Recent changes to the attorney-client privilege mean Minnesota businesses should consider using additional caution and taking affirmative steps in order keep documents prepared by their lawyers safe from disclosure. The Minnesota Supreme Court recently adopted a more stringent standard—the Predominant Purpose test—for assessing whether the privilege keeps attorney-prepared documents confidential, and this test could result in more sensitive documents being exposed during lawsuits.
Although this ruling introduces uncertainty—will documents with dual purposes of providing both legal and non-legal advice be subject to disclosure in litigation—businesses that are attuned to this development can tailor the way they interact with their lawyers to achieve the broadest possible application of the attorney-client privilege, and ensure the greatest confidentiality of their communications with counsel.
The context for the Minnesota Supreme Court’s ruling arose after Polaris, Inc. was sued in a product liability lawsuit. During the litigation, In re Polaris, Inc.,[1] Polaris inadvertently gave an audit report to the opposing party. This report had been prepared by a Polaris attorney in response to a government safety investigation and was marked throughout as “PRIVILEGED AND CONFIDENTIAL: Protected by Attorney Client Privilege and Attorney Work Product.” When Polaris learned of its mistake, it asked the opposing party to return the report, and destroy all copies (i.e., to clawback the report). When this request was refused, Polaris filed a motion seeking similar relief. The district court likewise denied the requested clawback, although it did require portions of the report embodying legal advice to be redacted. Polaris next sought a Writ of Prohibition from the Minnesota Court of Appeals. After the Writ was also denied, a final appeal brought Polaris before the Minnesota Supreme Court.
Facing the Supreme Court was the issue of “whether the report in its entirety is protected by the attorney-client privilege.” The court reiterated that the “threshold inquiry in a privilege analysis is determining whether the contested document embodies a communication in which legal advice is sought or rendered[,]” and formally adopted the Predominant Purpose test, under which attorney-client privilege applies to the entirety of a document only if communicating legal advice is the “predominant” purpose of the document. In applying this test, the court listed five factors to consider:
- the purpose of the communication;
- the content of the communication;
- the context of the communication;
- the recipients of the communication; and
- whether legal advice permeates the document or whether any privileged matters can be redacted.
While there was no dispute that the report contained both legal and business advice, Minnesota Supreme Court looked to these factors to determine the report’s “predominant purpose,” and whether the privilege applied to it as a whole or only in part. Polaris argued that the legal and business advice contained in the report were “inextricably intertwined,” but the court dismissed this argument because (in its view) the report primarily addressed Polaris’s organizational culture and discussed product design, engineering, and manufacturing practices, with an end goal “of improving the process Polaris uses to assess safety risks.” The report’s focus on Polaris’s business supported the lower court’s determination that the primary purpose of the report was setting corporate policy, and not providing legal advice. Accordingly, the court affirmed the lower courts’ rulings that the report did not “pass” the Predominant Purpose test, and that only portions containing legal advice were privileged. The task of determining which portions those were was left to the lower courts on remand.
Many businesses and clients incorrectly assume that all communications with their attorneys, and the advice and recommendations conveyed by those attorneys, are automatically privileged. However, this is not the case. While the communication must run between an attorney and client, in order for the privilege to apply, the communication must also be for the purposes of requesting or providing legal advice. Indeed, Wigmore’s “classic” formulation of the privilege requires eight factors to establish a privileged communication:
(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.
Simply demonstrating that communication was between attorney and client is never enough by itself to establish the privilege.
Moving forward, the In re Polaris, Inc. decision potentially creates significant difficulties for businesses in establishing that the subject of the communication was “legal advice.” Businesses must now question further whether their communications with their attorneys, and vice versa, will be protected by the attorney-client privilege, and whether a court will second guess the parties’ understanding and intent in generating the communication at issue. Effectively, courts now have the authority to look much more closely at the nature of the communication and find fewer communications to fall within the protected category of “legal advice.” For example, the court in Polaris, Inc. noted that “the attorney-client privilege does not apply if the client seeks regulatory advice for a business purpose[,]” placing immense importance on the tenuous distinction between advice that is “legal” and advice that is for a regulatory or business purpose. The dissent emphasized the difficulty of drawing such a distinction. In the future, the ambiguity surrounding whether audit reports and emails, or any of the many other communications between client and lawyer, will remain confidential could impede open communication between businesses and their lawyers for fear of confidential information being disclosed later during litigation.
To address this newfound threat to confidentiality, businesses can make several changes to the process they use when engaging and communicating with attorneys. At the beginning of an engagement, it is important to set out that the attorney will provide legal (not business) advice; this should be done by putting down in writing, with as much detail as is practical, which legal services and advice the attorney will provide, which laws caused the business to hire the attorney, and (as applicable) by connecting the lawyer’s work to ongoing litigation or investigations. Prominent disclaimers that the attorney is communicating his or her legal analyses are advisable, and should be included in formal reports, audits, etc. Finally, it may be necessary to assess whether documents being drafted by attorneys create risk of future disclosure, and to redefine the scope of those documents to ensure they won’t be used against the business during future litigation—as happened to Polaris. Simply engaging a lawyer and marking documents “Privileged” has never been a guaranty of confidentiality, but the chances of it being sufficient are even less so now.
[1] A20-0427, 2021 WL 5913633 (Minn. Dec. 15, 2021)
