In Re Grand Jury, Quantifying Purpose, and the “Lawyer in the Room” Problem in Corporate Attorney-Client Privilege, by Elise Bernlohr Maizel
This year, the United States Supreme Court heard its first major case on the corporate attorney-client privilege in decades. The issue before the Court was the appropriate test for whether a communication’s purpose was business or legal. The latter is privileged, the former is not.
In In re Grand Jury, an unnamed law firm challenged a grand jury subpoena for documents withheld under a claim of attorney-client privilege. The government urged the continued application of the “primary purpose” test, under which if a communication’s primary purpose were a legal one, it could be properly withheld under a claim of privilege. The unnamed law firm, on the other hand, asked that a “significant” or “bona fide” legal purpose could qualify for the protection of the attorney client privilege—a position described by the government as a “an expansive test that allows even a little bit of legal purpose to privilege the whole communication.” At oral argument, the justices seemed at times perplexed as to how one might distinguish between a communication for business or legal purposes. Several of the Justices asked the parties to quantify what percentage of a communication’s intent must be attributable to a legal purpose rather than a business purpose in order to qualify as privileged. Neither party could provide a satisfying answer. The following month, the Court quietly dismissed In re Grand Jury as improvidently granted.
What seemed like an easy, innocuous palate cleanser of a case in a term full of politically charged matters turned out not to be quite so simple. Without an opinion, we are left to read the tea leaves left after oral argument. At argument, the answer to two questions eluded advocates and Justices alike: (1) how do we quantify a legal purpose; and (2) what do we do about the “lawyer in the room” problem? These questions are conceptually challenging—an “inherently impossible exercise” in the words of one of the advocates—and yet their answers are necessary to the day to day practice of corporate litigation. With so much left undecided, parties return to a status quo that is largely undefined and in practice provides for an expansive corporate attorney-client privilege, determined mainly by advocates rather than courts.
I. The Corporate Attorney-Client Privilege
The attorney-client privilege protects from disclosure in discovery confidential communications between an attorney and a client for the purposes of facilitating legal advice. The attorney-client privilege developed with an individual client in mind. Corporations came later, and privilege theory has been applied in the corporate context through analogy. The Supreme Court’s decision in Upjohn v. United States laid the foundation for a broad and expansive corporate privilege by defining the corporate “client” to include all agents of the corporation. Thus, any communication between corporate counsel and a corporate employee falls within the ambit of the attorney-client privilege, so long as the communication is (1) confidential; and (2) for the purposes of facilitating legal advice. Courts now distinguish between legal advice and “non-legal” advice when assessing whether a particular communication may be shielded from discovery. The former is privileged. The latter is not.
II. Quantifying Privilege
At oral argument in In re Grand Jury, Petitioner’s counsel described legal and non-legal advice as serving “competing purposes.” However, when asked to provide an example of how a court might disentangle business and legal purposes in order to determine if a legal purpose was a “significant” one, Petitioner’s counsel was forced to reach outside of corporate law:
Someone goes in and asks a lawyer should I fight for the house in the divorce. There’s property as the legal part of that and there’s probably emotional and personal parts of that and it’s tied together. So you can have situations where it’s very hard to disentangle if not impossible to disentangle.
In the corporate context, there are no countervailing personal or emotional concerns. Legal advice is not necessarily distinct from business advice. Rather, it is often business advice of a different flavor, serving a risk management function, no different than the management of technical risk or public relations risk or accounting risk. Take another example from In re Grand Jury’s oral argument—the assessment of a potential settlement. In weighing the strategic benefit of settling a pending matter, lawyers and business side employees consider the impact of the cost of settlement—which effects a company’s bottom line—as well more indirect or speculative costs such as potential liability or reputational harm. While these are all “legal” concerns, they are all also “business” concerns which implicate actual or potential economic harm to the corporate enterprise. In this way, corporate or organizational privilege questions are not really asking about a binary: whether something is non-legal or legal. Instead, the question is how legal must a communication be in order to qualify as privileged. Indeed, though Petitioner’s counsel described a process akin to weighing apples and oranges, the reality looks more like asking how red an apple must be.
At oral argument, over and over, the Justices asked the advocates to assign a percentage to the quantum of legal purpose necessary to qualify for privilege. Petitioner, in proposing a test allowing for the withholding of any communication involving a “significant” or “bona fide” legal purpose, suggested that a 10 percent “degree of significance” would be sufficient to fall within the ambit of the privilege. The government resisted attaching a precise percentage to the proportion of a communication that would need to be legal to qualify as primary under the “primary purpose” test. Ultimately, the government refused to say whether the “primary purpose” test for which it advocated requires that the purpose of a communication be at least 51 percent legal. However, even in resisting a specific number, the government urged a test that required comparing and weighing a legal purpose against a non-legal one. Left undecided and unexplained was the question of how one would go about quantifying the primacy of the legal purpose in a communication under either test.
