Monday, August 22, 2016

Tax Procedure Book Errata - Correction Related to Abatement of Erroneous Assessment (8/22/16)

Delete the entire section (1 paragraph) in Chapter 6 at V. Abatements of Erroneous Asessments (at p. 240 of the Practitioner edition and p. 167 of the Student edition substituting in its place the following (note that the footnote numbers may not tie to the current editions):

V. Abatements of Erroneous Assessments.

Section 6404(a) authorizes the IRS to abate an assessment of tax (or liability) which is “(1) is excessive in amount, or (2) is assessed after the expiration of the period of limitation properly applicable thereto, or (3) is erroneously or illegally assessed.”  All of these alternatives seem straight-forward.  For example, if the taxpayer has been assessed $100 in tax or interest but shows that the correct tax or interest liability is $50 rather than the $100 assessed, under subparagraph (1), the IRS can abate the excessive $50 amount assessed. n848
   n848 In King v. Commissioner, ___ F.3d ___, 2016 U.S. App. LEXIS 13269 (7th Cir. 2016), dealing with abatement of interest rather than tax, the Seventh Circuit reversed the Tax Court’s holding that “excessive” could mean “unfair.”  The Court cited several reasons, including the indeterminancy of the concept of “unfair” and the Chevron appropriate regulation saying that, in the context of tax, “excessive” means "in excess of the correct tax liability,” with the conclusion that, as to interest, it must mean in excess of the correct interest.  See Regs. § 301.6404-1(a).

As noted above, however, the taxpayer still must claim his right to a refund timely, and, if he fails to do so, the statute of limitations on actually getting the refund will prevent the IRS from refunding the tax.  If for some reason, after the statute of limitations for refund has closed, the taxpayer establishes his or her right to an abatement, the IRS may make the abatement because there is no statute of limitations on abatement.n849  The problem, of course, is that the IRS cannot refund or credit the abated tax liability, if paid, to the taxpayer and, instead, the payments will be posted internally by the IRS to the Excess Collections File.
   n849 ILM 200915034 (3/2/2009), published at 2009 TNT 68-16.

Sunday, August 21, 2016

Excellent Law Review Article on Statutory Interpretation and Use of Legislative History (8/21/16)

An  important topic in all tax courses, including Federal Tax Procedure, is statutory construction.  One of the issues I discuss is the use of legislative history in statutory construction.  (See practitioner edition beginning on p. 6 and Student edition beginning on p. 4.)

I have just read a law review article that I think would be a worthy read for those wishing to dig further into the issue.  The article is:  Robert A. Katzman, Madison Lecture: Statutes, 87 N.Y.U.L. Rev. 637 (2012), here.   Katzman is a judge on the Second Circuit and a prominent constitutional scholar in his own right.  I offer below some snippets and my own comments.  In most quotes, I omit footnotes, except in some cases where I think the footnote is important

First, in a bow to James Madison who is often called the father of the Constitution because of his major contribution to the Constitution:
I owe much to James Madison, that diminutive giant, one of the founding architects of our constitutional structure.
Then, the author deploys Madison in support of his argument that legislative history is an important tool in statutory interpretation:
Generally, the interpretative problem arises because the statute is ambiguous. n127 From the start, the founders understood that legislation would often be unclear and admit of differing interpretations. Madison wrote in The Federalist No. 37, describing laws in general:
All new laws, though penned with the greatest technical skill, and passed on the fullest and most mature deliberation, are considered as more or less obscure and equivocal, until their meaning be liquidated and ascertained by a series of particular discussions and adjudications. Besides the obscurity arising from the complexity of objects, and the imperfection of the human faculties, the medium through which the conceptions of men are conveyed to each other, adds a fresh embarrassment... . No language is so copious as to supply words and phrases for every complex idea, or so correct as not to include many equivocally denoting different ideas. Hence, it must happen that however accurately objects may be discriminated in themselves, and however accurately the discrimination may be considered, the definition of them may be rendered inaccurate by the inaccuracy of the terms in which it is delivered. And this unavoidable inaccuracy must be greater or less, according to the complexity and novelty of the objects defined. n128
   n128. The Federalist No. 37, at 255 (James Madison) (Cynthia Brantley Johnson ed., 2004). It merits a note that Madison and other founders proposed an active role for judges in the legislative process by having members of the Supreme Court serve on a council of revision to help the President exercise the veto power. 2 The Records of the Federal Convention of 1787, at 73-80 (Max Farrand ed., 1911). Such a scheme, argued Madison, would help "preserve a consistency, conciseness, perspicuity & technical propriety in the laws, qualities peculiarly necessary; & yet shamefully wanting in our republican Codes." Id. at 74. With respect, I think that is one proposal whose rejection was well advised.

