In re Grand Jury
| Decision Date | 13 September 2021 |
| Docket Number | 21-55145,Nos. 21-55085,s. 21-55085 |
| Citation | 23 F.4th 1088 |
| Parties | IN RE GRAND JURY. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Thomas F. Carlucci (argued), Foley & Lardner LLP, San Francisco, California; Evan J. Davis (argued), Hochman Salkin Toscher Perez P.C., Beverly Hills, California; for Movants-Appellants.
Mark S. Determan (argued) and Joseph B. Syverson, Attorneys; S. Robert Lyons, Chief, Criminal Appeals & Tax Enforcement Policy Section; David A. Hubbert, Acting Assistant Attorney General; Tracy Wilkison, Acting United States Attorney; Tax Division, United States Department of Justice, Washington, D.C.; for Plaintiff-Appellee.
Laura L. Buckley, Higgs Fletcher & Mack, San Diego, California; Kevan P. McLaughlin, McLaughlin Legal APC, San Diego, California; for Amicus Curiae Executive Committee on the Taxation Section of the California Lawyers Association.
Jenny Johnson Ware, McDermott Will & Emery LLP, Chicago, Illinois, for Amicus Curiae American College of Tax Counsel.
Before: Mary H. Murguia, Bridget S. Bade, and Kenneth K. Lee, Circuit Judges.
ORDER
The Opinion filed on September 13, 2021, is amended as follows:
On slip opinion page 12, footnote 5, replace with .
The Clerk shall file the amended opinion submitted with this Order.
Appellants' Petitions for Panel Rehearing and Rehearing En Banc (Dkt. No. 65) are otherwise DENIED. No further petitions for rehearing may be filed. Appellants' motion to unseal the petitions and the amicus briefs (Dkt. No. 66) is DENIED as moot.
Given our increasingly complex regulatory landscape, attorneys often wear dual hats, serving as both a lawyer and a trusted business advisor. Our court, however, has yet to articulate a consistent standard for determining when the attorney-client privilege applies to dual-purpose communications that implicate both legal and business concerns.
In this case, the grand jury issued subpoenas related to a criminal investigation. The district court held Appellants—whom we identify as "Company" and "Law Firm"—in contempt after they failed to comply with the subpoenas. The district court ruled that certain dual-purpose communications were not privileged because the "primary purpose" of the documents was to obtain tax advice, not legal advice. Appellants argue that the district court erred in relying on the "primary purpose" test and should have instead relied on a broader "because of" test. We affirm and conclude that the primary-purpose test governs in assessing attorney-client privilege for dual-purpose communications.1
Company and Law Firm were each served with grand jury subpoenas requesting documents and communications related to a criminal investigation. The target of the criminal investigation is the owner of Company as well as a client of Law Firm. In response to the grand jury subpoenas, Company and Law Firm each produced some documents but withheld others, citing attorney-client privilege and the work-product doctrine.
The government moved to compel production of the withheld documents, which the district court granted in part. In those orders, the district court explained that these documents were either not protected by any privilege or were discoverable under the crime-fraud exception. Company and Law Firm disagreed with the district court's privilege rulings, so they continued to withhold the disputed documents. The government followed up with motions to hold Company and Law Firm in contempt, both of which the district court again granted. These appeals followed, and we have jurisdiction under 28 U.S.C. § 1291.
Whether the attorney-client privilege applies to specific documents represents "a mixed question of law and fact which this court reviews independently and without deference to the district court." United States v. Richey , 632 F.3d 559, 563 (9th Cir. 2011) (cleaned up). The district court's legal rulings about the scope of the privilege are reviewed de novo. Id. So is the district court's choice of the applicable legal standard. Fjelstad v. Am. Honda Motor Co. , 762 F.2d 1334, 1337 (9th Cir. 1985). We review the district court's factual findings for clear error. Richey , 632 F.3d at 563.
