Supreme Court Will Clarify Scope of Attorney-Client Privilege

[Editor's note: On Jan. 23, the U.S. Supreme Court dismissed its review of a case that would have clarified the scope of the attorney-client privilege, deciding that review of the case was improvidently granted.]

​The attorney-client privilege affects which communications between HR and attorneys as well as executives and counsel are confidential; some communications are, but others are not. The U.S. Supreme Court will clarify when "dual-purpose communications" are shielded from disclosure during litigation.

The Supreme Court "does not often weigh in on the scope of attorney-client privilege," said Jeffrey Mongiello, an attorney with Epstein Becker Green in Newark, N.J. "So, when the court does speak, it is consequential."

"Not all communications to and from counsel are considered privileged just because the communication is with an attorney," he said. "The communication must solicit or give legal advice" to be protected.

HR professionals and executives often include in-house counsel on communications that are focused on general business advice and not just legal advice, Mongiello added. If the communications are not protected, HR and executives need to be aware that the communications may be disclosed to adversaries during litigation.

Background on the Case

"In re Grand Jury concerns the scope of the attorney-client privilege where legal counsel provided advice on the tax consequences of a company's anticipated expatriation and also prepared several income tax returns in relation to the anticipated expatriation," said Matthew Scully, an attorney with Burr & Forman in Birmingham, Ala.

The company and the law firm—neither of whose names were disclosed by the courts—were served with grand jury subpoenas requesting documents and related communications, and the company and law firm withheld some documents, asserting the attorney-client privilege. The 9th Circuit held that the primary purpose of the communications was nonlegal and thus discoverable under the subpoena.

The petitioners in In re Grand Jury—including the company—urged the Supreme Court to use the case as a vehicle to clarify the scope of the attorney-client privilege across all fields of law, not just the criminal and tax context. This "would provide important clarity for HR professionals and executives," Scully said.

"Alternatively, the court may limit its decision to the scope of the attorney-client privilege to particular issues within tax law, such as the interplay between preparation of a tax return and related legal advice, which would limit its import to HR professionals and executives," he added. 

Appellate Court Split

The Supreme Court agreed on Oct. 3 to hear In re Grand Jury and may resolve what standard governs attorney-client privilege for dual-purpose communications, which are communications that have both legal and nonlegal, including business, advice.

The courts are currently split on the issue, said Alex Polishuk, an attorney with Polsinelli in Los Angeles. The U.S. Court of Appeals for the D.C. Circuit has held that a dual-purpose communication is privileged if one of the significant purposes of the communication between the client and attorney is to obtain or provide legal advice. In that decision, In re Kellogg Brown & Root Inc., then D.C. Circuit Justice and now Supreme Court Justice Brett Kavanaugh provided an expansive view of the privilege, said Greg Riolo, an attorney with Jackson Lewis in Albany, N.Y., and White Plains, N.Y.

But in the case before the Supreme Court, the 9th Circuit ruled that a dual-purpose communication is privileged when the legal purpose of the communication is the primary purpose of the communication or when it's at least as significant as any nonlegal purpose, Polishuk said.

The 9th Circuit joined the 2nd, 5th and 6th circuits in applying the primary purpose test, noted Zach Reeves, an attorney with Baker McKenzie in San Francisco, and Michelle Chung, an attorney with Baker McKenzie in Los Angeles.

"Executives and HR professionals must be aware that if the primary purpose is the chosen method, a significant amount of their once-privileged communications would lose protections and could end up being used in court," they cautioned.

Dual-Purpose Communications in the Workplace

Dual-purpose communications often arise at companies, Mongiello said.

"HR professionals and executives are routinely engaged in dual-purpose communications with counsel on a wide variety of areas where business advice and legal advice overlap, such as compliance," he noted. "For human resource professionals, this may include communications that discuss whether to terminate an employee and evaluating whether a noncompete clause in the employee's contract would be enforceable."

An executive may seek advice from counsel on newly implemented regulations, which could include legal advice on the scope of the regulations and nonlegal, business advice on whether the existing company's employees are already trained to handle any newly imposed responsibilities.

"HR professionals seek legal advice from in-house and outside counsel on anything from policy development, training, disciplinary issues, investigations [and] terminations," Riolo said.

"The line between legal advice and business advice is not always clear," Polishuk said.

Lawyers frequently provide business and legal advice in the same communication—like strategic advice about an acquisition and legal advice about the deal, Reeves and Chung noted.

One practical implication if the Supreme Court adopts the 9th Circuit's primary purpose rule is that written communications between counsel and HR as well as executives may need to be in separate communications to preserve the privilege, Polishuk said. "Should the primary purpose rule prevail, clients and attorneys that exchange communications that include both legal advice and nonlegal advice will risk leaving it up to the court to determine whether the legal advice portion of the communication was the primary purpose of the correspondence," he explained.

If the Supreme Court were to move far from the holding in In re Kellogg, HR, in-house attorneys and outside counsel would need to be careful that any advice that is sought is primarily legal advice—not business advice, Riolo said.

The Supreme Court will resolve how to determine what the purpose of the communication is, Mongiello noted. "Currently, making that determination differs based on the geographic location in which the communication arose. This is particularly challenging for businesses with national operations," he said.

He said the decision will provide a uniform standard and help clarify for HR and executives whether the communications they are having with attorneys are privileged.