Special In-House Counsel Alert: Ninth Circuit Adopts “Primary Purpose” Test for Dual Purpose Communications Seeking Attorney-Client Protection

Key Takeaways

• This OnPoint has particular application to in-house attorneys, and as such, is flagged as a “Special In-House Counsel Alert.”

• The attorney-client privilege applies to confidential communications between attorneys and clients that are made for the purpose of giving legal advice, but determining the purpose of a communication can be tricky when that communication has a dual purpose. For example, with in-house attorneys who may be consulted on both the legal and business or tax implications of corporate activities, counsel must be conscientious to maximize the likelihood that a court looking at the issue will afford legal communications privilege protection.

• The Ninth Circuit recently addressed attorney-client communications with a dual purpose in In re Grand Jury, Nos. 21-55085 & 55145, and concluded that the privilege should apply only where the “primary purpose” of the communication is for counsel to give or receive legal rather than business or tax advice. 

• The court rejected a broader test previously applied by some district courts in the circuit, under which communications were privileged if they occurred “because of” anticipated litigation.

• Several other federal circuit courts have already articulated privilege tests similar to the “primary purpose” test; no federal circuit has yet adopted the “because of” test.

• As a prophylactic measure, in-house counsel in particular would benefit from annotating their communications (especially emails) as “FOR PURPOSES OF LEGAL ADVICE” when communicating legal information or advice to business constituents or other stakeholders. Although not foolproof, such indicia increase the likelihood that a court will accept counsel’s intent and expectations of privilege as it relates to that communication. 

On September 13, 2021, the United States Court of Appeals for the Ninth Circuit in In re Grand Jury resolved a split among district courts within the circuit on the scope of the attorney-client privilege.¹ The question before the Ninth Circuit was how to handle the privilege when communications between an attorney and a client were not solely for the purpose of seeking legal advice, but also had a business advice or tax advice component.² Such “dual purpose” communications are quite common, particularly for in-house attorneys who wear multiple hats as trusted business advisors as well as legal experts.³

A grand jury subpoenaed the communications at issue in the Ninth Circuit case from an unidentified company and law firm, each of which withheld a variety of documents claiming attorney-client privilege and/or work product protection.⁴ The government moved to compel production and the district court granted the motion, holding that certain documents were not privileged because their “primary purpose” was seeking tax rather than legal advice.⁵ The company and law firm continued to withhold the documents, were held in contempt, and appealed, arguing that the district court should have applied a different test for privilege.⁶ Specifically, the appellants argued that the court should have borrowed the test from the attorney work product context for when dual-purpose communications are protected.⁷ That test, sometimes referred to as the “because of” test, protects such documents “when it can be fairly 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.”⁸

In a unanimous decision, the Ninth Circuit rejected the appellants’ suggested test, noting that the attorney client privilege and the work product protection “are animated by different policy goals” and thus it “makes sense to have different tests for the two.”⁹ Although privilege is focused on protecting full and frank communication between lawyers and clients, the work product protection is centered on protecting the adversarial process by allowing lawyers to develop litigation strategy without fear of intrusion by their adversaries.¹⁰ Thus, the appellate court concluded that applying the “because of” test in the different context of privilege would not make sense and could even “create perverse incentives for companies to add layers of lawyers to every business decision in hopes of insulating themselves from scrutiny in any future litigation.”¹¹ In the court’s view, the “primary purpose” test properly captured when attorney-client privilege should apply to dual-purpose communications between attorneys and clients.¹²

The Ninth Circuit’s endorsement of the “primary purpose” test brought it in line with similar tests applied by some of the other federal circuit courts. The Second Circuit and the Sixth Circuit consider whether the “predominant purpose of the communication is to render or solicit legal advice,”¹³ while the Fifth Circuit asks if the communication was “for the primary purpose of securing either a legal opinion or legal services, or assistance in some legal proceeding.”¹⁴ The D.C. Circuit’s approach is similar but applies the privilege slightly more broadly, asking “was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?”¹⁵ That federal appellate court opined that “trying to find the one primary purpose for a communication motivated by two sometimes overlapping purposes (one legal and one business, for example) can be an inherently impossible task” because, often, it is “not useful or even feasible to try to determine whether the purpose was A or B when the purpose was A and B.”¹⁶ The appellants actually asked the Ninth Circuit to follow this slightly broader approach from the D.C. Circuit, but the court declined to decide the issue, concluding that it would not make a difference on the facts of the case.¹⁷ 

The most obvious effect of the Ninth Circuit’s opinion is to resolve a split within the district courts of the circuit, some of which had adopted the broader “because of” test for privilege—a test that has now been rejected in that circuit.¹⁸ But it may also impact the way other courts nationwide consider privilege issues when communications have a dual purpose by adding to the growing circuit consensus that a “primary” or “predominant” purpose test is appropriate. Thus, although attorneys—particularly those who work in house—may never be able to fully separate their dual roles as business and legal advisors, they would do well to try to emphasize their legal role in communications over which they may wish to claim privilege. This could be as simple as adding a header to the top of a communication or email subject line, with the notation “FOR PURPOSES OF LEGAL ADVICE.” It also includes advising businesspeople to clearly state when they are seeking “the legal perspective.” It is perfectly appropriate for lawyers to wear multiple hats, but ensuring that the legal hat is discernably the (or a) “primary” purpose of the communication may make the difference between producing a communication in litigation or withholding it as privileged.

Footnotes

1) Nos. 21-55085 & 55145, slip op. at 14 (9th Cir. Sept. 13, 2021).  
2) Id. at 4.
3) Doug Gallagher & Manasi Raveendran, “Attorney-Client Privilege for In-House Counsel,” ABA LANDSLIDE (Nov./Dec. 2017), available here.
4) In re Grand Jury, Nos. 21-55085 & 55145, slip op. at 4. 
5) Id. at 4-5. 
6) Id. at 5. 
7) Id. at 9. 
8) Id. (quoting In re Grand Jury Subpoena (Mark Torf/Torf Env’t Mgmt.), 357 F.3d 900, 908 (9th Cir. 2004)). 
9) Id. at 10. 
10) Id. at 10-11.
11) Id. at 11. 
12) Id. at 8. 
13) In re County of Erie, 473 F.3d 413, 420 (2d Cir. 2007); see also Alomari v. Ohio Dep’t of Pub. Safety, 626 F. App’x 558, 570 (6th Cir. 2015) (“When a communication involves both legal and non-legal matters, we consider whether the predominant purpose of the communication is to render or solicit legal advice.”) 
14) United States v. Robinson, 121 F.3d 971, 974 (5th Cir. 1997). 
15) In re Kellogg Brown & Root, Inc., 756 F.3d 754, 760 (D.C. Cir. 2014) (emphases added). 
16) Id. at 759 (emphases added). 
17) In re Grand Jury, Nos. 21-55085 & 55145, slip op. at 13-14. 
18) See, e.g., In re CV Therapeutics, Inc. Sec’s Litig., No. C-03-3709, 2006 WL 1699536, at *3 (N.D. Cal. June 16, 2006) (“the Ninth Circuit has recently suggested that the primary purpose test may have been replaced or refined by the ‘because of’ standard”); Visa U.S.A., Inc. v. First Data Corp., No. 02–1786, 2004 WL 1878209, *4 (N.D. Cal. Aug. 23, 2004) (applying the “because of” test in the privilege context).