Supreme Court stated in an earlier privilege case, “uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.” Upjohn v. United States, 449 U.S. 383, 393 (1981). “[F]or the attorney-client privilege to be effective, it must be predictable.” United States v. Jicarilla Apache Nation, 564 U.S. 162, 183 (2011).

Another factor likely to keep the Court from straying far from the standard embraced by the government at argument is that the Court’s authority is limited to delineating the privilege under Federal Rule of Evidence 501 in light of reason and experience. That standard on its face commends some adherence to standards generally accepted in state courts, many of which articulate a “primary purpose” standard even if in application that standard comes close to the D.C. Circuit’s in Kellogg and Boehringer.⁵ Moreover, having radically different privilege inquiries in state and federal court would undermine the policy behind the privilege, because it will often be difficult to know in advance whether a state or federal court would be deciding the privilege question, and as noted, uncertainty inhibits candor. 

The Supreme Court seems likely to land within haling distance of Kellogg and leave it to the Ninth Circuit to apply that standard to the documents sought by the grand jury but withheld by the law firm. Petitioner’s standard is predictable, but because it invites the participation of lawyers in communications for the purpose of shielding them from disclosure, it is too amenable to abuse. Avoiding the need to precisely measure purposes against each other is likely to eliminate the main concerns expressed about the “primary purpose” standard in its real world application to communications that have more than one significant (not merely legitimate) purpose. 
 

¹ In re Grand Jury, 23 F.4th 1088 (9th Cir. 2022) (opinion as amended on denial of rehearing).
² FTC v. Boehringer Ingelheim Pharmaceuticals, Inc., 892 F.3d 1264, 1267-68 (D.C. Cir. 2018) (attorney client privilege applies to communications related to negotiating terms of an antitrust settlement); In re Kellogg, Brown & Root, Inc., 756 F.3d 754, 759-60 (D.C. Cir. 2014) (attorney client privilege applies to communications related to internal investigation). 
³ Moore v. United States, 285 A.3d 228 (D.C. Nov. 17, 2022). The court, in a 2-1 decision, overturned Moore’s convictions because of the erroneous admission of statements he made to his then defense attorney in a prior criminal case expressing hostility to and arguably threats against a prosecutor. The majority applied an avowedly “permissive” standard to the privilege in the context of a defendant’s communications to an appointed defense lawyer. Moore is not really an example of a “dual purpose” communication; the specific statements were not made to obtain legal advice, but they “related to” an indigent client’s significant purpose of obtaining legal advice. Moore’s rationale for extending the privilege is to protect the attorney client relationship in a context in which understanding (and to some extent managing) a client’s emotional state can be vital to providing effective representation.
⁴ In reality most communications involve “mixed questions” or the application of law to fact. The difficulty in identifying a single primary purpose, in this view, may come from the interdependence of legal and business considerations, for example, in arriving at the best settlement possible from the client’s perspective in light of both legal and business constraints, rather than the difficulty in measuring the relative importance of independent purposes. 
⁵ Under the current Restatement, for the privilege to apply, the “client must consult the lawyer for the purpose of obtaining legal assistance and not predominantly for another purpose.” Restatement (Third) of the Law Governing Lawyers § 72, cmt. c. That standard is inconsistent with a version of a “significant purpose” that would apply to any legitimate purpose, however unimportant it may be in relation to other purposes.