In Taylor Lohmeyer Law Firm P.L.L.C. v. United States, 957 F.3d 505 (2020), the Fifth Circuit affirmed the district court’s ruling that a law firm’s clients’ names were not protected by the attorney client privilege.
Taylor Lohmeyer, a Texas law firm, filed an action to quash an IRS John Doe summons. The IRS had issued a broad summons to the law firm seeking the identity of clients “who, at any time during the years ended December 31, 1995[,] through December 31, 2017, used the services of [the Firm]… to acquire, establish, maintain, operate, or control (1) any foreign financial account or other asset; (2) any foreign corporation, company, trust, foundation or other legal entity; or (3) any foreign or domestic financial account or other asset in the name of such foreign entity.”
Recognizing that the attorney client privilege generally does not protect the identity of clients, the law firm asserted that in this case, revealing the identities would result in disclosure of confidential information. Rejecting that argument, the court held that the firm’s clients’ identities are not “connected inextricably with a privileged communication”, and, therefore, the “narrow exception” to the general rule that client identities are not protected by the attorney-client privilege is inapplicable. Thus, disclosing the clients’ identities would not necessarily lead to disclosure of confidential, privileged communications.
Law firms providing tax advice should be aware of this case. Based on this ruling and the current administration’s increased focus on tax enforcement, the IRS will likely continue attempting to obtain client names to obtain evidence of alleged fraud, particularly involving foreign bank accounts.