Are Discussions with Lawyer Colleagues Waivers of the Work Product Privilege? (4/30/20)

Today, I discuss a facet of the work-product doctrine, often called the work product privilege.  I address waiver for opinion work product in the setting for discussions among lawyers (or others for whom the privilege might apply) who have not been retained in the engagement to develop and refine legal issues and theories.

The specific context that this came up was for a legal email discussion group maintain by an attorney organization to discuss particular tax contexts and issues.  The discussion group contains a large number of lawyers (I think it is limited to lawyers), and so far as I am aware, the list of lawyers (as it may change from time to time) is not made available to the members of the group.  So participants invariably do not know some or even many in the group.  There is a prohibition on Government attorneys being members.  Of course, members may from time to time become Government attorneys and have the prior discussions available to them, but that’s a rabbit trail I won’t go down right now.  Suffice it to say that there is the expectation that the discussions in the group are not available to the IRS or DOJ.

The clients' identities are not disclosed in the discussions. I have no way of knowing, but assume that the attorneys anonymize any facts that are disclosed in order to set up and move the discussion forward.  For purposes of this discussion, let’s assume that the facts are so anonymized.

The issue I present is whether the discussions that, from each participating attorney’s perspective disclose anonymized facts and seek only legal discussion, thereby constitute a waiver of the work product privilege.  Yesterday, there was a discussion on an attorney mail group regarding whether the discussions in emails to the group constituted a waiver of the work-product privilege.

The issue is whether the IRS or DOJ could in a tax investigation (including grand jury investigation) or tax litigation discover the group email discussions on the basis of waiver of the work product privilege and thereby prejudice the client (taxpayer).  For example, the first interrogatory and/or request for production in tax litigation from the Government would be to identify all discussions by the attorney relating to the client’s facts and produce all documents relating to those discussions.  Similarly, the Government could use its investigative compulsory process to demand access to the discussions and documents related to the discussions.

I had never thought about the issue before (that I can recall).  In a more general sense, I had never thought that discussing anonymized facts with fellow practitioners was a waiver of the work product privilege as to the anonymized facts and the legal and practice discussions that the anonymized facts generate.  The settings presenting the issues can be myriad, including a lunch with a fellow practitioner, a small discussion group of practitioners (many larger cities have such groups), or larger groups (such as at CLE events or, in the present case, an email discussion group).  (I should note that perhaps, if the “waiver” were viable in this context, it might also apply to Government attorney discussions with fellow Government attorneys who are not involved in the particular litigation.)

Having now thought about the issue and done some poking around on the issue, I am just going to offer some non-definitive thoughts on the issue.

I first offer the generic discussion from the current working draft of my Federal Tax Procedure Book (for publication in August 2020) (footnotes omitted, but those wanting footnotes can get the pdf with footnotes here):

f. Work Product Doctrine.

Microsoft Summons Enforcement on Transfer Pricing "Planning" - Mixed on Privilege Claims (1/22/20)

In United States v. Microsoft, 2020 U.S. Dist. LEXIS 8781 (W.D. Wash. 1/17/20), here, the district court resolved a contentious designated summons enforcement proceeding started in December 2014.  (See the CourtListener docket entries, here.)  Summons enforcement proceedings are supposed to be “summary in nature.”  United States v. Clarke, 573 U.S. 248, 254 (2014) (citing United States v. Stuart, 489 U.S. 353, 369 (1989)).  Why the extended time for resolution?

Well, one of the problems is that the transfer pricing "planning" was, as the court found, a KPMG promoted type of tax shelter from the era of KPMG's foray into bullshit tax shelters in the late 1999s and early 2000s.  (I am just saying that it was from that era, not that the KPMG promoted planning was a bullshit tax shelter; that is yet to be seen.)  In resolving the various privilege claims (work product, attorney-client and § 7525 Federally Authorized Tax Practitioner ("FATP") Privilege, the court did not resolve the ultimate audit for the tax years 2004-2006, but did find that KPMG's promoted transfer pricing "planning" was a tax shelter with some not Microsoft-favorable descriptions. 

I write on the case on my Federal Tax Procedure Blog.  See Microsoft Summons Enforcement on Transfer Pricing "Planning" - Mixed on Privilege Claims (1/22/20), here.

Third Circuit Reverses District Court on Application of Work-Product Privilege for Email to Return Preparer (1/30/17)

In In re: Grand Jury Matter #3, ___ F.3d ___, 2017 U.S. App. LEXIS 1498 (3d Cir. 2017), here, the Third Circuit in an unusual procedural setting reversed a district court holding that an email turned over by an accountant pursuant to a grand jury subpoena was subject to the crime-fraud exception to the work-product privilege.

The Unusual Procedural Setting - Appeal by Target Rather than Party Compelled Not Mooted by Indictment Because Grand Jury Ongoing.

The grand jury was investigating an individual, pseudonymed as John Doe, for potential fraud.  (The precise nature of the potential fraud is set forth in the opinion, but not important for this summary.)  Part of the fraud related to ownership of a company.  In the events leading to the possible fraud, Doe claimed he did not own the company.  However, Doe had previously filed tax returns indicating that he did own the company.  Doe received an email from his attorney indicating steps needed "to correct his records so that they reflect that the business associate, not Doe, owned Company A since 2008."  Doe forwarded this email to his accountant.  The accountant retained the email in his files.  Doe never amended the returns or otherwise corrected the information as suggested in the email.

