October 5, 2022

The U.S. Supreme Court agreed to consider a law firm’s case to shield client communications from grand jury subpoenas. The law firm is arguing attorney-client privilege should protect communication between them and their client when involving both tax and legal advice, legal and non-legal (“dual-purpose communications”).

The tax firm provided the client information regarding tax implications related to an upcoming expatriation while also discussing their tax return preparation. The brief showed that the firm prepared the clients tax returns and Form 8854, Initial Expatriation Statement.

Per an order list by the justices, the unnamed tax law firm’s challenge will be reviewed to dispute the Ninth Circuit’s order to comply with subpoenas from the federal grand jury for documents and materials related to client dual-purpose communications involving tax return preparation.

In May, the firm filed a petition to the Supreme Court arguing that the justices should clarify the law in regards to attorney-client privilege communication protections when both legal and nonlegal advice is given. After justices reviewed the petition, it was found that the firm must comply with subpoenas from the grand jury for all documents related to tax advice given to an unnamed client under criminal investigation. The firm then provided over 20,000 pages of records, however they withheld dual-purpose records based on attorney-client privilege and work-product doctrine, per the petition. In their petition, the firm said some communications were withheld as they contained legal advice about taxes for the client’s tax return preparation.

The petition submitted by the law firm stems from the U.S. District Court for the Central District of California’s 2021 ruling, which adopted the “primary purpose” test to determine if communications are protected from subpoenas when there are dual-purpose communications with an attorney and client. The district court ruled that attorney-client communications were not protected since the primary purpose of communications in the case was to obtain tax advice, not legal advice.

In their petition, the firm also argued that the D.C. Circuit’s findings in the case of Kellogg Brown & Root Inc., did not align with the Ninth Circuit’s findings, where it was said that communications are privileged if they have ‘significant’ legal purpose and removing the need for a balancing test. Also cited in the petition was a Seventh Circuit ruling that dual-purpose communications are never privileged.

The case is In re Grand Jury, case No. 21-1397, in the U.S. Supreme Court.