2016 Editions (Student and Practitioner) of Townsend on Federal Tax Procedure (8/21/16)

I have prepared my 2016 editions (Student and Practitioner) of my Federal Tax Procedure Book.  I am providing links to the pdf versions of those books:
  • Federal Tax Procedure (Student 2016), here. [SSRN link, here.]
  • Federal Tax Procedure (Practitioner 2016), here. [SSRN link, here]
I invite and welcome comments from  readers of these books as to how I might improve them.  Now that I am no longer actually teaching this course, I plan to keep up the publications and make them available once a year in August (hopefully so that those schools that use the book can do so at the beginning of the semester).  But, I no longer have the regular give and take with students on the subject and the book.  Hence, input from users of the book is invaluable.  I would appreciate input both on substance (errors and omissions as to content) and on style (grammar, syntax, misspelling, hard to understand sentences, etc.).  Please help me make this a better book (actually it is a single book -- the student version is the same as the practitioner version with the footnotes stripped out.

I have submitted these books to SSRN but they have not yet been cleared by their opaque processes.  When they are cleared, I will provide links in the columns to the right of this blog.

While I was teaching a class in Federal Tax Procedure (at UH Law School through Fall 2015), I used this blog for two purposes:  (i) to keep my students informed and (ii) to provide updates to the books.  I will continue to use this blog to provide such updates.  I will link all such updates as "Federal Tax Procedure Book - Errata."  In most cases, I will provide the appropriate page numbers for the errata, but some postings may be more general interest for tax procedure enthusiasts with no specific page numbers being appropriate.

I remind readers that the best blog on tax procedure is Procedurally Taxing, here.  You can get daily fixes (well most days' fixes) for your addictions to tax procedure on that blog.  My fixes on this blog will be more infrequent and more episodic and usually less nuanced and often less edifying.

For even more in depth reading on tax procedure, the best text is Michael Saltzman and Leslie Book, IRS Practice and Procedure (Thomsen Reuters 2015), here.  Leslie Book is a principal contributor to Procedurally Taxing, but his magnum opus is the Saltzman and Book book (sounds redundant but it is not).  This book is the go-to resource for depth on the subject.  (I have to disclose that I am the principal author for Chapter 12 dealing with Criminal Penalties and the Investigation Function.)

Saturday, March 12, 2016

District Court holds the § 6707 Tax Shelter Reporting penalty Not Divisible (3/12/16)

I previously reported on a case in the Court of Federal Claims, Diversified Group Inc. v. United States, 123 Fed. Cl. 442, 2015 U.S. Claims LEXIS 1276 (2015), here, appeal docketed, No. 16-1014 (Fed. Cir. October 6, 2015), here, that held that the § 6707 penalty was not divisible for purpose of the Flora, here, full payment rule for refund suits.  See Flora Full Payment Rule and the Rough Edges (Federal Tax Procedure Blog 9/17/15), here.  In Pfaff v. United States, Civil Action No. 14-cv-03349-PAB-NYW, 2016 U.S. Dist. LEXIS 30844 (D. Colo. Mar. 10, 2016) [no link available], in a much shorter opinion, the District Court reached the same result that, in my judgment, does not provide anything not covered in the Diversified Group opinion.

Monday, February 15, 2016

Justice Scalia on Chevron Deference (2/15/16)

The Country mourns the death of Justice Scalia.  Despite being prone to hyperbole, he was a force and, I think, generally for good.  He made us think about his statements which were the product of a keen mind.

