The Minnesota Supreme Court Adopts the Predominant Purpose Test for Determining Whether Documents are Protected by the Attorney-Client Privilege

The Minnesota Supreme Court has adopted the predominant purpose test for determining whether a document that contains both business advice and legal advice is protected by the attorney-client privilege. If the predominant purpose of the communication is legal advice then the entire communication is protected by the attorney-client privilege. But if the predominant purpose of the communication is deemed to be non-legal advice then the privilege protects only those portions of the document that contain legal advice.

In re Polaris, Inc. erodes the protections that typically applied to attorney-client communications and will likely have a significant impact on future communications between businesses and their counsel. Businesses should no longer assume that such communications will automatically be protected from disclosure—even if the document is labeled “PRIVILEGED AND CONFIDENTIAL,” as was the case in In re Polaris.

Case Background

In re Polaris arose out of a product liability claim involving a model of all-terrain vehicles manufactured by Polaris. Before the litigation began, Polaris announced a recall of the ATVs, the federal Consumer Product Safety Commission notified Polaris it was investigating Polaris’ compliance with the Consumer Product Safety Act, 15 U.S.C. § 2064(b), and the CPSC indicated enforcement action, including litigation, was possible. In response to the CPSCP notice, Polaris retained outside counsel to conduct an audit of Polaris’ safety processes and policies. The audit resulted in a 32-page report, titled “Embracing Safety as a Business Priority,” which contained outside counsel’s recommendations to improve Polaris’ compliance with federal consumer product safety laws. When the audit report was inadvertently disclosed during discovery in the product liability claim, Polaris attempted to claw the document back on the grounds that it was protected by the attorney-client privilege. The district court denied the claw-back request but permitted redactions of the legal advice in the audit report. Polaris sought a writ of prohibition to prevent the report from being disclosed but the court of appeals denied the writ.

The Minnesota Supreme Court affirmed. The court unanimously agreed the predominant purpose test applied but split, in a 5-2 vote, as to whether the predominant purpose of the Polaris audit report was legal advice. The case was remanded with instructions for the district court to identify the portions of the audit report that contain legal advice, which may be redacted as attorney-client communications.

Analysis

As the Minnesota Supreme Court noted, the predominant purpose test has been adopted by a majority of courts that have considered the issue. Thus, a document may only be withheld on the basis of attorney-client privilege if the predominant purpose of the communication is to render or solicit legal advice. Notably, a district court’s findings with respect to the predominant purpose test are subject to appellate review under an abuse of discretion standard, meaning the district court’s ruling will not be reversed unless it clearly erred.

In a 25-page dissent, the two dissenting Justices questioned the lack of “clear guidance” in the majority opinion as to the distinction between legal and business advice.  The dissent proposed the focus should be on the purpose for which the lawyer was retained: If the lawyer employs his or her legal training or experience to provide recommendations for future conduct, or an analysis of past conduct, to assist the client in avoiding or obtaining future legal outcomes then the predominant purpose of the communication is legal advice.  In the absence of a clearly articulated distinction between legal and business advice, however, the dissent predicted In re Polaris would yield a “completely unpredictable standard” that would “frustrate attorney-client relations[.]”

While time will tell whether the dissent’s concerns come to fruition, at a minimum, In re Polaris warrants a careful re-examination of how businesses communicate with their counsel.