To foster open and honest communications with counsel, it is critically important that those communications are protected from disclosure by the attorney-client privilege. But, not every communication with counsel is privileged, and knowing when a communication with counsel is protected can sometimes prove difficult. Given an increasingly complex regulatory landscape, more and more attorneys—particularly in-house attorneys—are wearing dual hats as both lawyers and business advisors. As a lawyer, communications may be privileged; but if acting as a business advisor, communications may be subject to disclosure.
Since the corporate setting doesn’t lend itself to bifurcating legal and business communications, what happens when the lines are blurred or when a communication serves both purposes?
The “Primary Purpose” Test
Many courts, like the U.S. Courts of Appeal for the Second, Fifth, Sixth, and D.C. Circuits, require that for a communication to be protected by the attorney-client privilege, the “primary purpose” of the communication must be to give or receive legal advice. Attorney-client privilege does not apply to business, commercial, or tax advice. Under this method of analysis, courts look to the content of a communication to determine its predominant or primary purpose.
Ninth Circuit Adopts “Primary Purpose” Test
On September 13, the U.S. Court of Appeals for the Ninth Circuit became the latest U.S. Court of Appeals to adopt this “primary purpose” method for analyzing dual-purpose communications with counsel. In In re: Grand Jury, an unnamed company and law firm received grand jury subpoenas for communications relating to a criminal investigation. Both the company and the law firm produced some communications but withheld many others, claiming protection under the attorney-client privilege. When the government sought to compel disclosure of these communications, the trial court reviewed them ex parte. It determined that their primary purpose was to obtain tax (rather than legal) advice and ordered the company and the law firm to produce the documents.
Proposed “Because of” Test
On appeal, the company and law firm seeking to withhold the dual-purpose communications argued that the Ninth Circuit should adopt a different, so-called “because of” test that turns on whether the communication occurred “because of” a need to give or receive legal advice, even if the primary purpose of a particular communication is not to give or receive legal advice. This test had been adopted by some district courts within the Ninth Circuit and derived from the attorney work-product doctrine that protects work product created “because of” anticipated litigation. Under the “because of” test, courts look to the content and context of the communication to see whether a request for legal advice could fairly be implied. If the legal purpose and business purpose cannot be discretely separated from one another, then the communication is protected.
The Ninth Circuit declined to adopt this proposed “because of” test, reasoning that the traditional scope of the attorney-client privilege has always been defined by the purpose of a communication, and not the communication’s relationship to anticipated litigation, noting that the attorney-client privilege and the work-product doctrine serve different goals.
Application to Internal Investigations
The Ninth Circuit left open whether, in applying the “primary purpose” test, legal advice must be the primary or predominant purpose of the communication or whether it can simply be a primary purpose (if not the predominant purpose) of the communication. In In re: Grand Jury, the trial court found that the primary purpose of the communications was tax advice, not legal advice, which the Ninth Circuit accepted, noting that “normal tax advice—even coming from lawyers—is generally not privileged.”
However, the Ninth Circuit recognized that the primary purpose of communications in other contexts—specifically, internal investigations— can be much harder to define. In that context, the U.S. Court of Appeals for the D.C. Circuit has held that legal advice must only be one of the “significant purposes” of a communication, recognizing that trying to identify a singular “primary purpose” for a communication motivated by overlapping legal and business purposes can be “an inherently impossible task.”
Because of the increasingly blurred lines between legal and business advice, lawyers and clients cannot simply assume that attorney-client privilege will protect all communications. The following principles should be kept in mind when communicating with corporate counsel, including during an internal investigation:
- A primary purpose of the investigation and communications related to the investigation should be to provide legal advice. Fact-finding investigations and investigations conducted in the ordinary course of business or according to company policy without the clear purpose of obtaining legal advice may not be privileged.
- As the D.C. Circuit noted in its decision, the attorney-client privilege also “only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney.” Thus, while communications sharing facts with counsel during an investigation are privileged, the facts themselves are not necessarily shielded from disclosure simply because they were shared with an attorney.
- To decrease the risk of disclosure of investigative communications, keep contemporaneous documentation outlining the scope and purpose of the investigation.
- Consider retaining external litigation counsel to make clear the purpose of the investigation is to obtain legal advice and not simply to make a business decision.
- Treat the investigation and its contents as privileged throughout the process. Be careful not to share documents with third parties or internal company employees who are not involved in the investigation. Ensure that any non-attorneys engaged in the investigation are aware that a purpose of the investigation is to obtain legal advice and that they are operating at the direction of counsel.
- Do not assume that communications involving counsel are always privileged, and understand that even if privileged, the final determination may not be made until a court has reviewed the information. So, treat every written communication as potentially subject to others’ review.
Contact the authors or download Bass, Berry & Sims’ Healthcare Fraud & Abuse Review for more information about government and internal investigations.