I provide below some of the more substantive quotes and references in the tax procedure area from my Federal Tax Procedure book (the latest published version can be downloaded on SSRN - footnoted version here and nonfootnoted; I probably will have updated versions later this year).  Justice Scalia was not a tax lawyer, so his opinions in the tax area are few.  Most of his influence in the tax area is in the context of whether administrative agency pronouncement, principally Regulations, are subject to so-called Chevron deference.  In the tax context, the announcements are regulations and other announcement subject to Chevron or some lesser deference.  So most of the quotes below relate to Chevron deference in some of its many manifestations.  Justice Scalia early signaled the importance of Chevron deference in a lecture after the Chevron opinion reprinted in the Duke Law Journal (Antonin Scalia, Judicial Deference to Administrative Interpretations of Law, 1989 Duke L.J. 511,(footnotes omitted) here):
Administrative law is not for sissies -- so you should lean back, clutch the sides of your chairs, and steel yourselves for a pretty dull lecture. There will be a quiz afterwards. 
Five Terms ago, the Supreme Court issued its opinion in the case of Chevron, U.S.A., Inc. v. NRDC, which announced the principle that the courts will accept an agency's reasonable interpretation of the ambiguous terms of a statute that the agency administers. Dealing with the question whether the Environmental Protection Agency could permissibly adopt the "bubble concept" -- that is, a plantwide definition of "stationary source" -- under the Clean Air Act, Justice Stevens for a unanimous Court adopted an analytical approach that deals with the problem of judicial deference to agency interpretations of law in two steps: 
First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.  
Failing an affirmative response to the first inquiry, the Chevron analysis moves to step two: 
If, however, the court determines that Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute.
So, with that introduction, here are the significant Scalia quotes and references in my Federal Tax Procedure Book, primarily on Chevron:

On giving primacy to the text over other forms of statutory interpretation:
Some jurists, Justice Scalia the most visible, give primacy to the statutory text and are reluctant to look beyond the statutory text (for example, to the legislative history) for assistance in determining how the statutory text should be interpreted. fn15  They may discern what they often call the “plain meaning” to statutory text; in such cases, they profess to give little or no credence to broader legislative context, including legislative history (such as Committee Reports), because, they reason, only the statutory text was enacted by Congress and the text means what they believe it plainly says. fn 16  This approach to statutory interpretation is often called textualism. fn 17  If context is relevant at all to textualists, it is internal context (i.e., context within the statute itself rather than context determined from sources external to the statute) and perhaps the context of what the legislative words would mean to the hypothetical reasonable person versed in the English language as of the date of enactment (thus, for example,  permitting resort to a contemporaneous dictionary).  Other jurists find that broader legislative context assists in interpreting text and are willing to look to that broader context, most immediately the legislative history, to determine how the enacted text should be interpreted.  This approach to interpretation has different iterations that go by the terms intentionalism, purposivism and the practical reason (or dynamic) method.
   fn 15 Justice Scalia’s impact in the debate in terms of influencing others to the same position has been questioned.  See David S. Law and David Zaring, Law Versus Ideology: The Supreme Court and the Use of Legislative History, 51 Wm. and Mary L. Rev. 1653, 1659 (2010). Other authors conclude from smaller and perhaps less sophisticated samplings that Justice Scalia has had a significant impact, if not so much on other Justices on the Supreme Court then in the lower courts.  Id. 1671-1672, 1682.  Professors Law and Zaring, however, question the sophistication of the prior analyses to address the determinants in the use of legislative history.
   fn 16 Earlier in his career while on the D.C. Circuit Court of Appeals, Justice Scalia so pronounced by quoting a marvelous floor dialog between Senator Armstrong and Senator Dole, then Chair of the Finance Committee, in which Senator Dole denied having written or even read or even knowing whether any Senator wrote or even read the Committee Report and denied that the Report had been voted on by the Committee.  Hirschey v. F.E.R.C., 250 U.S. App. D.C. 1, 777 F.2d 1, 7 n.1 (D.C. Cir. 1985) (Scalia, J., concurring) (quoting 128 Cong. Rec. S8659 (daily ed. July 19, 1982)). Senator Armstrong concluded the dialog with the following comment: “[F]or any jurist, administrator, bureaucrat, tax practitioner, or others who might chance upon the written record of this proceeding, let me just make the point that this is not the law, it was not voted on, it is not subject to amendment, and we should discipline ourselves to the task of expressing congressional intent in the statute.”
   fn 17 See (also containing a fair general description of the concept and noting the difference between textualism, of which Justice Scalia is a proponent, and strict construction, of which Justice Scalia is not a proponent). 
On the use of legislative history in statutory interpretation, I quote from a law review article::

Thursday, December 17, 2015

Good Discussion of the Burden of Proof When the Trier of Fact Bases Decision on a Preponderance of the Evidence (12/17/15)

A case decided yesterday by the Fifth Circuit has a pretty good discussion on the effect of § 7491's shift of the burden of proof when the Tax Court may have improperly assigned the burden of proof under that section but had decided the case based on a preponderance of the evidence.  Brinkley v. Commissioner, ___ F.3d ___, 2015 U.S. App. LEXIS 21838 (5th Cir. 2015), here.

