Attorney-Client Privilege for Dual-Purpose Communications: Supreme Court to Decide Which Test Applies

WASHINGTON — The Supreme Court agreed on Friday to decide when the attorney-client privilege protects communications that serve both a legal and a business purpose, taking up a question that divides the courts of appeals and that the justices had set down for decision once before, in 2023, only to dismiss the case after argument. The grant in Halvorsen & Pike LLP v. United States arises from a grand jury subpoena for a law firm's tax-advice files, and the Court's answer will reach every company whose lawyers are also its business advisers.

"Every general counsel in the country wears two hats. The question is which one the privilege follows," a former general counsel who now teaches professional responsibility told The Counsel.

The case

Halvorsen & Pike advised a client on the structure of a cross-border transaction and prepared the client's tax filings. When a grand jury subpoenaed the firm's files, the firm withheld documents that discussed both the legal consequences of the structure and its tax and accounting treatment. The district court, applying the primary purpose test, ordered most of them produced on the ground that their predominant purpose was tax return preparation, which is not legal advice; the court of appeals affirmed. The firm's petition argued that the D.C. Circuit would have reached the opposite result under its significant purpose test, that the circuits have been divided for a decade, and that the Court's dismissal in 2023 had left lawyers and clients without guidance on how to structure communications they have every day.

The competing tests

Test	Courts	What it asks
Primary purpose	Ninth Circuit (In re Grand Jury, 2021); Second Circuit district courts; Sixth Circuit	Whether the predominant purpose of the communication was to obtain or give legal advice. If the business purpose predominates, the document is produced.
Significant purpose	D.C. Circuit (In re Kellogg Brown & Root, 2014); several district courts elsewhere	Whether obtaining or providing legal advice was one of the significant purposes, even if not the primary one. If so, the document is privileged.
No privilege for dual-purpose tax documents	Seventh Circuit (United States v. Frederick, 1999)	Documents prepared for tax return preparation are not privileged merely because a lawyer prepared them, whatever the mix of purposes.

The Ninth Circuit in In re Grand Jury left open whether the significant purpose test should apply where the legal and business purposes cannot be disentangled; the Supreme Court granted review of that decision, heard argument in January 2023, and dismissed the writ as improvidently granted two weeks later, with several justices indicating at argument that the record did not present the question cleanly. The new case, the petition says, does: the documents are identified, the purposes are described, and the district court applied the primary purpose test expressly.

The arguments

• For the significant purpose test. The firm and its amici — bar associations and in-house counsel groups — argue that the primary purpose test asks a question that has no answer for most modern legal communications, that it discourages clients from consulting lawyers early, and that courts applying it have reached inconsistent results on identical facts. A significant purpose test, they say, is predictable and reflects how legal advice is actually given.
• For the primary purpose test. The government argues that privilege is a derogation from the search for truth and must be construed narrowly, that a significant purpose test would let companies cloak business records by copying a lawyer, and that the primary purpose test has been applied for decades without the difficulties the firm describes. Tax preparation, it adds, has never been privileged, and the firm's documents are tax preparation with a legal gloss.

Every general counsel in the country wears two hats. The question is which one the privilege follows.

A former general counsel, to The Counsel

Why it matters

The question arises in every discovery dispute and every investigation in which a company's lawyers also advise on strategy, compliance, tax or deals — which is to say, in nearly all of them. In-house lawyers are the paradigm case: their advice is legal and commercial at once, and they are copied on communications for both reasons. Under the primary purpose test, companies have been told to separate legal from business communications, to keep lawyers off threads where the business purpose dominates, and to expect to produce the rest. A significant purpose test would relieve much of that burden; a decision adopting the primary purpose test nationwide would entrench it, and a decision in the government's favor on the tax point would narrow privilege for every lawyer who prepares returns.

What happens next

Briefing will run through the winter, with argument expected in the January or February sitting and a decision by June 2027. Until then, counsel in the Ninth and Second Circuits operate under the primary purpose test, counsel in the D.C. Circuit under the significant purpose test, and multinational companies under whichever a court chooses to apply.

The Counsel will cover the briefing and argument. Companies should continue to document the legal purpose of communications with counsel; whichever test the Court adopts, a record of why advice was sought will decide close cases.

This report is for general information only and is not legal advice. Readers should consult a licensed attorney about their own circumstances. Docket numbers and citations are to the official reporters unless otherwise stated.