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Supreme Court to Hear Case on Client-Attorney Privilege in the Context of Dual-Purpose Legal Advice — Orbitax Tax News & Alerts

The United States Supreme Court on 3 October 2022 accepted to review a case dealing with the legal protection of client-attorney communications in situations where the communication deals with both legal and non-legal matters (so-called dual-purpose communications). The petitioner in the case is an international tax law firm seeking to shield client communications from grand jury subpoenas seeking documents on its tax advice to the client. The petitioner assisted one of its clients on matters regarding the tax consequences of their anticipated expatriation and prepared for the client several individual income tax return and their Form 8854. In connection with a criminal investigation of the client, the petitioner and two of its employees were served with grand jury subpoenas seeking communications and other material related to the expatriation and tax return preparation. In response, the petitioner produced over 1,700 records but withheld others on the basis of client-attorney privilege and work-product doctrine.

The attorney-client privilege protects from disclosure confidential communications between attorney and client made to obtain or provide legal advice. However, advice sought by clients or provided by attorneys can be both legal and non-legal in nature (dual-purpose advice). The question then arises as to whether the same protection for legal advice extends to advice which is both legal and non-legal in nature. In this context, three US Circuit Courts took different positions with respect to the protection of dual-purpose advice. In the D.C. Circuit, dual purpose communications are privileged whenever there is a significant legal purpose. The Ninth Circuit Court held that the court must weigh all the purposes of the communication, and that a communication is privileged only where a legal purpose is at least as significant as any non-legal purpose. In contrast, the Seventh Circuit follows the position that dual-purpose communications are never privileged, at least in cases involving tax returns, irrespective of how significant the legal purpose is.