## Facts

- A federal grand jury in the Central District of California investigated the owner of a Company for possible federal tax crimes.
- The grand jury issued subpoenas to the Company and its outside Law Firm seeking documents and communications.
- The Company and Law Firm withheld certain materials, asserting attorney–client privilege and work-product protection, including “dual-purpose” communications involving both legal advice and tax-return-preparation or tax-advice functions.
- The government moved to compel production; the district court ordered production of certain materials after finding their primary purpose was non-legal tax advice rather than legal advice.
- The district court held the Company and Law Firm in contempt for continued noncompliance.
- The Company and Law Firm appealed the contempt orders to the Ninth Circuit.

## Issues

1. What test governs attorney–client privilege for dual-purpose communications that combine legal advice with non-legal purposes such as tax advice or tax-return preparation.
2. Whether the “because of” test associated with work-product doctrine can be applied to determine privilege for dual-purpose attorney–client communications.
3. Whether the withheld communications were privileged under the proper standard.

## Decision

- The Ninth Circuit affirmed the contempt orders.
- The court held that the attorney–client privilege for dual-purpose communications turns on whether the primary purpose of the communication was to give or receive legal advice.
- The court declined to apply the work-product “because of” test to attorney–client privilege determinations.
- Applying the primary-purpose test, the court agreed the disputed communications were primarily for non-legal tax advice and therefore not protected by attorney–client privilege.
- The court noted, without deciding, that a formulation asking whether legal advice was “a primary purpose” might apply in some circumstances, but found the distinction immaterial on the record before it.

## Legal Principles

- Attorney–client privilege protects confidential attorney–client communications made for the purpose of giving or receiving legal advice; it does not protect ordinary business or tax advice merely because an attorney is involved.
- For dual-purpose communications, the Ninth Circuit applies a primary-purpose test: the privilege applies only if the primary purpose of the communication is legal advice rather than non-legal advice.
- The work-product “because of” standard is a distinct doctrine tied to anticipated litigation and is not the governing test for attorney–client privilege.
- In the tax context, communications related to tax-return preparation are generally not privileged, though legal advice about what to claim on a return can be privileged if legal advice is the communication’s primary purpose.

## Conclusion

The Ninth Circuit held that dual-purpose attorney–client communications are privileged only when their primary purpose is legal advice, rejected importing the work-product “because of” test into privilege analysis, and affirmed contempt sanctions for withholding materials it found primarily directed to non-legal tax advice.


In re Grand Jury, 23 F.4th 1088 (9th Cir. 2021)