III. The “Lawyer in the Room” Problem
Beyond the problem of “quantifying” privilege, the Justices also identified a major conceptual problem underlying both the government and Petitioner’s frameworks—the “lawyer in the room” problem. At the start of oral argument, Petitioner offered an example of a quintessential pretextual use of privilege: a lawyer called into a room or copied on an email to listen in on a business conversation and, by their presence, conceal the entirety of the conversation with the veil of the attorney-client privilege. Justice Kagan pushed back on the classification of a lawyer copied on an email communication or asked to sit in on a meeting for issue spotting purposes as pretext:
And why is that pretextual? I mean, actually, you sometimes want a lawyer to sit in and issue-spot and see if he’ll come up with anything. You want a lawyer on your email chain just to see if the lawyer spots anything that you’re not spotting about how the law relates to a particular course of conduct. So, you know, that seems to me legitimate. It will also basically immunize every communication that a business has.
The attorney-client privilege protects both communications from lawyer to client and from client to lawyer. Thus, under Petitioner’s framework, the logical conclusion of the “lawyer in the room” problem is to cloak every communication for which an attorney is an audience with privilege or to concede that the lawyer’s purpose in being there is not “significant” or “bona fide.” Under the government’s framework, parties and courts are forced to parse, ex ante, when a communication was intended primarily for legal purposes or non-legal purposes. The exact measure of when the pendulum fully swings from legal to non-legal may or may not be apparent to the parties at the time of the communication. Thus, corporate actors may not know whether they are speaking under the protection of the privilege, or may mistakenly believe they are protected by the privilege when they are not.
IV. The Impact of a Vague Privilege
These are hard questions. Oral argument in In re Grand Jury revealed privilege withholding decisions to require controversial hair splitting. At oral argument, this was done out in the open with hypotheticals. In practice it is done in secret by the parties policing themselves. This is why clear rules of privilege matter. Lawyers are required to act with “zeal in advocacy” in representing their clients’ interests. When the lines between business and legal interests are fuzzy, corporate counsel is incentivized—or even arguably required—to take the broadest possible interpretation of what constitutes a privileged communication, sweeping wide swaths of potentially relevant materials out of the bounds of litigation discovery. At oral argument, the parties and Justices repeatedly cited the privilege proponent’s burden to prove they have made out all of the privilege’s elements. However, as a practical matter, parties are only held to that burden if they are challenged—a potentially costly endeavor.
Overzealous withholding of purportedly privileged documents and communications may only be resolved in expensive privilege battles. Indeed, In re Grand Jury arose as a battle between powerful and well-resourced litigants, a corporate law firm and the United States government. Not all litigants have the kind of resources necessary to wage a privilege challenge against a corporate litigant. Even those who do risk drawing the ire of the judge. Because of the burdens associated with challenging a litigation adversary’s privilege withholding decisions, the position urged by the Petitioner in In re Grand Jury—the “significant purpose” test—may well be closer to a statement of the actual state of the law in practice than the test urged by the government.
The attorney-client privilege is purportedly justified by the need for client and counsel to engage in “full and frank” communications to facilitate compliance with law. For this justification to be plausible, the privilege needs to be somewhat predictable. Corporate agents and attorneys need to know their communications are safe from later revelation in discovery in order to engage in the kind of “full and frank” conversations the Upjohn court envisioned. As the In re Grand Jury oral argument demonstrated, setting a boundary based on a fictional distinction between legal and business advice leaves a tremendous opportunity for ambiguity.
Being clear about what the privilege protects—and what it does not—is the only way to allow the privilege serve its intended purpose. “An uncertain privilege” is said to be “no privilege at all.” Or, in the corporate context, it may, in fact, mean too much privilege. Without clear boundaries between what is privileged and what is not, the privilege is broken, as it fails to serve the justification for its existence. Instead it may be serving something else—the ability of well-heeled parties to avoid discovery obligations in litigation by involving lawyers in minimally “legal” tasks. Though neither party offered a perfect answer, the Supreme Court had the opportunity to improve the corporate attorney-client privilege this term by providing a greater measure of clarity and giving overzealous corporate litigants a line they could not cross. Sadly, the Court dismissed that chance.
Elise Bernlohr Maizel is an Acting Assistant Professor of Lawyering, New York University School of Law. The author is indebted to Haiyun Damon-Feng and Sandeep Dhaliwal for many helpful conversations and comments.