Much Ado About Nothing: Flirting With Changing the World’s Oldest Privilege
7.20.2023
The case involved the appropriate criteria to apply to the attorney-client privilege. Perhaps not surprisingly, the privilege (which dates back to jolly old England) seems to engender – on a regular basis – a lot of “ado”; so why should it be any different now?[2] But, before we get to the case at hand, let’s make sure we all understand the basics.
What Is the Privilege?
The attorney-client privilege is the “oldest of privileges for confidential communications.”[3] For the privilege to exist, there must be the five Cs: (1) a client; (2) a communication; (3) confidentiality (4) counsel (an attorney); and (5) counsel (the giving of legal advice by an attorney).[4] Four out of five Cs is not sufficient; there must be all five for the privilege to exist. It is the client’s privilege to assert or waive, not the attorney’s. When the client is a corporation, generally the board of directors or in-house counsel has the authority to waive the privilege on behalf of the corporation.[5] Voluntary waiver of the privilege vitiates the privilege thereafter; once breached, it cannot be resurrected.[6]
In 1981, the U.S. Supreme Court strongly affirmed the privilege in the corporate setting in Upjohn Co. v. United States.[7] The Upjohn court stressed the importance of there being “full and frank communications between attorneys and their clients,” and that such communications were necessary to enable a lawyer to give “sound and informed advice.” The court concluded that the privilege “promote[s] broader public interests in the observation of law and administration of justice.” As a consequence of those policies and interests, the court barred disclosure to the Internal Revenue Service of corporate counsel’s fact-oriented communications with employees regarding an investigation into questionable payments made to foreign government officials, and, given an attorney’s need to render “sound and informed advice,” the court specifically rejected prior precedent limiting the privilege to only certain employees.
The Supreme Court subsequently reinforced the teachings of Upjohn in Swidler & Berlin v. United States.[8] In Swidler & Berlin, the court rejected the argument that the attorney-client privilege could be vitiated after the client’s death in certain criminal proceedings. Citing the broad purposes of the privilege, the court observed that “[k]nowing that communications will remain confidential even after death encourages the client to communicate fully and frankly with counsel” and that “[w]ithout assurance of the privilege’s posthumous application, the client may very well not have made disclosures to his attorney at all.”
Is There an Additional Test Beyond the Five Cs?
The answer to the above-posed question, if you just looked at the leading Supreme Court decision (Upjohn) or the classic treatise on the privilege (Wigmore), would be no.[9] But, growing out of case law where lawyers were also acting as tax return preparers/accountants, there has developed the “primary purpose” test.
The first such case was U.S. v. Frederick.[10] There, Judge Richard Posner (writing on behalf of a unanimous Seventh Circuit panel) found that communications between a lawyer and clients for whom the lawyer had done legal work and prepared tax returns would be fair game for an IRS subpoena. First correctly noting that “[t]here is no common law accountant’s or tax preparer’s privilege,”[11] Posner then created a hardline standard: “a document prepared for use in preparing tax returns and for use in litigation [can never be privileged] . . . otherwise, people in or contemplating litigation would be able to invoke, in effect, an accountant’s privilege, provided that they used their lawyer to fill out their tax returns.”[12] While this makes a fair amount of sense – when limited to that precise circumstance – unfortunately, like a noxious weed in a pristine garden, the “primary purpose” standard started to expand beyond just the sui generis tax preparation area.[13]
A Growing Weed
On June 27, 2014, the U.S. Court of Appeals for the D.C. Circuit handed down, in one commentator’s opinion, “one of the most important decisions in recent memory concerning internal investigations.”[14] As I have previously written, I disagree with that assessment. The circuit court in In re Kellogg Brown & Root got five things on the law very wrong and (in a backhanded way) got only one sort of right.[15] In reversing the district court’s articulation of the “primary purpose” test, the circuit court said the lower court’s “but for” test “is not appropriate for [an] attorney-client privilege analysis.” As the higher court correctly noted, there is “no Supreme Court or Court of Appeals decision that has adopted a test of this kind in this context.”[16] The circuit court (citing the “Restatement (Third) of the Law Governing Lawyers”) then went on to drill down as to what “primary purpose” really meant as a standard: “Was obtaining or providing legal advice a primary purpose of the communication, meaning, one of the significant purposes of the communication?”[17]