This is cumulative to what I state in the text book, but is probably a good reminder for students and new practitioners.  I incorporate the entire discussion on that subject:
A. The Allocation of the Burden of Proof 
"The allocation of the burden of proof [under I.R.C. § 7491] is a legal issue reviewed de novo." Whitehouse Hotel Ltd. P'ship v. Comm'r, 615 F.3d 321, 332 (5th Cir. 2010) (quoting Marathon Fin. Ins., Inc., RRG v. Ford Motor Co., 591 F.3d 458, 464 (5th Cir. 2009)). 
As a general rule, the Commissioner's determination of a tax deficiency is presumed correct, and the taxpayer has the burden of proving the determination to be erroneous. See Tax Ct. R. 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, I.R.C. §§ 6201(d) and 7491(a) set forth exceptions to this rule. Under § 6201(d), "if a taxpayer asserts a reasonable dispute with respect to any item of income . . . and the taxpayer has fully cooperated with the Secretary . . ., the Secretary shall have the burden of producing reasonable and probative information concerning such deficiency." Similarly, under § 7491(a), if "a taxpayer [(1)] introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax," n7 (2) complies with certain substantiation requirements, (3) "maintain[s] all records required under this title," and (4) "cooperate[s] with reasonable requests by the Secretary for witnesses, information, documents, meetings, and interviews," then "the Secretary shall have the burden of proof with respect to such issue." Nevertheless, this Court has held that the operation of this burden-shifting scheme is irrelevant when both parties have met their burdens of production and the preponderance of the evidence supports one party. See Whitehouse Hotel, 615 F.3d at 332; Knudsen v. Comm'r, 131 T.C. 185, 189 (2008) ("[A]n allocation of the burden of proof is relevant only when there is equal evidence on both sides.").
   n7 Although this Court has yet to speak on what constitutes "credible evidence," the Eighth and Tenth Circuits have defined the term to mean "the quality of evidence, which after critical analysis, the court would find sufficient upon which to base a decision on the issue if no contrary evidence were submitted. . . ." Blodgett v. Comm'r, 394 F.3d 1030, 1035 (8th Cir. 2005) (quoting Griffin v. Comm'r, 315 F.3d 1017, 1021 (8th Cir. 2003)); accord Rendall v. Comm'r, 535 F.3d 1221, 1225 (10th Cir. 2008) (citing Blodgett, 394 F.3d at 1035). 
Here, the tax court initially found that Brinkley "did not introduce credible evidence regarding the tax character of the income in issue that merited a shifting of th[e] burden [of proof] to [the Commissioner]" under §§ 6201(d) and 7491(a). But the court ultimately declined to hold Brinkley to his burden, concluding instead that "[t]he preponderance of the evidence, without regard to burden of proof, is that [under letter agreement II] petitioner received the value of his stock and compensation for service previously rendered or to be rendered in the future." Accordingly, the resolution of this issue turns on the tax court's finding that the preponderance of the evidence supports the Commissioner's position that the $3.1 million payout in letter agreement II amounted to compensation for both his stock and his services to Zave and/or Google -- and therefore was properly characterized as ordinary income. 
We agree with the tax court's finding that the preponderance of the evidence favors the Commissioner's deficiency determination, so any error in the court's allocation of the burden of proof is harmless. See Whitehouse Hotel, 615 F.3d at 332; Blodgett v. Comm'r, 394 F.3d 1030, 1039 (8th Cir. 2005).
Addendum 12/18/15 9:00am:

Saturday, November 14, 2015

Significant 2d Circuit Opinion on Lack of Waiver of Attorney-Client and Work Product Privileges in Common Interest Situation (11/14/16)

Note, this presentation was substantially revised on 11/15/16.

In Schaeffler v. United States, ___ F.3d ___, 2015 U.S. App. LEXIS 19617 (2d Cir. 2015), here, the Second Circuit rendered a major decision on the issue of waiver of the attorney client privilege, through § 7525, here, in a common legal interest context.  The Court's opening paragraph is:
Georg F.W. Schaeffler ("Mr. Schaeffler" or "Schaeffler") and associated entities ("Schaeffler Group") (collectively "appellants") appeal from Magistrate Judge Gorenstein's order denying a petition to quash an IRS summons. n1 We conclude that: (i) the attorney-client privilege was not waived by appellants' provision of documents to a consortium of banks ("Consortium") sharing a common legal interest in the tax treatment of a refinancing and corporate restructuring resulting from an ill-fated acquisition originally financed by the Consortium; and (ii) the work-product doctrine protects documents analyzing the tax treatment of the refinancing and restructuring prepared in anticipation of litigation with the IRS. We therefore vacate and remand.
So, how did the 2d Circuit justify that holding?  The opinion is relatively short, so that is the best source for its reasoning.  At the risk of oversimplification, I offer my short analysis of the points I think appropriate.

