TAX OPINIONS from a law firm may have lost their “privilege” because the company shared them with its tax accountants, a US district court said.

It ordered the opinions produced for inspection by the court.

Long-Term Capital Partners, L.P. hired Shearman & Sterling and King & Spaulding to render opinions about aspects of a transaction that produced a tax loss of $106 million in 1997.  The IRS questioned the loss on audit.  The partnership turned over the Shearman & Sterling opinions to the IRS, but refused to give it copies of the King & Spaulding opinions on grounds that they are protected by both the “attorney-client privilege” — for communications between a client and its lawyers — and the “work product privilege”— for work that its lawyers do in anticipation of litigation.

The court suggested that Long-Term Capital Partners waived any attorney-client privilege by sharing the gist of the opinions with its tax accountants and by giving the IRS the Shearman & Sterling opinions.  The court said a company cannot selectively disclose opinions about a single transaction.

The court asked for copies of the opinions to determine whether they are covered by the work-product privilege.  The case is Long-Term Capital Holdings v. United States.

Keith Martin