Supreme Court grapples with scope of attorney-client privilege

The scope of attorney-client privilege reached the Supreme Court on Monday as justices grappled with arguments on when communications intertwined with legal and business advice should be shielded from court proceedings.

The case’s background remains shrouded in mystery, but the justices’ ruling on how significant a legal purpose must be for attorney-client privilege to apply could have broader implications for in-house counsels and tax firms that send so-called dual purpose communications, which provide both legal advice and business strategy.

Public filings provide few details about the facts of the dispute, only indicating it arose from an unnamed tax law firm’s refusal to produce some documents in connection with a criminal tax investigation into an unnamed client. Other court filings remain under seal.

The federal government in court filings indicated the client was an “early promoter of bitcoin” who leveraged the firm to aid their expatriation from the U.S.

Daniel Levin, arguing on behalf of the unnamed firm, urged the justices to apply attorney-client privilege to communications containing a “significant” legal purpose, if nonlegal aspects cannot be separated.

He contended that mechanism would align with a Court of Appeals for the D.C. Circuit opinion authored by then-Judge Brett Kavanaugh. But Masha Hansford, arguing on behalf of the federal government as the assistant to the solicitor general, favored a “primary-purpose” test utilized by multiple other appellate courts.

“Taken seriously, that test requires parties and courts to disentangle competing purposes and to identify the single most important one. That is an inherently impossible exercise,” Levin said of the primary-purpose test.

A number of justices seemed disinclined to dramatically expand the privilege, believing that many courts already using the more stringent test don’t actually parse close calls of which purpose should be deemed the singular, primary one.

“To a certain extent, I think we’re talking about labels rather than analysis,” said Chief Justice John Roberts.

Justice Elana Kagan similarly asked Levin to respond to the “ancient legal principle” of “if it ain’t broke, don’t fix it.”

Levin argued that if the justices tell lower judges they must rank which purpose is predominant, it creates an unpredictable test that would lead to a chilling effect in communications with attorneys. His position was supported by briefs from the U.S. Chamber of Commerce and some attorney groups.

Levin asserted that the justices could lay out a more predictable test by not requiring a specific percentage of the communication’s purpose be legal advice. Instead, any communication containing a “real and legitimate” legal purpose that cannot be separated from nonlegal elements should be privileged, Levin argued.

The federal government raised concerns that Levin’s suggestion would enable companies to shield communications from court proceedings anytime they “might have one eye on the legal implications.”

“I guess I see that as problematic,” Justice Ketanji Brown Jackson similarly told Levin. “Why shouldn’t I worry that using your test now, we are going from one extreme to the other?”

Justice Amy Coney Barrett asked Hansford if it’s best for the justices to “say nothing” by opining that courts should privilege communications with a primary legal purpose but leave it to a court’s discretion about what that means.

“I don’t think there’s a problem in the lower court case law, so I think the Court could say nothing,” Hansford responded. “I think the Court could also say primary purpose, when there is an identifiable primary purpose, that has to be the right one in situations where it’s really close.”