Schaeffler, a U.S. resident (perhaps not citizen), was 80% owner of a German corporation which attempted to acquire a minority interest in another German corporation by a tender offer.  German law requires such tender offers to at least offer to acquire all shares.  The offer, unfortunately, was made just before the 2008 financial crisis, hence "far more shareholders than expected or desired accepted [4]  the offer, leaving the Schaeffler Group the owner of nearly 89.9% of outstanding Continental AG shares."  The net result was that the Schaeffler Group had to re-group, so to speak, or refinance with its committed lenders.  That created a potential bust in the financing as a result of the decline in the market and German law.  That required coordination among all parties, including Schaeffler and the coordination in order to respond to the crisis.

From that re-grouping and refinancing and sharing among the parties of information, documents and legal analysis, this dispute arose.  Did that sharing among parties with a common legal interest waive the privileges -- attorney-client and work product?

The issue presented a subtlety in the application of the attorney-client privilege in a common-interest situation.  What exactly does it mean that sharing of otherwise attorney-client or work product privileged information among persons with a common interest preserves the privileges from waiver?  The opinion does not provide any black letter law on that issue, but does address the issue in the specific context before it.

The Second Circuit described the common interest rule as follows (omitting all citations and most quotation marks for easier readability):
While the privilege is generally waived by voluntary disclosure of the communication to another party, the privilege is not waived by disclosure of communications to a party that is engaged in a “common legal enterprise” with the holder of the privilege. Such disclosures remain privileged where a joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel in the course of an ongoing common enterprise and multiple clients share a common interest about a legal matter. The need to protect the free flow of information from client to attorney logically exists whenever multiple clients share a common interest about a legal matter. 
Parties may share a “common legal interest” even if they are not parties in ongoing litigation. The common-interest-rule serves to protect the confidentiality of communications passing from one party to the attorney for another party where a  joint defense effort or strategy has been decided upon and undertaken by the parties and their respective counsel. It is therefore unnecessary that there be actual litigation in progress for the common interest rule of the attorney-client privilege to apply. However, only those communications made in the course of an ongoing common enterprise and intended to further the enterprise are protected. The dispositive issue is, therefore, whether the Consortium's common interest with appellants was of a sufficient legal character to prevent a waiver by the sharing of those communications.
The Saltzman Tax Procedure treatise, here, has a good discussion of the common interest rule.  Saltzman and Book, Tax Practice and Procedure, ¶ 13.04[3][a][viii][A] Express waiver [of the attorney-client privilege].