More recently, on Sept. 13, 2021, the Ninth Circuit weighed in on the “primary purpose” test in In re Grand Jury.[18] In that case, a law firm was both providing legal advice and helping to prepare a client’s tax returns. The Ninth Circuit not only rejected the Seventh Circuit’s absolutist standard of Frederick,[19] it also declined to adopt the Kellogg Brown & Root gloss (“one of the significant purposes”) because the D.C. Circuit ruling was in “the very specific context of corporate internal investigations” and “the reasoning does not apply with equal force in the tax context.”[20] After a lengthy discourse on the differences between the attorney-client privilege and the attorney work product doctrine, the Ninth Circuit rejected a “because of” test (similar to the D.C. Circuit’s rejection of a “but for” test),[21] emphasizing that the scope of the privilege at common law has historically been defined by the purpose of the communication.[22] The Ninth Circuit thus held that the “primary purpose” test should be applied to dual-purpose communications (affirming the district court’s ruling that the materials/communications had to be turned over to the government).[23]
The losing law firm sought certiorari to the U.S. Supreme Court based upon the notion there was a significant split in the circuits and that the Ninth Circuit’s test was “unworkable in real life.” When the court granted the writ, that brought on breathless headlines that the case provided the court with a “historic” opportunity to define the attorney-client privilege.[24] Initially, the law firm asked the court to reject the Ninth Circuit’s test and embrace the D.C. Circuit’s standard. But after various amicus briefs (e.g., the American Bar Association and the Association of Professional Responsibility Lawyers) weighed in,[25] the law firm’s reply brief to the court urged a much broader standard: that a communication with any bona fide legal purpose should be protected.
Oral Argument and Its Aftermath
Oral argument before the Supreme Court on Jan. 9, 2023 did not go well for the law firm’s advocate. First, he backed off his reply brief, urging instead the D.C. Circuit’s “significant purpose” test. Then, he seemed to suggest a numerical 60-40 test would be appropriate. And last, he appeared to concede that the line between the Ninth Circuit’s standard and that of the D.C. Circuit was not really so qualitatively different.
Even more indicative of how his argument was going were the comments/questions from the individual justices.
Chief Justice Roberts: “I think we’re talking about labels rather than analysis.” “[Even the primary purpose test] really puts a lot of work on the judge [because courts will need to “parse things pretty fine” to determine all the possible purposes of the communication] . . . I think it’s important to keep in mind what the judges have to do here, which is go through these documents” [as opposed to determining a 51% purpose].
Justice Kagan: “[T]here’s no particular evidence of confusion, nor is there any particular evidence of chill. Why would there be chill? Because, by definition, if there is a primary purpose that’s non-legal driving the communication, somebody will make that communication because they have a non-legal primary purpose to do so. . . . If it ain’t broke, don’t fix it.”
Justice Jackson: “[Both sides seem to be] going from one extreme to the other. . . . It seems to me that district courts are not doing math. They have a lot of experience not only in this area but in other document-related, privilege-related contexts, where they make a judgment call, as judges do, about what this particular communication relates to, what its point was. . . . [I]f they’re actually [focusing on whether there is a legal purpose], then it isn’t a big change. You can’t have it both ways. You just said I think this is going to make a difference, and now you’re saying no, it’s not because they’re already doing it in the way that we’re asking you to adopt.”
Justice Sotomayor: “You make this claim that it’s so difficult [for lower courts to apply the primary purpose test], but I really haven’t seen much to say that it’s difficult to administer. I don’t see a rounding number of courts in states or even federal courts saying, I can’t figure this out. . . . This particular judge, I think, was meticulous in separating out documents. As you said, this judge picked out sentences and redacted them. This judge upheld your objections to a number of disclosures based on points that you raised with respect to the legal nature of the communication. So I don’t see how judges are having the hard time you’re talking about.”
Justice Barrett: “So do you think that, in terms of what an opinion would look like in your favor, it might say something like, just to be clear, it is primary purpose, it’s not significant purpose, we’re not going to say really anything about what it means because we’re just going to let courts continue to do what they do? Because we can’t really say tie goes to the runner, right, when the burden is on the person invoking the privilege? We can’t get into this whole pick a percentage on it for the reasons that we’ve already talked about. So maybe it’s best to say nothing?”
