On Jan. 23, the US Supreme Court issued a brief statement dismissing a case just two weeks after hearing oral argument in a case that could have significantly changed the scope and breadth of the attorney-client privilege doctrine.
The case, In re Grand Jury, involved grand jury subpoenas for records related to a law firm’s work for a client on tax and cryptocurrency issues. The court said the appeal was improvidently granted, meaning they should not have taken it in the first place.
At Issue
At stake was the test federal courts use to evaluate the attorney-client privilege and if the privilege applies to dual-purpose communications, one with both a business and legal purpose.
A federal district court in California held the law firm in contempt for refusing to comply with an order to produce materials the firm claimed were covered by the dual-purpose test.
On appeal to the US Court of Appeals for the Ninth Circuit, the firm argued the district court erred in relying on the primary purpose test, which doesn’t extend the privilege to nonlegal communications.
The law firm also argued the district court could have used the significant purpose test, where a communication is privileged if one of its significant purposes is to provide legal advice. Justice Brett Kavanaugh laid out this test in 2014 when he sat on the DC Circuit.
The Ninth Circuit concluded that the lower court correctly applied the primary purpose test, and that the privilege determination here was not a close enough call to implicate the approach advanced by Kavanaugh’s opinion.
Unique Situation
The Supreme Court dismisses appeals as improvidently granted only a few times each term.
In this case, the court’s decision is disappointing to the defense bar and many interested parties that filed amicus curiae briefs. All were hoping for clarity and expansion of attorney-client privilege relating to dual-purpose communications.
The dismissal raises the question about what changed the court’s thinking that led to this rare ruling. The decision was perhaps previewed during the oral argument, when Justice Elena Kagan asked counsel for the petitioner to comment on “the ancient legal principle, if it ain’t broke, don’t fix it.”
Why Dismiss the Case?
It is worth evaluating why the court accepted the appeal in the first place.
A case needs four justices to agree to hear it for certiorari to be granted. This means four justices thought the moment was right to clarify the privilege test for dual-purpose communications, especially given the petitioner’s reliance on Kavanaugh’s significant purpose approach.
However, during oral argument, the petitioner faced a skeptical court, which questioned just how subsidiary the legal purpose of a document had to be before it would lose protection under the attorney-client privilege.
In answering these questions, the petitioner argued for a broader approach than the significant purpose test, noting that as long as the legal purpose was “real and legitimate,” the document should be protected.
This argument came under fire from the court’s liberal wing. Justice Sonia Sotomayor said she did not know “why lawyer advice that’s predominantly business should be protected simply because you sneak in some minor legal consideration.”
Both sides of the court questioned the utility of such a broad test for privilege in the federal courts, especially given that most state courts use the primary purpose test.
Oral argument revealed there was clear hesitation on both sides of the court’s political spectrum to expand attorney-client privilege to cover any dual-purpose document so long as there was any real and legitimate legal purpose involved. But the dismissal post-hearing also reflects discomfort with codifying a more rigid approach that required weighing of purposes to determine the primary purpose of a document.
It appears the court felt there was no need to upset the current jurisprudence. As Sotomayor noted during oral argument, she did not see much evidence that the current test was “difficult to administer” or that judges were “having the hard time” the petitioner claimed they were in making privilege calls.
Legal and Business Implications
While the defense bar wanted the court to expand the scope of the attorney-client privilege for dual-purpose communications, the dismissal at least maintains the status quo. Kavanaugh’s significant purpose test remains in the DC Circuit, just as the primary purpose test remains law in the Ninth and other circuits.
Because there is as no bright-line test for determining privilege in dual-purpose documents, lawyers will be free to argue for a particular approach, and a judge will have to make the determination using the appropriate test for that jurisdiction.
More important for in-house lawyers and compliance professionals is, whenever possible, to separate business and legal advice. At a minimum, it’s important to clearly identify legal advice and privileged materials in situations where business and legal advice intertwine.
The case is In Re Grand Jury, U.S., No. 21-1397, 1/23/23.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Write for Us: Author Guidelines
Author Information
Winston M. Paes is a litigation partner at Debevoise and a member of the firm’s white collar and regulatory defense group. He previously served as chief of the Business and Securities Fraud Section for the US Attorney’s Office for the Eastern District of New York.
Stephen Petraeus is an associate in Debevoise’s litigation department.