March 7, 2023 – In re Grand Jury, 23 F.4th 1088, 1090 (9th Cir. 2021) — originating out of California — recently reignited debate regarding “the oldest of the privileges for confidential communications known to the common law.” Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S. Ct. 677, 682, 66 L. Ed. 2d 584 (1981).
The attorney-client privilege dates back to the 1800s (Hunt v. Blackburn, 128 U.S. 464, 9 S. Ct. 125, 32 L. Ed. 488 (1888)), has been found to survive death (Swidler & Berlin v. United States, 524 U.S. 399, 403, 118 S. Ct. 2081, 2084, 141 L. Ed. 2d 379 (1998)), and belongs to individuals and companies alike. Commodity Futures Trading Comm’n v. Weintraub, 471 U.S. 343, 348, 105 S. Ct. 1986, 1990, 85 L. Ed. 2d 372 (1985). Specifically, the Court brought to the forefront the primary purpose test, asking: When communications provide both legal and business advice does the legal advice have to be “the” or “a” primary purpose to retain privilege?
The United States Supreme Court elevated the profile of this issue by initially granting certiorari resulting in 16 amicus submissions. However, the Court ultimately dismissed the appeal as being improvidently granted, thus failing to address this hot button issue. In re Grand Jury, No. 21-1397, 2023 WL 349990, at *1 (U.S. Jan. 23, 2023). As the landscape of this privilege remains murky, clients and attorneys alike must employ best practices to protect communications.
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The purpose of the attorney-client privilege is “to encourage full and frank communication between attorneys and their clients.” Upjohn, 449 U.S. at 389, 101 S. Ct. at 682, 66 L. Ed. 2d 584. “[S]ound legal advice or advocacy” is dependent upon “the lawyer being fully informed by the client.” Id.
The attorney must know all the facts to effectuate proper representation. Trammel v. United States, 445 U.S. 40, 51, 100 S. Ct. 906, 913, 63 L. Ed. 2d 186 (1980). Practically speaking, clients will be reluctant to share damaging information if same can then be more readily obtained from the attorney. Fisher v. United States, 425 U.S. 391, 403, 96 S. Ct. 1569, 1577, 48 L. Ed. 2d 39 (1976).
However, this privilege has its limits as it “applies only where necessary to achieve its purpose.” Id.As such, it “protects only those disclosures necessary to obtain informed legal advice[.]” Id. The fact is, legal advice is protected, but business advice is not.
In the In re Grand Jury Matter, 23 F.4th 1092, the 9th U.S. Circuit Court of Appeals adopted the primary purpose test to evaluate attorney-client privilege where communications involve dual purposes, which looks at “whether the primary purpose of the communication is to give or receive legal advice, as opposed to business or tax advice.” The primary purpose test has been employed in multiple jurisdictions including those covering Arizona, California, Florida, Ohio, Nevada, New York, Pennsylvania, and Texas. See, e.g., In re Cnty. of Erie, 473 F.3d 413, 420 (2d Cir. 2007); United States v. Robinson, 121 F.3d 971, 974 (5th Cir. 1997); Alomari v. Ohio Dep’t of Pub. Safety, 626 F. App’x 558, 572 (6th Cir. 2015); In re Diagnostics Sys. Corp., 328 F. App’x 621, 622–23 (Fed. Cir. 2008); Se. Pennsylvania Transp. Auth. v. Caremarkpcs Health, L.P., 254 F.R.D. 253, 258 (E.D. Pa. 2008); Real Est. Indus. Sols., LLC v. Concepts in Data Mgmt. U.S., Inc., No. 6:10-CV-1045-ORL-GJK, 2012 WL 12903171, at *7 (M.D. Fla. Jan. 30, 2012).
The differentiation between whether the giving or receiving of legal advice must be “a” or “the” primary purpose is crucial since “[l]egal advice concerning commercial transactions is often intimately intertwined with and difficult to distinguish from business advice.” Sedco Int’l, S. A. v. Cory, 683 F.2d 1201, 1205 (8th Cir. 1982).
The manner in which “primary purpose” is practically applied informs the manner in which clients communicate with their counsel when their legal needs and their business needs are entangled. Both attorney and client need some degree of certainty about which discussions will be protected because “[a]n uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all.” Upjohn, 449 U.S. at 393, 101 S. Ct. at 684, 66 L. Ed. 2d 584.
