In re Grand Jury, 23 F.4th 1088 (9th Cir. 2022), appeal dismissed as improvidently granted, In re Grand Jury, 598 U.S. ____ (2023) (No. 21-1397).
Summary of the Case: The Supreme Court, which had initially agreed to consider a circuit split on a privilege issue that commonly arises in discovery, reversed course and dismissed the writ of certiorari as “improvidently granted”—meaning the Supreme Court will not resolve the circuit split this term. The appeal arose from a recent Ninth Circuit decision ordering a law firm to produce documents that reflected “dual purpose” legal and business advice. The firm had provided legal advice about certain tax avoidance measures to a client and also prepared the client’s tax filings. Later served with a grand jury subpoena in connection with a criminal investigation of this client, the firm withheld some communications containing both legal and business tax advice.
In evaluating whether the dual-purpose communications were protected from disclosure, the Ninth Circuit affirmed the District Court’s use of “the primary purpose” test. The test looks at whether the primary purpose of the communication relates more to legal advice, as opposed to business advice. The Ninth Circuit held the attorney-client privilege did not protect documents that primarily reflect procedural aspects of preparing tax returns even if the document involves legal advice, while adding that “a dual-purpose communication can only have a single ‘primary’ purpose.”
The Ninth Circuit’s “primary purpose” test stands in contrast to the Seventh Circuit’s strict per se approach, as applied in United States v. Frederick, 182 F.3d 496, 501 (7th Cir. 1999), that “a document prepared for use in preparing tax returns and for use in litigation” is not privileged no matter how significant the legal purpose. The Ninth Circuit’s and the Seventh Circuit’s tests are also narrower than the D.C. Circuit’s broader version of “a primary purpose” test, as applied in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014), which requires only that legal advice be one of the primary purposes rather than that it be the predominant or sole primary purpose.
While complicated privilege issues are typical in complex civil litigation, discovery practitioners longing for greater uniformity in how privilege issues are addressed will have to wait. The Supreme Court may have had second thoughts about wading into these waters with this particular case given that the appeal arose from a grand jury proceeding where many of the facts and actual documents at issue remain confidential.
Practical Insight: When weighing issues of privilege in the civil context, parties and counsel alike must know the laws of their particular jurisdiction. Counsel can seek to avoid dual-purpose communications altogether to the extent practical and exercise discretion where written dual-purpose communications are necessary. Parties and counsel can also make it clear that their communications are intended to serve primarily a legal purpose by using language within the communication itself that states as much, as well as marking such communications with “Attorney-Client Privileged” labels. However, keep in mind that any communication must substantively and primarily serve a legal purpose, as such language and labels will not magically transform communications into protected ones.