By: Angela L. Beblo and Trinity J. Gray
Key Take-Away: What is the difference between “a” and “the”? Quite a lot if you are in-house counsel for a company that wants to assert attorney-client privilege for dual-purpose communications made by you as in-house counsel. The Supreme Court of the United States (“SCOTUS”) granted cert in In re Grand Jury and recently heard oral arguments regarding dual-purpose communications, giving hope that SCOTUS would resolve a contentious circuit split on the issue and provide much-needed guidance to companies and lawyers across the country. Instead, SCOTUS ultimately dismissed cert for the case and the circuit split now remains unresolved. Thus, the extent to which a company can assert attorney-client privilege for dual-purpose communications by in-house counsel is determined by location. For those courts following the Kellogg standard, the question of whether the communications were “a” reason or “one of the significant purposes” for the communication will control its disclosure. For those courts following In re Grand Jury, the question of whether the communications were “the primary purpose” will control its disclosure. The different standards can have a dramatic impact on whether dual-purpose communications are subject to disclosure. Whether communications must be disclosed will depend upon the jurisdiction in which a case is filed.
Dual-Purpose Tests: The Differences In-Depth
There are currently different tests utilized by federal courts to determine whether in-house counsel’s dual-purpose communications are shielded from disclosure by the attorney-client privilege.[1]
Broad View – In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014) (Cavanaugh, J.)
In Kellogg, the district court found that a company was not entitled to the protection afforded by attorney-client privilege when it conducted an internal investigation regarding allegations of defrauding the United States government by a defense contractor. An individual, who previously worked for the defense contractor, filed a False Claims Act complaint, then sought internal investigation documents that included attorney communications and notes by non-attorneys who were serving as agents for the attorneys. The company argued that “the internal investigation had been conducted for the purpose of obtaining legal advice and that the internal investigation documents therefore were protected by the attorney-client privilege.” The individual argued the documents were “unprivileged business records” that were subject to discovery. The district court agreed with the individual and ruled that the documents were discoverable after applying the “primary purpose test” on the basis of a single primary purpose for each communication. In an appellate decision written by now-Supreme Court Justice Cavanaugh, the appellate court concluded that the district court’s ruling was “legally erroneous” and vacated the court’s order. In reviewing the attorney-client privilege, the appellate court reiterated “that a lawyer’s status as in-house counsel ‘does not dilute the [attorney-client] privilege,’” that “communications made by and to non-attorneys serving as agents of attorneys in internal investigations are routinely protected by the attorney-client privilege,” and that no magic words are needed to shield investigations when the “employees knew that the company’s legal department was conducting an investigation of a sensitive nature and that the information they disclosed would be protected.” The appellate court concluded that the district court erred by applying the wrong legal standard because “trying to find the one primary purpose for a communication motivated by two sometimes overlapping purposes (one legal and one business, for example) can be an inherently impossible task.” The appellate court summarized its position by stating:
We agree with and adopt that formulation—“one of the significant purposes”—as an accurate and appropriate description of the primary purpose test. 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.
The appellate court acknowledged the tension between disclosure and withholding documents, but stated that the “legal system tolerates those costs because the privilege ‘is intended to encourage ‘full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice[.]’’” The appellate court vacated the district court’s order for production of the documents.
Narrow View – In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021) (Lee, J.)
In In re Grand Jury, a grand jury issued subpoenas to a company and a law firm as part of a criminal investigation and sought, among other items, information on tax advice and documentation. In response, the company and law firm “each produced some documents but withheld others, citing attorney-client privilege and the work-product doctrine.” The government filed a motion to compel and the district court, granting the motion in part, “explained that these documents were either not protected by any privilege or were discoverable under the crime-fraud exception.” The company and law firm continued to withhold the documents and were held in contempt. The decisions were then appealed to the United States District Court for the Ninth Circuit.
The Ninth Circuit acknowledged the split within the circuit relating to both dual-purpose communications (“where an attorney’s advice may integrally involve both legal and non-legal analyses”) and the work-product doctrine (where the “because of” test “considers the totality of the circumstances and affords protection when it can fairly be said that the document was created because of anticipated litigation, and would not have been created in substantially similar form but for the prospect of that litigation”). The Ninth Circuit summarily resolved the split, holding “that the primary-purpose test applies to attorney-client privilege claims for dual-purpose communications.” To support its holding, the Ninth Circuit reviewed the history of the attorney-client privilege and the work-product doctrine. According to the court, “the attorney-client privilege and work-product doctrine are typically mentioned together, attorney-client privilege and the work-product protection doctrine are animated by different policy goals. It thus makes sense to have different tests for the two.” The driving force behind the work-product doctrine is “to preserve a zone of privacy in which a lawyer can prepare and develop legal theories and strategy with an eye toward litigation, free from unnecessary intrusion by his adversaries,” whereas the attorney-client privilege is to ensure “full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.” The Ninth Circuit ultimately held that “the primary purpose” test applied and affirmed the district court’s rulings.
Interestingly, while the Ninth Circuit adopted the primary purpose test, it left open the potential to adopt Kellogg’s “a primary purpose” test in a future case. The Ninth Circuit stated that Kellogg “dealt with the very specific context of corporate internal investigations, and its reasoning does not apply with equal force in the tax context” and its reasoning would “only change the outcome of a privilege analysis in truly close cases, like where the legal purpose is just as significant as a non-legal purpose.” Thus, the Ninth Circuit distinguished Kellogg by stating that it relates to a “narrow universe where the Kellogg test would change the outcome of the privilege analysis,” but provided a narrow window to potentially adopt the reasoning in the future.
[1] Dual-purpose communications are communications made for both a business purpose and a legal purpose.