The Circuits however have applied the term and test of “primary purpose” quite differently:
(1) District of Columbia U.S. Circuit Court of Appeals: The D.C. Circuit held, in the context of internal investigations, that “if one of the significant purposes . . . was to obtain or provide legal advice, the privilege will apply.” In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014). See also Federal Trade Commission v. Boehringer Ingelheim Pharmaceuticals, Inc., 892 F.3d 1264, 1266 (D.C. Cir. 2018). This test, referred to as the Kellogg test, highlighted that attempting to discern one primary purpose “can be inherently impossible” and a court cannot “presume that a communication can only have one primary purpose.” Kellogg, 756 F.3d at 759-60. As such, the correct question is: “Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?” Id.
Although none of the other circuits have “openly embraced Kellogg yet,” many District Courts have been persuaded by and applied Kellogg’s reasoning. See, e.g., Smith-Brown v. Ulta Beauty, Inc., No. 18 C 610, 2019 WL 2644243, at *3 (N.D. Ill. June 27, 2019); Pitkin v. Corizon Health, Inc., No. 3:16-CV-02235-AA, 2017 WL 6496565, at *4 (D. Or. Dec. 18, 2017); Aetna Inc. v. Mednax, Inc., No. 18-CV-02217-WB, 2019 WL 6467349, at *1 (E.D. Pa. Dec. 2, 2019); Ramb v. Paramatma, No. 2:19-CV-21-RWS, 2021 WL 5038756, at *3 (N.D. Ga. Sept. 22, 2021).
(2) 9th Circuit: In the 9th Circuit, the predominant or primary purpose of the communication governs with the understanding that “a dual-purpose communication can only have a single ‘primary’ purpose.” In re Grand Jury, 23 F.4th at 1091, 1095. This test will necessarily require an inspection of each communication to ascertain the single primary purpose rather than a significant purpose.
Other circuits have employed this more narrow privilege test. See., e.g., Erie, 473 F.3d at 420; Robinson, 121 F.3d at 974.
The Supreme Court may have ultimately decided certiorari was not appropriate to address this split because In re Grand Jury arose in the tax context. Courts have consistently held that preparation of tax returns and related communications are not privileged. See, e.g., United States v. Frederick, 182 F.3d 496, 500 (7th Cir. 1999), cert. denied, 528 U.S. 1154 (2000); United States v. Gurtner, 474 F.2d 297, 299 (9th Cir. 1973); In re Grand Jury Investigation, 842 F.2d 1223, 1224-25 (11th Cir. 1987).
That being said, the Supreme Court’s non-decision creates even more uncertainty about when information can be protected and how the Courts will evaluate privilege moving forward especially because the 9th Circuit left open the possible future application of the Kellogg test.
Some practical tips and best practices to protect privilege in this climate are:
(1) Do your utmost to keep legal and non-legal advice separate.
(2) Be aware of what qualifies as business advice.
(3) Have emails within the company requesting information needed for litigation originate from counsel (outside or in-house) rather than from employees. Information furnished by clients (including from lower-level employees) to counsel is privileged when provided to obtain legal advice. SeeUnited States v. Bauer, 132 F.3d 504, 507 (9th Cir. 1997); In re Grand Jury Investigation, 974 F.2d 1068, 1070 (9th Cir. 1992); Upjohn, 449 U.S. at 390, 101 S.Ct. at 683, 66 L.Ed.2d 584; Eglin Fed. Credit Union v. Cantor, Fitzgerald Sec. Corp., 91 F.R.D. 414, 418 (N.D. Ga. 1981); Kintera, Inc. v. Convio, Inc., 219 F.R.D. 503, 514 (S.D. Cal. 2003). However, when the requests emanate internally the lines of privilege can become blurred.
(4) When seeking information, ensure that the subject matter discussed is within the scope of the employee’s duties. SeeUpjohn, 449 U.S. at 391, 101 S. Ct. at 683, 66 L. Ed. 2d 584; Eglin, 91 F.R.D. at 418; Kintera, 219 F.R.D. at 515.
(5) Do not over-circulate attorney communications. Privilege remains intact where the communications are not “disseminated beyond those persons who need to know the information.” Kintera, 219 F.R.D. at 514(internal quotation marks and citations omitted); see also In re Grand Jury 90-1, 758 F.Supp. 1411 (D. Colo. 1991); Cohen v. Trump, 2015 WL 3617124 (S.D. Cal. June 9, 2015); Garvey v. Hulu, LLC, 2015 WL 294850 (N.D. Cal. Jan. 21, 2015).
(6) Do not forward attorney communications outside the company.
(7) Keep counsel on all communications you seek to protect and engage them in the discussion, but know that just adding a “cc” may not be enough.
Until the Supreme Court weighs in on the “a” versus “the” debate, clients and counsel must remain extra vigilant to protect communications. If in doubt, pick up the phone and ask your lawyer how best to communicate.
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