Part I
On January 23, 2023, the U.S. Supreme Court took the unusual step of dropping a case after oral argument. In re Grand Jury, 23 F.4th 1088 (9th Cir.), cert. granted, 143 S. Ct. 80 (2022), cert. dismissed as improvidently granted, 143 S. Ct. 543 (2023) (per curiam). Many commentators have noted the bizarre oral argument, in which both the plaintiff and the government seemed to shift their positions on the proper privilege standard. But what was the basic issue, why did the Supreme Court back away, and where does the Supreme Court's move leave the law?
The story starts in 2014. In United States ex rel. Barko v. Halliburton Co., the court adopted a narrow version of the widely articulated "primary purpose" test for privilege protection — holding that "[t]he party invoking the privilege must show the 'communication would not have been made "but for" the fact that legal advice was sought.'" 37 F. Supp. 3d 1, 5 (D.D.C. 2014) (citation omitted). The court held that the privilege did not protect communications during Kellogg Brown & Root (KBR)'s investigation into possible overseas fraud, because the investigation "resulted from the Defendants[҅] need to comply with government regulations." Id. The D.C. Circuit Court vacated, with Judge Kavanaugh noting that the privilege could apply to KBR's investigation and other similar investigations "even if there were also other purposes for the investigation and even if the investigation was mandated by regulation rather than simply an exercise of company discretion." In re Kellogg Brown & Root, Inc., 756 F.3d 754, 758-59 (D.C. Cir. 2014).
Only a few district courts have adopted what became known as Judge Kavanaugh's "one significant purpose" standard, and only one circuit court (In re Grand Jury, supra) had anything nice to say about it. The next two weeks' Privilege Points will surmise why the Supreme Court backed away, and what might happen next.
Part II
Last week's Privilege Point described the Supreme Court's failure to decide between a "primary purpose" and a "one significant purpose" privilege standard. Everyone wonders why the Supreme Court dropped the case. The best explanation may be that the court realized that it should have waited for an internal corporate investigation case like KBR. In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).
In re Grand Jury, 23 F.4th 1088 (9th Cir.), cert. granted, 143 S. Ct. 80 (2022), cert. dismissed as improvidently granted, 143 S. Ct. 543 (2023) (per curiam), involved a government-initiated criminal tax investigation. Since the District Court's file was under seal, we don't know much about the context or the substance of the withheld documents — unlike many civil investigation cases. And of course our common law advances most efficiently and fairly when based on incremental rulings in specific situations (even about specific withheld documents) — rather than in some one-size-fits-all legal doctrine pronouncement. So the Supreme Court might have done better by waiting for a civil investigation case with a lengthy document-specific district court opinion to sink its teeth into. It is unfortunate that the Supreme Court did not at least reject the extreme "but for" standard, under which the privilege presumably would not protect most if any documents created during an investigation mandated by government regulations or even some internal corporate policy.
The good news is that the government did not argue for a draconian "but for" standard during the Grand Jury oral argument. In fact, the government lawyer said "we completely agree with the result" in KBR (Transcript of Jan. 9, 2023, Oral Argument at 76, In re Grand Jury, 143 S. Ct. 543 (2023)). Next week's Privilege Point describes the opportunity for the Supreme Court to address a similar dichotomy of approaches in the work product arena.
Part III
The last two Privilege Points (Part I and Part II) addressed the Supreme Court's abandoned attempt to address the abstract "primary purpose" versus "one significant purpose" privilege standard in the absence of specific facts about particular documents. Interestingly, the Ninth Circuit's In Grand Jury decision mentioned what it called the "because of" test in the work product arena — before noting the inherent differences between the attorney-client privilege and work product protection. 23 F.4th 1088 (9th Cir.), cert. granted, 143 S. Ct. 80 (2022), cert. dismissed as improvidently granted, 143 S. Ct. 543 (2023) (per curiam). We will see if the Supreme Court takes the hint.
For decades, some circuits (most notably, the Fifth Circuit) have limited work product protection to documents that will be used to "aid or assist" in litigation. Other circuits have endorsed a much broader "because of" standard, which extends work product protection beyond that narrow range — as long as the documents were created "because of" litigation or anticipated litigation, and would not exist in the same form but for that litigation. In some situations, courts from different parts of the country have simultaneously disagreed. For instance, the court in Hempel v. Cydan Development, Inc., Case No. PX-18-3040, 2020 U.S. Dist. LEXIS 153208, at *15 (D. Md. Aug. 24, 2020), rejected work product protection because a document was "not written with any purpose of actually assisting Plaintiffs or their counsel." Just three days later, the court in Profit Point Tax Technologies, Inc. v. DPAD Group, LLP, No. 20-mc-0009, 2020 U.S. Dist. LEXIS 156639, at *182-83 (W.D. Wis. Aug. 27, 2020), protected as work product documents "prepared because of disputes that would otherwise have been litigated." It is easy to envision documents that fail the "aid or assist" standard but satisfy the "because of" standard. For example, a company worried about having to raise money to pay for a possible loss in pending litigation might create documents focusing on where it will find the money — which presumably would satisfy the "because of" standard, but not the "aid or assist" standard.
This dichotomy differs from — but parallels — the privilege standard debate that will continue after Grand Jury. With any luck, the Supreme Court will address this inherently federal issue while on the lookout for an extensively litigated document-intensive case to use in rejecting the frighteningly narrow "but for" privilege standard.
Published April 3, 2023.
