Court Upholds GE's Attorney-Client Privilege Amidst Government Challenge

On September 15, 2015, the United States District Court, District of Connecticut rejected most of the Government's challenges to privilege claims asserted by General Electric Company ("GE").38 The challenges related to nearly 9,000 documents on GE's privilege logs pertaining to GE's tax refund suit for approximately $660 million. While rejecting most of the Government's claims, the Court ordered the appointment of a special master to review nearly 1,000 documents that lacked identification on GE's privilege log of an author and recipient.

Background

The privilege dispute stemmed from GE's suit against the Government for a tax refund of approximately $660 million including interest relating to a series of complex corporate restructuring/sale transactions that occurred more than 10 years prior. The Government challenged GE's privilege logs, of which the Government sought discovery in opposition of GE's refund suit. The Government raised three challenges to GE's privilege claims: (i) privilege does not relate to attachments of otherwise privileged email communications; (ii) privilege does not attach when the predominant purpose of the communication is for business advice, not legal or tax advice purposes, and (iii) privilege does not attach to documents where the privilege log lacks indication of the author or recipient of the correspondence in violation of Local Rule 26.39 The Court rejected the Government's first two challenges, but ordered the appointment of a special master to determine the privileged nature of documents that failed to identify an author and recipient.

Discussion

GE's privilege claims involved the attorney-client privilege and related tax practitioner privilege found in Section 7525 of the Internal Revenue Code. The basic elements of attorney-client privilege are as follows: "A party invoking the privilege must show (1) a communication between client and counsel that (2) was intended to be and was in fact kept confidential and (3) was made for the purpose of obtaining or providing legal advice."40 Section 7525 recognizes a privilege with respect to tax advice, "the same common law protections of confidentiality which may apply to a communication between a taxpayer and an attorney shall also apply to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney."41

The Government...