Pursuant to a grand jury subpoena, Doe's accountant delivered his copy of the email to the grand jury.  The accountant's attorney shortly thereafter asked that it be returned as it was within the work-product privilege (the attorney said it was not for legal advice).  Based on the request, the government attorney refrained form presenting it to the grand jury and asked the District Court for permission to present it to the grand jury, on the ground that Doe had waived the privilege (presumably by showing it to the accountant).  The District Court ruled that (i) the attorney-client privilege did not apply because Doe did not send the email to the accountant to obtain legal advice, (ii) the work-product privilege (called, or miscalled, the attorney work-product privilege) did apply because the accountant was not an adversary, and (iii) the crime-fraud exception applied.

Immediately after the order, Doe appealed.  While the appeal was pending, the email was shown to the grand jury.  And, while the appeal was pending, the grand jury indicted Doe and then issued a superseding indictment.

Through the appeal and rehearing up until the decision discussed here, the grand jury continued its investigation of Doe with the possibility of returning a superseding or even a new indictment.

The Third Circuit first issued an opinion holding that it lacked jurisdiction.  Doe sought rehearing.  This opinion is the opinion on rehearing.

So, the first question addressed in the new opinion was whether the Court of Appeals had jurisdiction.  The panel held that the Court of Appeals did have jurisdiction.  Although not a perfect fit, the Court of Appeals applied by analogy the rule in Perlman v. United States, 247 U.S. 7 (1918), that permits a party other than the party compelled (here the party compelled was the accountant) to contest an order to comply with a grand jury subpoena where the party compelled may not have sufficient interest to follow the normal procedure of refusing to comply and suffering a contempt order in order to obtain appellate review.

Third Circuit on Crime-Fraud Exception to Attorney-Client and Work-Product Privileges (12/12/12)

The Third Circuit yesterday issue a major opinion involving assertions of the attorney-client and work-product privileges and the application of the crime-fraud exception to those privileges.  In Re: Grand Jury John Doe 1; John Doe 2; ABC Corporation, 705 F.3d 133 (3d Cir. 12/11/12), here.  The introduction of the majority opinion is (footnotes omitted):

ABC Corp., John Doe 1, and John Doe 2 are subjects of an ongoing grand jury investigation into an alleged criminal tax scheme.1 As part of that scheme, ABC Corp., under the direction of John Doe 1 and John Doe 2, purchased and subsequently sold numerous companies. These consolidated appeals concern whether documents and testimony relating to legal advice obtained by ABC Corp. in connection with these transactions are shielded by the attorney-client and work product privileges. 

When ABC Corp. objected that the Government had improperly served a subpoena for documents on ABC Corp., the Government issued grand jury subpoenas for those documents to ABC Corp.'s current outside counsel—LaCheen, Wittels & Greenberg, LLP, and Blank Rome, LLP. Later, it also served subpoenas for documents and testimony on three attorneys formerly employed by ABC Corp. as in-house counsel. In each instance, the firms and counsel asserted attorney-client and work product privileges on ABC Corp.'s behalf, the Government moved to enforce the subpoenas, and ABC Corp. opposed the motion as the purported privilege holder. 

The District Court granted the Government's motions to enforce based in part on the crime-fraud exception, which permits the Government to obtain access to otherwise privileged communications and work product when they are used in furtherance of an ongoing or future crime. Finding that the requested communications and work product either did not qualify as privileged or that any protection afforded was vitiated by this exception, the Court largely rejected ABC Corp.'s privilege claims and issued corresponding disclosure orders—the first directed to ABC Corp., LaCheen Wittels, and Blank Rome in March 2012 (the "March Order"), and the second directed to the three in-house counsel in June 2012 (the "June Order").

More on the Yip Criminal Case - FBARs and other Matters (3/13/10)

I have previously blogged here on the Ninth Circuit's published decision in United States v. Yip, ___ F.3d ___ (9th Cir. 2010). That decision dealt with inclusion of state tax loss in relevant conduct. At the same time as issuing that precedential decision, the Ninth Circuit entered an unpublished decision with limited precedential effect. See United States v. Yip, 2010 U.S. App. LEXIS 4639 (9th Cir. 2010). The unpublished decision cryptically presents its many holdings, but I thought it helpful to present some of them for readers:

In Yip, the defendant appealed from convictions of one count of Klein / defraud conspiray, one count of tax perjury and two counts of failure to file FBARs.

1. The defendant argued that the evidence was insufficient to support his convictions for failure to file FBARs. The Court of Appeals dismissed that claim as follows:

Defendant's accountant, who prepared Defendant's taxes for seven years before the first tax filing at issue here, testified that it was his usual practice to review the foreign account question on Defendant's tax form with him each year. This constituted sufficient evidence for a rational jury to have inferred that Defendant knew of his duty and willfully failed to report the foreign accounts.

Although this holding is too cryptic for meaningful comment, I do note that a return preparer will have an incentive to claim that he or she did cover this question specifically with the taxpayer when, in fact, they may not have actually covered it, at least not as crisply as they imagine it when their own conduct might be under scrutiny.