The U.S. Supreme Court heard oral arguments Monday in a tax case in which both attorneys and CPAs offered advice. At issue is the question of whether a communication involving both legal and nonlegal advice is protected by attorney-client privilege when obtaining or providing legal advice is one of the "significant purposes" behind the communication. While the case,
Mary-Christine "M.C." Sungaila, a shareholder in the Orange County and San Diego offices of law firm Buchalter, submitted an amicus curiae brief for the petitioner on behalf of the Federation of Defense & Corporate Counsel. Hers was one of 13 amicus briefs, all supporting the petitioner, an unidentified tax law firm.
Sungaila noted that the privilege exists to encourage clients to make full disclosure to their attorneys. An uncertain privilege is little better than no privilege at all, she observed. The "single primary purpose test" adopted by the Ninth Circuit in this case results in such uncertainty, she argued, since it depends on a court's interpretation of a client's primary motivation in seeking the advice in the first place.
Rather than the primary purpose test, the more appropriate test should be whether legal advice was one of the significant purposes of the attorney-client communication. Sungaila cited a number of district courts and state courts that have adopted "significant purpose" analysis, finding that communications were privileged even though they addressed business as well as legal issues.
"In adopting this test, these courts, consistently with this court's precedent, have rejected an after-the-fact balancing test that fails to sufficiently define the contours of the privilege, and may give clients pause in consulting a lawyer because they cannot determine whether their communications will remain confidential," she stated.
Moreover, a "significant purpose" test takes into account the convergence of two trends, according to Sungaila: the expanding role of in-house counsel and the ubiquitous use of email and online communications.
She noted that lawyers today offer mixed legal and non-legal advice throughout the decision-making process. "The convergence of an increased use of technology in the workplace and the expanded role of in-house counsel make it much easier for legal communications to be intertwined with business communications. The 'one significant purpose' test reflects this new reality," she concluded.
At the hearing, the government maintained that this is a tax question rather than an attorney-client privilege question, Sungaila indicated: "There was some questioning as to what the standard would mean in practical terms. When questioned whether they would be bound by the standards if there were any mix of advice, the government said they would be bound by the same rule, but that nothing they do is mixed."
It's always a challenge to predict the mindset of justices based on questions at a hearing, but Sungaila said she was concerned that they might not be as sensitive to the practical implications of whatever standard they would adopt.
