“SOUND AND FURY . . . “: THE SUPREME COURT THROWS UP IT’S HANDS ON ATTORNEY-CLIENT PRIVILEGE

Opinion Contributed by Ron Minkoff, Esq.

After months of briefing by the parties, more than a dozen amicus submissions, and an extended oral argument two weeks ago, the U.S. Supreme Court yesterday suddenly dismissed the appeal in In re Grand Jury on the ground that certiorari was improvidently granted.   This appeal, described by many bloggers as the most significant attorney-client privilege case before the Court in many years, turned out to be, in the Justices’ eyes, “sound and fury, signifying nothing.”  Macbeth, Act V, Scene 5, lines 16-27.

How did this happen?  All the pieces for a blockbuster decision were in place.  The parties dispute whether a law firm must produce documents concerning (1) “the procedural aspects” of preparing a client’s tax return, and (2) advice as to completing the return, either by a lawyer or an accountant – classic scenarios raising the question of whether the documents contained legal advice (the attorney-client privilege would apply) or business advice (the privilege would not apply).  See Government’s Brief at 4 (citing District Court).  The issue was important:  the Government wanted the privilege interpreted narrowly so it could better investigate possible criminal activity, while businesses wanted the privilege interpreted more broadly so as to cover these so-called “dual purpose communications”.  The issue had wide application, as it affected the ability of businesspeople and their lawyers to predict whether the privilege would apply to their communications in transactional settings.  On top of this, there was a split among the Circuits: the Ninth Circuit, in ordering production, applied the “primary purpose” test – i.e,, that the privilege applies only if the “primary purpose” of the communication was providing legal advice — while the law firm sought to apply the broader “substantial purpose” test espoused by the D.C. Circuit.

But as soon as the oral argument began, the hope of a significant, clear ruling started to crumble.  Prodded by the Justices, the lawyers on both sides abandoned their original positions.  The law firm, noting the difficulty of establishing whether the legal purpose of a given dual purpose communication could be considered “substantial”, much less “principal”, began arguing for an even broader interpretation of the privilege, where all the proponent had to show was a “bona fide legal purpose.”  Oral Arg. Tr. at 28.  The Government, meanwhile, appeared (at least to some of the Justices) to retreat from, the “primary purpose” test to contend that a communication with a “substantial” legal purpose would be privileged – as long as the legal purpose was really, really substantial (even if not primary).  Id. at 50-51. 

These verbal gymnastics left the Justices spinning.   Justice Kagan pointed out that the majority of courts have been using the “primary purpose” test for years, and “there’s no particular evidence of confusion, nor is there any particular evidence” that attorney-client communications are being chilled.  Id. at 18.  Justice Sotomayor worried that departing from the majority test would risk putting the federal courts at odds with state courts, who also use the “principal purpose” test, with the ability to assert the privilege riding on the forum where the case was brought.  Id. at 15-16.  Many of the Justices scratched their heads at trying to determine what percentage of the communication had to be legal – 51%? 49%? 40%? – for the “principal purpose” test to apply.  Id. at 12 (Justice Jackson: if 90% of the document is a factual recitation and only 10% is legal, is it privileged?); Id. at 29 (Justice Sotomayor: “Is it 51 percent versus 49 percent or the 50/50 situation” where privilege will apply?); Id. at 28 (Justice Alito:  “Significance concerns importance. Maybe it’s a lot lower perhaps than primary, but it does involve a . . . certain quantum of importance”).  Chief Justice Roberts bemoaned “I think we’re talking about labels rather than analysis”.  Justice Kagan perhaps best summed up the Court’s conundrum by asking one of the lawyers to “comment on, you know, the ancient legal principle, if it ain’t broke, don’t fix it.” Id. at 33.

That, apparently, is where the Court ended up.  The “primary purpose” test is basically working; any other test would be too broad, too narrow or at least equally confusing; and solidifying any test might remove the flexibility trial judges need to make privilege determinations regarding complicated, dual purpose documents.  So, in the end, the Court retreated, leaving things as they are:  doctrinally confused, but providing sufficient guidance for judges to do their work.

One more comment.  The case did contain another, even more difficult issue:  if lawyers and accountants are giving essentially the same advice, why is one privileged and the other not?  And how, in the area of tax law and tax reporting, can we draw lines about what accountants and lawyers can and cannot do?  But though some of the Justice alluded to this concern, neither they nor the parties wanted to address it.  The question of whether non-lawyers, like accountants, can provide what is essentially legal advice without being admitted to the Bar will – like the standard for evaluating dual purpose communications – remain for another day.

The views expressed here are those of the author, and do not necessarily represent or reflect the views of NYCLA, its affiliates, its officers or its Board.