With the foregoing barrage from the justices, it should have come as no shock that the court (shortly after oral argument) dismissed the writ of certiorari “as improvidently granted.”[26] Besides the multitude of problems identified by the justices, this was not an ideal test case on the subject matter given that (as Justice Sotomayor noted) the 54 documents at issue involved communications between the client and an accountant employed by the law firm and not an attorney.[27]
The Real Lesson
To this observer, the real lesson of the Supreme Court’s brief, toe-in-the-water foray on the privilege issue can be found in the various justices’ trouble with and ultimate rejection of hanging a percentage on the “primary purpose” test. That type of test is precisely the type of gloss many courts formerly tried to impose upon Rule 26(b)(3) of the Federal Rules of Civil Procedure with respect to attorney work product (e.g., “primarily,” “principally” or “exclusively” in anticipation of litigation).[28] And it is striking that all three circuit court decisions (Frederick, Kellogg Brown & Root and In re Grand Jury) focused on attorney work product and its interplay with the privilege.[29] Ultimately, in U.S. v. Adlman (II),[30] a Second Circuit panel headed by Judge Pierre Leval correctly noted that none of those modifiers are part of Rule 26(b)(3).[31] Similarly, the various justices’ emphasis on lower courts doing the in-the-trenches spade work to make sure that the fifth C – counsel (the giving of legal advice by an attorney) – is present in order to have the privilege upheld ensures that that process still is the watchword. While those who wanted a new gloss on the privilege are disappointed,[32] Justice Kagan’s admonition is spot on.
C. Evan Stewart is a senior partner in the New York City office of Cohen & Gresser, where he focuses on business and commercial litigation. He is an adjunct professor at Fordham Law School and a visiting professor at Cornell University. This article appears in NY Business Law Journal, a publication of NYSBA’s Business Law Section. For more information, please see NYSBA.ORG/BUSINESS.
[1] “Nothing” and “noting” were near homophones at the time Shakespeare’s play was written in 1598 and 1599. It is one of his most performed works.]
[2] Because of widespread confusion concerning the privilege – among practitioners, legal academics and judges (with a few notable exceptions, e.g., Judge Pierre Leval) – I have been writing and speaking about the privilege for almost 40 years. See, e.g., Defending the Attorney-Client Privilege, Case & Comment (1986); Whither the Attorney-Client Privilege? N.Y. Law J., Oct. 22, 1990; The Corporate Attorney-Client Privilege: Is Nothing Sacred? The Corp. Crim. & Const. L.R., April 5, 1991; Corporate Counsel and Privileges: Going, Going . . ., N.Y. Law J., July 11, 1996; The Attorney-Client Privilege: The Best of Times, the Worst of Times, The Professional Lawyer, 1999; The Attorney-Client Privilege and Email: Strange Bedfellows? The Computer and Internet Lawyer, March 2007; Will Waiving the Privilege Save It? N.Y. Bus. Law J., Spring 2007; Pandora’s Box and the Bank of America, N.Y. Law J., Nov. 4, 2009; Attorney-Client Privilege: Ohio Takes a Bite Out of the Big Apple, N.Y. Law J., Sept. 7, 2012; Attorney-Client Privilege: Misunderestimated or Misunderstood? N.Y. Law J., Oct. 20, 2014; The D.C. Circuit: Wrong and Wronger, N.Y. Bus. Law J., Winter 2015; Exes and the Attorney-Client Privilege, N.Y. Bus. Law J., Summer 2019; How Sausage Is Made: The Latest Judicial Takes on Privilege and Work Product, N.Y. Bus. Law J., Summer 2021.
[3] J. Wigmore, Wigmore on Evidence § 2290, at 542 (McNaughton rev. ed. 1961). Grounded in the common law, the privilege is found in state court rules or state statutes (e.g., CPLR 4503(a)) and the Federal Rules of Evidence (Rule 501).
[4] See Wigmore, supra note 3 § 2293, at 554; U.S. v. United Shoe Machinery Corp., 89 F. Supp. 357, 358–69 (D. Mass. 1950). See also C. Evan Stewart, Attorney-Client Privilege: Misunderestimated or Misunderstood? N.Y. Law J., Oct. 20, 2014.
[5] U.S. v. DeLilio, 448 F. Supp. 840 (E.D.N.Y. 1978); Veisicol Chemical Corp. v. Parsons, 561 F.2d 671 (7th Cir. 1977), cert. denied, 435 U.S. 942 (1978).
[6] Compare Westinghouse Electric Corp. v. Republic of Philippines, 951 F.2d 741 (3d Cir. 1991) (general waiver), with In re Steinhardt Partners, 951 F.3d (2d Cir. 1993) (held general waiver based on facts of the case; declined to apply across-the-board waiver, envisioning possible scenarios whereby a limited waiver could be upheld, e.g., the regulatory body explicitly agrees to keep the document confidential or the regulatory body and company’s interests are aligned and non-adversarial), with Diversified Industries v. Meredith, 372 F.2d 596 (8th Cir. 1978) (en banc) (disclosure in “separate and nonpublic SEC investigations” held to constitute only a “limited waiver”). See also C.E. Stewart, Attorney Client-Privilege: Killing Limited Waiver, N.Y. Law J., Jan. 16, 1992.