"The attorney-client privilege protects confidential communications between attorneys and clients, which are made for the purpose of giving legal advice." United States v. Sanmina Corp. , 968 F.3d 1107, 1116 (9th Cir. 2020). Generally, communications related to an attorney's preparation of tax returns are not covered by attorney-client privilege. Olender v. United States , 210 F.2d 795, 806 (9th Cir. 1954). So, for example, "a client may communicate the figures from his W-2 Form to an attorney while litigation is in progress, but this information certainly is not privileged." United States v. Abrahams , 905 F.2d 1276, 1283–84 (9th Cir. 1990), overruled on other grounds by United States v. Jose , 131 F.3d 1325 (9th Cir. 1997). On the other hand, if a client seeks a lawyer's legal advice to figure out what to claim on a tax return, then that advice may be privileged. Abrahams , 905 F.2d at 1284.
But some communications might have more than one purpose, especially "in the tax law context, where an attorney's advice may integrally involve both legal and non-legal analyses." Sanmina , 968 F.3d at 1118. Sanmina , for example, involved communications about the propriety of a particular tax deduction, which could have both a non-legal purpose (tax compliance considerations) as well as potentially a legal purpose (seeking advice on what to do if the IRS challenged the deduction). Id. at 1117–18.
When dual-purpose communications are involved, there are two potential tests that courts have adopted: the "primary purpose" test and the "because of" test. Under the "primary purpose" test, courts look at whether the primary purpose of the communication is to give or receive legal advice, as opposed to business or tax advice. See In re County of Erie , 473 F.3d 413, 420 (2d Cir. 2007) (). The natural implication of this inquiry is that a dual-purpose communication can only have a single "primary" purpose.
On the other hand, the "because of" test—which typically applies in the work-product context—"does not consider whether litigation was a primary or secondary motive behind the creation of a document." In re Grand Jury Subpoena (Mark Torf/Torf Env't Mgmt.) , 357 F.3d 900, 908 (9th Cir. 2004). It instead "considers the totality of the circumstances and affords protection when it can fairly be said that the document was created because of anticipated litigation, and would not have been created in substantially similar form but for the prospect of that litigation." Id. (cleaned up). It is a broader test than the "primary purpose" test because it looks only at causal connection, and not a "primary" reason. See Visa U.S.A., Inc. v. First Data Corp. , No. C-02-1786JSW(EMC), 2004 WL 1878209, at *4 (N.D. Cal. Aug. 23, 2004). In the attorney-client privilege context, the "because of" test might thus ask whether a dual-purpose communication was made "because of" the need to give or receive legal advice.
As the Sanmina court recently noted, the Ninth Circuit has not explicitly adopted either the "primary purpose" test or the "because of" test in determining whether dual-purpose communications are entitled to attorney-client privilege. Sanmina , 968 F.3d at 1118.2 And Sanmina itself declined to resolve this issue because the district court there had made a factual finding that the communications were not dual-purpose. Id. at 1119. Without guidance from our court, district courts in this circuit have split, applying both tests for attorney-client privilege claims. Id. at 1118 n.5 ().
Because this case squarely involves dual-purpose communications, we now answer the question that Sanmina left open. We hold that the primary-purpose test applies to attorney-client privilege claims for dual-purpose communications.
To start, the "interpretation of the privilege's scope is guided by ‘the principles of the common law ... as interpreted by the courts ... in the light of reason and experience.’ " Swidler & Berlin v. United States , 524 U.S. 399, 403, 118 S.Ct. 2081, 141 L.Ed.2d 379 (1998) (quoting Fed. R. Evid. 501 ). At common law, the attorney-client privilege extends only to communications made "for the purpose of facilitating the rendition of professional legal services." See United States v. Rowe , 96 F.3d 1294, 1296 (9th Cir. 1996) (citation omitted); Restatement (Third) of the Law Governing Lawyers § 68 (Am. L. Inst. 2000) (). Thus, the "client must consult the lawyer for the purpose of obtaining legal assistance and not predominantly for another purpose." Restatement, supra , § 72 cmt. c; see Swidler & Berlin , 524 U.S. at 406–07, 118 S.Ct. 2081 (). As the Supreme Court has recognized, the attorney-client privilege "protects only those disclosures necessary to obtain informed legal advice which might not have been made absent the privilege." See Fisher v. United States , 425 U.S. 391, 403, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976) (citation omitted). Thus, the scope of the attorney-client privilege is defined by the purpose of the communication consistent...
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