On Monday, January 9, 2023, the United States Supreme Court heard argument in a case with potentially major implications for companies and individuals alike. In re Grand Jury asks the Court to give trial courts a definitive standard for determining if dual-purpose client communications containing both legal and nonlegal advice are protected under the attorney-client privilege.
In re Grand Jury is a unique case. A person, whose identity is not publicly known, wished to expatriate from the United States and hired a law firm, whose identity is also not publicly known, for advice on how to do so.
The federal government suspected that the unknown individual was engaged in criminal activity, so it convened a grand jury, which subpoenaed records related to the law firm’s work. The law firm produced more than 1,700 documents but withheld others as protected by the attorney-client privilege, which protects communications exchanged between clients and their lawyers for the purpose of seeking legal advice. When the law firm refused to produce the withheld documents, the government moved to compel.
The California district court performed an in camera review of the documents using the “primary-purpose test.” Under the “primary-purpose” test, a communication is protected by the attorney-client privilege only if the “primary purpose” of the communication is to obtain or give legal advice. If the communication’s primary purpose is non-legal, such as business advice, then the communication is not privileged, even if the communication also conveys legal advice.
Following its review, the California district court ordered the law firm to produce approximately fifty additional documents. The law firm refused to comply with the order, and the district court held it in contempt.
The Ninth Circuit affirmed the lower-court decision, holding the primary purpose of the documents was to provide tax advice. In doing so, the court declined to adopt the “significant purpose” test of a 2014 opinion by then-Judge Brett Kavanaugh of the D.C. Circuit. Under the “significant purpose” test, a dual-purpose communication may be protected by the attorney-client privilege so long as legal advice represents a significant purpose for the communication, even if not the primary purpose.
In its petition, the unknown law firm asked the Court to cure the circuit split and observed that the approaches of both the Ninth and D.C. Circuits also conflict with the Seventh Circuit, in which a dual-purpose communication is never privileged. The Supreme Court granted certiorari.
Daniel B. Levin of Munger Tolles & Olson LLP, who argued on behalf of the unnamed firm, initially urged the court to adopt a test along the lines of the D.C. Circuit’s “significant purpose” test. But at oral argument, Levin expanded his definition of the word “significant.” He said if seeking legal advice was a client’s bona fide purpose then the dual-purpose communication should be protected.
Several justices took issue with this argument and Levin received several questions regarding proportionality. In particular, Justices Sotomayor and Jackson focused on Levin’s position that even if nonlegal advice far exceeded the lawyer’s legal advice, the entire communication would be privileged. They expressed concern that such a sweeping view of privilege would allow sophisticated clients to cloak nearly all of their internal communications with the privilege.
In response to this concern, Levin argued that a primary-purpose test would require courts to disentangle competing purposes and identify the single most important one, which would unnecessarily burden district courts. Chief Justice Roberts seemingly agreed with this argument and stated that the primary purpose test “really puts a lot of work on the judge.”
Justice Kagan, however, pushed back on this argument by noting that an overwhelming number of lower and state courts have adopted the “primary purpose” test for decades and there has not been an outcry from lower courts stating that the test is impractical or unwieldy. In that vein, Justice Kagan asked why the “ancient legal principle” of “if it ain’t broke, don’t fix it” should not apply. Justices Sotomayor, Barrett, and Jackson seemed to echo the same sentiments through their questions as well.
Masha Hansford argued on behalf of the Government that the “primary-purpose” test is the de facto test in nearly all jurisdictions, district judges have been able to implement the primary-purpose test for decades without issue, and a change to that test would be “destabilizing.”
Hansford faced a series of questions trying to tease out the difference between the words “primary” and “significant,” such as: how does a district judge decide whether legal advice was the primary purpose? In particular, Justice Gorsuch asked to what degree a communication needed to be for a legal purpose for the legal purpose to be primary. For example, he wanted to know if it had to be 60/40 or 51/49 in favor of a legal purpose, or if it would be sufficient if legal and non-legal purposes were “in equipoise.”
Hansford pushed back and said that “judges don’t do math,” but even if they did, in most cases, district judges have been able to make that determination without too much difficulty. Hansford pointed out that there are very few opinions from district courts decrying the application of the primary purpose test. But the Government did concede that if there were a hard case, where the district judge was truly “stuck” and unable to determine the primary purpose of a communication, then the Government would be fine with a “tie goes for the runner” rule in favor of finding the communication privileged.
The questioning at oral argument indicated that the Justices are wrestling with the standard. We will be on the watch for the opinion to provide guidance across the Circuits.