WASHINGTON — The Supreme Court debated the limits of the attorney-client privilege on Monday, struggling to articulate a standard that would protect confidential legal advice without shielding routine business communications.
The case before the justices, In re Grand Jury, No. 21-1397, was itself shrouded in secrecy. It involved a criminal investigation of an unnamed person described in court papers as “an early promoter of Bitcoin” who “expatriated from the United States in early 2014.”
After a grand jury sought records from an unnamed law firm hired to prepare that person’s tax returns, a federal judge ordered the firm to turn over documents that contained both legal advice and ordinary tax-return accounting unless the legal advice was the document’s “primary purpose.” The firm refused, saying that the documents should be protected so long as legal advice was a “substantial purpose” of the communication.
The judge held the firm in contempt, an appeals court agreed that the tougher “primary purpose” standard should apply, and the firm appealed to the Supreme Court, asking the justices to let it withhold documents in which legal advice played a subsidiary but significant role.
The more demanding standard has a long history, Justice Elena Kagan told a lawyer for the firm, Daniel B. Levin.
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“We’ve had the attorney-client privilege for a long time, and until 2014, nobody ever suggested that the test that you’re proposing is the right one,” she said. “Everybody instead used the primary purpose test.”
She added, “So this is a big ask.”
Later, Justice Kagan asked Mr. Levin to comment on “the ancient legal principle” of “if it ain’t broke, don’t fix it.”
Justice Sonia Sotomayor said Mr. Levin’s proposed test would protect too many communications. “If 1 percent of the purpose of this communication was to render legal advice,” she said, “the whole communication is suppressed.”
Mr. Levin acknowledged that the mere presence of a lawyer did not render communications privileged.
“Everybody agrees you can’t just copy a lawyer on a communication, you can’t just have a lawyer sit in the corner of a meeting,” he said, “and say the whole thing’s privileged.”
But when authentic legal advice was rendered, Mr. Levin said, disentangling a communication’s competing purposes and deciding which was the primary one was “an inherently impossible exercise.” Endorsing the tougher standard, he said, would make it hard for lawyers and their clients to predict whether their consultations would be protected.
Justice Sotomayor said that such predictions would remain hard no matter how the Supreme Court ruled on the scope of the privilege in federal proceedings.
“The vast majority of states use the primary purpose test,” she said, adding: “So how is this going to work? In federal court, we’re going to say you apply the significant test, and in state cases you apply the primary test?”
Masha G. Hansford, a lawyer for the federal government, asked the court to apply the privilege narrowly.
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“The public has a right to every man’s evidence,” she said. “The attorney-client privilege creates an important but limited exception to that rule for communications seeking legal advice.”
Adopting the law firm’s position, she said, “would create an accountant-client privilege whenever a taxpayer can afford to hire an attorney to prepare his taxes.”
Chief Justice John G. Roberts Jr. said that requiring judges to determine a communication’s primary purpose was burdensome.
“I think it’s important to keep in mind what the judges have to do here, which is go through these documents,” he told Ms. Hansford, adding that “it seems to me that your approach really puts a lot of work on the judge.”
Justice Neil M. Gorsuch said both sides had shifted their positions during the litigation. The law firm, he said, had moved from calling for a significant purpose test to one that essentially protected any legitimate purpose. The government, he said, had moved from pressing the primary purpose test to saying that the privilege would apply in close cases.
“I’ll be honest,” Justice Gorsuch said. “I’m struggling this morning.”