Minnesota Lawyer and Finance & Commerce – Partner Content
Author: Kathryn Campbell
Minnesota business attorneys, heads up: documents provided to clients that blur the distinction between legal and business advice, while previously protected disclosure, may become a powerful weapon in your adversaries’ arsenal.
In a recent Minnesota Supreme Court decision in In re Polaris, Inc., ___ N.W.2d ___, 2021 WL 5913633 (Minn. Dec. 15, 2021), the Court addressed whether a document containing both legal and business advice could be protected by the attorney-client privilege. Applying the predominant purpose test, the Court held that where a document contains both legal and business advice, for the attorney-client privilege to apply, the predominant purpose of the document must be to provide legal advice. Further expanding on this rule, the Court also found that the predominant purpose of a document is a question of fact subject to the clear error standard.
The dispute arose when, following a 2016 recall, Polaris retained counsel to conduct an audit into its safety processes and policies. The information gathered in the audit was communicated to counsel through an audit report marked “Privileged and Confidential: Protected by Attorney Client Privilege and Attorney Work Product.” The audit report contained both legal and business advice, including “recommendations in the areas of safety, engineering, design, and corporate practices.”
In 2017, Polaris was sued on theories of tort liability relating to injuries sustained by a customer from one of the recalled vehicles. During discovery, Polaris inadvertently disclosed the audit report, which it learned about when the customer attempted to use the report during a deposition. Naturally, Polaris objected to the use of the report and attempted to claw back the report pursuant to Minn. R. Civ. P. 26.02(f)(2), claiming both attorney-client privilege and work-product doctrine. The special master denied the request, finding that the majority of the audit report pertained to business advice. Polaris appealed, with the matter eventually working its way to the Minnesota Supreme Court.
The Supreme Court noted that the threshold inquiry with respect to privilege is whether the document “embodies a communication in which legal advice is sought or rendered,” and that the inclusion of both “privileged” and “confidential” labels does not automatically cloak a document in privilege. Moreover, the Court observed that while the attorney-client privilege protects legal advice, the privilege does not extend to business advice.
Rejecting Polaris’s arguments, the Court favored the “predominant purpose” test adopted by a majority of courts, finding that such a test “preserves the integrity” of the privilege by separating legal advice from business advice in a document that serves primarily business purposes. The Court did, however, note that even where the predominant purpose of the document is to provide business advice, the attorney-client privilege still extends to and protects any portions of the document containing legal advice.
The Court then held that determining the predominant purpose of a document is a question of fact considering the “totality of the circumstances,” subject to a clearly erroneous standard. The Court listed several factors relevant to such inquiry, including:
- 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.
This shift in how Minnesota courts analyze claims of privilege for documents containing both business and legal advice now requires careful attention from attorneys. Critically, what steps can lawyers take to protect their communications with clients?
Begin by examining the purpose of the document with respect to the client’s needs. Has the client specifically requested business advice, or are they purely seeking legal advice? If the client has requested both, consider distinctly categorizing the types of advice or otherwise taking precautions to distinguish between what constitutes legal advice and what constitutes business advice. As the Court pointed out, the line between legal advice and business advice is “not always clear,” and that attorneys provide legal advice “when they draw on their legal training and apply legal principles to the specific circumstances of their client.” Thus, a separate categorization or distinction could help guide a court’s analysis in determining the document’s predominant purpose.
To that end, language matters. For example, the Court in Polaris specifically notes that “not all compliance advice is legal advice,” and that by using the title “Embracing Safety as a Business Priority,” the client had sought regulatory advice for a business purpose, despite Polaris’ assertion that the discussions of safety in the context of regulation “should be classified as legal matters.” Because privilege is construed and applied narrowly, language that further blurs the distinction between legal and business advice may result in the Court finding that the advice is business in nature, regardless of the drafting attorney’s intent.
Finally, and as is always a best practice, limit the number of people receiving any guidance from an attorney to the smallest group possible. The Polaris Court specifically noted that although communications with the board of directors does not automatically waive privilege, the audit report in question had been distributed to both Polaris management and the board of directors with “the express goal of improving the process Polaris used to assess safety risks.”
While Polaris does not represent the end-all, be-all for attorney-client privilege with respect to business-related documents, Minnesota attorneys should understand its impact when sharing business-related reports and documents with their clients.