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Every day in corporate America, in-house and outside legal counsel attend meetings and correspond by email with their clients about both legal and business matters. Often it difficult to separate the legal and non-legal parts of these communications. Sometimes it is difficult to discern whether the primary purpose relates to legal or business issues. Clarity in this area is of course highly desirable. Lawyers and clients need to know which communications will be protected under the attorney-client privilege to facilitate candid and robust dialogue, so that lawyers can get all the facts and clients can receive the best possible advice.
Seeking more clarity, the legal community eagerly followed the January 9, 2023 arguments at the U.S. Supreme Court in In re Grand Jury, No. 21-1397, in expectation of a decision from the Court in the first half of this year. This case was set to clarify a three-way circuit split to resolve the question of what test applies to assessing whether dual-purpose communications are privileged. However, two weeks after hearing argument, on January 23, 2023, the Court dismissed the writ of certiorari as improvidently granted, leaving the circuit split in place.
So how should lawyers assess whether their communications with clients will be privileged in situations involving mixed legal and business discussions? In the nine western states and two U.S. territories within the Ninth Circuit, an attorney-client communication is privileged if the primary purpose of the communication is to obtain legal advice. This was the holding of the Ninth Circuit in In re Grand Jury, 23 F.4th 1088 (9th Cir. Sept. 23, 2021, amended January 27, 2022), the case the Supreme Court took up before abandoning it on January 23, 2023. This case involved mixed communications -- legal advice about tax obligations and non-legal tax return preparation advice.
Of course, as the law firm petitioner argued before the Supreme Court on January 9, 2023, it is often difficult for parties and courts to assess whether the primary purpose of a communication was legal or business. It is even more difficult to assess this before or during, for example, a meeting with executives. For this very reason, the D.C. Circuit established a clearer test in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014). In Kellogg, then-Judge Brett Kavanaugh wrote for a unanimous panel that the proper test for assessing whether dual-purpose communications are privileged is as follows: “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication? . . . Sensibly and properly applied, the test boils down to whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication.” In other words, under the D.C. Circuit’s rule, there is no need to assign a primary purpose to a communication. If obtaining legal advice was at least one significant purpose, the communication will be deemed privileged.
The Ninth Circuit panel in In re Grand Jury remarked that it saw “the merits of the reasoning in Kellogg,” but nonetheless declined to apply it to the tax matters case before it. The panel’s phrasing perhaps leaves a window cracked for the Ninth Circuit to apply the simpler Kellogg test in a case involving an internal investigation, which was the context in Kellogg. In the meantime, lawyers and clients in the Ninth Circuit are left to assess and argue about whether legal or business matters served as the primary purpose of a communication. Compounding the difficulty, especially for lawyers who have a need to consider the law in multiple circuits in the course of their work, is that the Seventh Circuit articulated a third, even less protective, test in United States v. Frederick, 182 F.3d 496, 501 (7th Cir. 1999). Although it is not clear yet whether the Seventh Circuit would apply its test beyond the tax matters context, for now lawyers and clients in that circuit have to assume that dual-purpose communications are simply not privileged.
If the Supreme Court decides to revisit this issue in the future, it is far from clear that it would adopt the Kellogg test (perhaps leaving aside Justice Kavanaugh as the author of Kellogg). Some justices expressed skepticism with the Kellogg approach during the January 9, 2023 argument in In re Grand Jury, pointing out that business communications might become privileged if a lawyer in the room merely makes one or more non-trivial legal points in the course of a meeting. For now, lawyers and clients, especially outside the D.C. Circuit, should not assume that their communications will be protected by the attorney-client privilege for discussions involving both legal and business matters, and should be mindful to clearly separate discussions about these matters in oral and written communications to the extent possible.