SCOTUS accepts case on scope of attorney-client privilege
The U.S. Supreme Court on Monday agreed to decide when attorney-client privilege protects “dual-purpose” documents that gave legal advice and also discussed the preparation of tax documents.
An unnamed law firm that provides international tax advice is fighting disclosure of the documents in a grand jury investigation of its client, according to the cert petition. The law firm had advised the client on the tax consequences of expatriation and prepared the client’s tax returns.
Courts generally treat advice on tax planning and controversy as legal in nature, but preparation of tax documents as nonlegal and not privileged, according to the law firm’s cert petition.
The law firm had turned over more than 20,000 pages of documents in response to the grand jury subpoena, but it argued that it shouldn’t have turn over the dual-purpose documents because one of their “significant purposes” was providing or obtaining legal advice.
The 9th U.S. Circuit Court of Appeals at San Francisco ruled in the law firm’s case that a communication is privileged only when a legal purpose is at least as significant as any nonlegal purpose, according to the cert petition.
The 9th Circuit test “directs courts to compare the legal purpose to the nonlegal purpose (or purposes) of a communication and assess which is more significant,” the cert petition explains. “If the legal purpose is more significant, then the communication is privileged; if the nonlegal purpose is more significant, then it is not.”
The cert petition argues that the 9th Circuit approach is “misguided” and nearly impossible to apply in practice.
The cert petition says federal appeals courts are split on whether the privilege protects a communication made for multiple purposes, some of which are legal.
A second federal appeals court has held that dual-purpose documents are never privileged, at least in cases involving tax preparation. A third has held that the privilege applies if providing legal advice was one of the significant purposes of the communication.
The case is In Re Grand Jury.