[7] 449 U.S. 383 (1981).
[8] 524 U.S. 399 (1998).
[9] See supra notes 2, 4, 7 & 8.
[10] 182 F.3d 496 (7th Cir. 1999)
[11] See U.S. v. Arthur Young, 465 U.S. 805 (1984).
[12] 182 F.3d at 500.
[13] See, e.g., In re County of Erie, 473 F.3d 413, 420 (2d Cir. 2007) (“predominant purpose” test); Alomari v. Ohio Dep’t of Public Safety, 626 F. App’x 588, 592–93 (6th Cir. 2015) (“primary purpose” test); General Motors LLC Ignition Switch Litigation, 2015 WL 22105 (S.D.N.Y. Jan. 15, 2015) (“primary purpose” standard applied to General Motors’ internal investigation).
[14] See J. McLaughlin, Attorney-Client Privilege in Internal Investigations, N.Y. Law J., Aug. 14, 2014.
[15] In re Kellogg Brown & Root, 756 F.3d 754 (D.C. Cir. 2014), rev’g United States ex rel Barko v. Halliburton Co., 2014 WL 1016784 (D.D.C. March 6, 2014). See C. E. Stewart, The D.C. Circuit: Wrong and Wronger, N.Y. Bus. Law J., Winter 2015.
[16] 756 F.3d at 758–60.
[17] Id. (emphasis added). As noted in the Wrong and Wronger article from 2015 (see supra note 15), the circuit court got everything else wrong on the privilege front because the communications were between company personnel and the company’s compliance officials (thus, one of the five Cs was indisputably absent).
[18] 23 F.4th 1088 (9th Cir. 2022).
[19] Id. at 1092 n. 2.
[20] Id. at 1094–95.
[21] Correctly noting that such a test applies with respect to attorney work product not attorney-client privilege. Id. at 1091–92.
[22] Id. at 1095 (quoting Fisher v. United States, 425 U.S. 391, 403 (1976)).
[23] Id. at 1094.
[24] See, e.g., A. Frankel, U.S. Supreme Court Grants Review in Crucial Attorney-Client Privilege Case, Reuters, Oct. 3, 2022.
[25] The APRL’s amicus brief, for example, argued “that the privilege should apply to any communication where at least one purpose of the communication is that the client is in the process of seeking or the lawyer is rendering legal advice or seeking to gather information to assist in rendering legal advice to the client” (further arguing that a “significant” or “primary” purpose “should be rejected or abrogated”). Other amicus briefs submitted by the U.S. Chamber of Commerce, the Washington Legal Foundation and the California Lawyers Association argued that the three circuits’ tests (Ninth vs. D.C. vs. Seventh) “have left practitioners scratching their heads about whether their client communications are susceptible to discovery.” See supra note 24.
[26] In re Grand Jury, 143 S. Ct. 543 (mem.) (2023).
[27] Thus, again, one of the five Cs was missing.
[28] See, e.g., In re Woolworth Corporation Securities Class Action Litigation, 1996 WL 206576 (S.D.N.Y. June 7, 1996); In re Leslie Fay Companies Inc. Securities Litigation, 161 F.R.D. 274 (S.D.N.Y. 1995); In re Kidder Peabody Securities Litigation, 1996 WL 263030 (S.D.N.Y. May 17, 1996); Garrett v. Metropolitan Life Ins. Co., 1996 WL 325725 (S.D.N.Y. June 12, 1996); In re Willkie Farr & Gallagher, 1997 U.S. Dist. LEXIS 2927 (S.D.N.Y March 14, 1997).
[29] This just highlights the ongoing confusion between the privilege and the work product doctrine. See supra note 2.
[30] 134 F.2d 1194 (2d Cir. 1998).
[31] See C. E. Stewart, Hickman v. Taylor Reinvigorated by the Second Circuit, With Important Benefits for Litigants, ABA Pretrial Practice & Discovery (July 1998).
[32] Predictability, the losing lawyer (and amici) bemoaned the dismissal and predicted it “will cause grave uncertainty for business and law firms,” and that how lawyer handle privileged communication going forward ‘will vary based on jurisdiction, unfortunately.” See K. Lucero, High Court Drops Tax Law Firm’s Privilege Case, Law360, Jan. 27, 2023 (comments of John M. Masslon II & Evan Davis). Don’t believe it!
