Justices Have No Appetite for New Attorney Privilege Test (1)

The US Supreme Court seemed unlikely to give either side what it wants in a case closely watched by in-house counsel about the scope of the attorney client privilege, suggesting that courts already agree about the proper outcome.

At issue in the case argued Monday is what test courts should use to determine whether a “dual-purpose” communication—one having both a legal and business purpose—between a business and its lawyer must be turned over during discovery. The US says the communications must be turned over unless the legal purpose is primary. The other side says it’s enough to protect the document from discovery if the legal purpose is significant.

Most of the justices seemed to think that state and federal courts use a hybrid test when it is hard to disentangle the legal and business purposes.

“I think we’re talking about labels rather than analysis,” Chief Justice John Roberts said.

Justice Elena Kagan wondered if the court should therefore follow what she referred to as an ancient legal proposition: “If it ain’t broke, don’t fix it.”

The case involves a criminal investigation of an unnamed company and grand jury subpoenas issued to both the company and its law firm. The disputed communication involves advice the law firm, which specializes in international tax issues, provided to the company about “particularly novel” issues like the ownership of crypotocurrency, according to the brief filed by the unnamed firm.

Say Nothing?

The US is alone in arguing for a narrow test to determine if dual-purpose communications should be protected by the privilege. All of the amici sided with the firm in urging the justices to adopt a broader test that they say will add predictability to attorney-client communications.

But both sides seem to be “going from one extreme to the other,” said Justice Ketanji Brown Jackson.

Justice Department attorney Masha Hansford said the primary purpose test has been used “for decades in a huge body of state and federal cases.”

Under that test, courts will need to “parse things pretty fine” to determine all the possible purposes behind potentially privileged communications and then rank them in order of importance, Roberts said. “It seems to me that your approach really puts a lot of work on the judge,” he said.

But Hansford said courts that are employing this test aren’t actually “doing math” and assigning specific percentages to the purposes behind a communication. Instead, they are trying to get an overall sense about what motivated the communication.

“Once there are multiple really meaningful purposes and courts can’t tell what to do,” Hansford said, the courts are applying a “kind of a tie goes to the runner rule in favor of the privilege in those cases.”

That test sounds a lot like the firm’s broader significant purpose test, Justice Neil Gorsuch said, in which courts look only to whether obtaining legal advice was one, significant purpose of the communication.

“What is the disagreement?” Gorsuch asked.

Moreover, Justice Sonia Sotomayor said judges don’t seem to be having a hard time applying the hybrid test. “I don’t see a rounding number of courts in states or even federal courts saying, I can’t figure this out,” Sotomayor said.

In the end Justice Amy Coney Barrett suggested there may not be much for the court to do. “Maybe it’s best to say nothing,” she said.

The case is In re Grand Jury, U.S., No. 21-1397, argued 1/9/23.