The US Supreme Court will consider the scope of attorney-client privilege in a case that attorneys say could impact every in-house counsel and the outside lawyers who support them.
The question for the justices at argument on Monday in In re Grand Jury is what test courts should apply to determine whether “dual-purpose” communications—those that contain both legal and business advice—should be shielded by the privilege.
The federal government is alone in advocating for a narrower understanding of the privilege while groups representing specialties as varied as intellectual property and tax attorneys argue a broader one is necessary to capture the real world role of in-house counsel. During arguments Monday, the justices indicated they were likely to fall somewhere in between the two positions.
But all seem to agree that a predictable test is necessary to ensure candid communications between attorneys and their clients. The test has to be clear, “not just for courts looking at the issue in retrospect, but for lawyers working on the job,” said Lawrence S. Ebner, executive vice president and general counsel of the Atlantic Legal Foundation.
Ebner is one of the several amicus who wrote a friend-of-the-court brief in favor of a broader understanding of the privilege. Though unusual, such lopsided amicus support makes sense in this instance.
The case involves a criminal investigation of an unnamed company and grand jury subpoenas issued to both the company and its law firm. At issue, is advice the law firm, which specializes in international tax issues, provided to the company about “particularly novel” issues like the ownership of cryptocurrency, according to the brief filed by the unnamed firm.
Federal prosecutors are trying to get more information handed over in discovery.
“To facilitate criminal investigations and prosecutions, the Justice Department wants the scope of the attorney-client privilege to be narrow,” Ebner said.
Lawyer groups warn that reading the privilege too narrowly could undermine the purpose behind it and chill open and frank discussions between lawyers and their clients. The firm here says a broad privilege is particularly important in extraordinarily complex areas of the law like tax and cryptocurrency.
So beyond prosecutors, it’s “hard to figure out who the natural allies of the government’s position would be,” Buchalter APC shareholder Mary-Christine Sungaila said. She filed an amicus brief on behalf of Federation of Defense & Corporate Counsel supporting a broad application of the privilege.
Primary v. Significant
The US Court of Appeals for the Ninth Circuit applied the more narrow “primary purpose” test to determine whether dual-purpose communications were discoverable during investigations and litigation.
Under that test, communications are protected only if the primary purpose of the communication was to obtain legal advice. The “overwhelming majority of lower courts and other legal authorities have advocated and applied a test,” the US said in its brief.
Sungaila, though, says that ignores the practicalities of what in-house and their outside counsel do.
The role of in-house counsel is increasingly a dual one, particularly in highly regulated industries, Sungaila said.
“One of the biggest problems with the primary purpose test is that it focuses on the client,” even when it “can be difficult for the company officers to even know if they are facing a legal or purely business issue” when they approach their in-house counsel, she said.
Sungaila says hampering in-house counsel’s ability to provide strategic business guidance along with legal advice could deter company officers from even approaching their legal departments—something she says isn’t good for anybody.
She and the other amicus say courts should apply a “significant purpose” test instead.
Under that test, the privilege applies “as long as providing or obtaining legal advice was one of the primary—or significant—purposes of the communication,” Ebner said, and “not necessarily the only primary or significant purpose.”
Because corporate officers often ask their in-house counsel questions that have both legal and business importance, “the significant purpose test looks more practically at the way corporations actually work,” Redgrave said.
The case is In re Grand Jury, U.S., No. 21-1397, argued 1/9/23.