The common interest rule has a specific application in criminal investigations and prosecutions where parties who are subjects, targets or defendants with common interests may enter a "joint defense agreement" ("JDA") as a formal expression of their common interest and commitment to preserve the privilege with respect to privileged information shared among them.  I thought readers might like something on the JDA, so I add the following from the last iteration of my self-published Tax Federal Tax Crimes Book, here (which I suspended after preparing Chapter 12 on Tax Crimes from the Saltzman Tax Procedure publication, here).  Here is where I left it off (not covered in the Saltzman chapter 12):
We attorneys think that we understand the attorney-client privilege, and at a basic level in most situations, undoubtedly we do.  The classic statement of the privilege is (8 Wigmore on Evidence 2292 (McNaughton rev. 1961)): 
(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived. 
Federal Courts apply a more generalized federal common law attorney-client privilege.  There is no definitive statement of this federal common law privilege, so Wigmore’s definition is often used as a starting point.  In addition, Proposed FRE 503(b), 56 F.R.D. 183, 326 (1972), although not adopted, is recognized as “a source of general guidance regarding federal common law principles.”   That proposed rule is: 
A client has a privilege to refuse to disclose and to prevent any other person from disclosing confidential communications made for the purpose of facilitating the rendition of professional legal services to the client, (1) between himself or his representative and his lawyer or his lawyer's representative, or (2) between his lawyer and the lawyer's representative, or (3) by him or his lawyer to a lawyer representing another in a matter of common interest, or (4) between representatives of the client or between the client and a representative of the client, or (5) between lawyers representing the client.
 I have bold-faced the key portion relevant to this blog entry.  The common interest privilege is the basis of Joint Defense Agreements ("JDA").  Here also is my discussion in the prior Federal Tax Crimes Book about Joint Defense Agreements (most footnotes omitted):
H. Joint Defense Agreements (“JDAs”). 
1. Theory of JDAs – Extension of Attorney-Client Privilege. 
Knowledge is power.  In a defense setting, obtaining information efficiently and effectively is power.  In multi-target investigations and multi-defendant prosecutions, each target or defendant may have information that would be important to the defense of the other targets or defendants.  Hence, the targets and defendants often feel a mutual need to share information for their mutual benefit.  Sharing the information, however, means the potential for damage if the information is misused.  No target or defendant wants to share information with other targets or defendants who might then turn it over to the Government.  And, no target or defendant wants the sharing of information to be treated as a waiver of the attorney-client privilege or work product privilege.  If these risks can be eliminated or at least mitigated sufficiently, the sharing of information among targets or defendants can be quite beneficial to them.  The JDA permits such sharing of information with at least acceptable tolerances for risk. 
 JDAs are based on the joint defense or common interest doctrine.  The joint defense doctrine permits parties investigated for or charged with a crime (hence a common interest) to share information pursuant to a joint defense agreement without waiving any of the parties’ attorney-client and work product privileges.  The doctrine is usually justified as an extension of the attorney-client privilege that makes, for some purposes (“some” is meant to be vague here), each attorney in the joint defense group (“JDG”) the attorney for each of the members of the JDG. fn1672  I  explore in this section some of the problems that this justification for the doctrine creates.
   fn 1672 United States v. Henke, 222 F.3d 633, 637 (9th Cir.2000); Wilson P. Abraham Construction Corp. v. Armco Steel Corp., 559 F.2d 250, 253 (5th Cir. 1977) (holding that an attorney  in a JDA is “in effect, counsel for all” and breaches his fiduciary duty if he uses information learned from one of the co-defendants pursuant to the JDA against that co-defendant); United States v. Melvin, 650 F.2d 641, 645-646 (5th Cir. 1981) (noting the “respectable body of law from other courts to the effect that the attorney-client privilege applies to confidential communications among attorneys and their clients for purposes of  a common defense” and string citing cases); United States v. BDO Seidman, 492 F.3d 806, 815-816 (7th Cir. 2007) (noting the doctrine “ extends the attorney-client privilege to otherwise non-confidential communications in limited circumstances.).”  Because, however, the JDA does not fit perfectly the paradigm of the attorney-client privilege (e.g,, can it be logically said that, by joining a JDA, an attorney for one participant becomes the attorney for all, thus raising conflicts questions and duty questions?), there have been various attempts at reformulating the justification for the doctrine in a way that does not implicate the attorney-client privilege.  See ABA Formal Opinion 95-395 (July 24, 1995);  Brown v. Doe, 2 F.3d 1236 (2d Cir. 1993) (describing the joint defense doctrine as creating a fiduciary relationship among the members of the JDG and their lawyers); Deborah Stavile Bartel, Reconceptualizing the Joint Defense Doctrine, 65 Fordham L. Rev. 871 (1996); and Amy Foote, Joint Defense Agreements in Criminal Prosecutions: Tactical and Ethical Implications, 12 Geo. J. Legal Ethics 377, 378 (1999).  Nevertheless, mainstream discussion by the courts and the commentators continue to emphasize the attorney-client privilege justification for the doctrine, even when they gerrymander the concept to avoid some of the problems from application of attorney-client privilege concepts.  
The purpose of the doctrine is to insure that members of the JDG can share otherwise privileged attorney-client communications or attorney work product without waiving either privilege.  The joint defense doctrine is thus more precisely is characterized as a derivative privilege to protect from waiver otherwise privileged information shared in the joint defense context.  This truism sets the limits of its application  – information that is not otherwise privileged does not become privileged simply because shared among parties who have entered a JDA.  Of course, there is also a truism that much of what will be shared will be otherwise privileged at least under the work product privilege. 
Most critically and immediately, of course, the members of the JDG do not want the Government to be able get to the information and use it against any member of the JDG in the criminal investigation and prosecution.  Beyond that, generally, if the JDA is to serve its intended purpose, there needs to be some assurance that the information will not be used in any context adverse to the members providing the information.  
 I will use a simple example to explore some of the issues presented by JDAs.  A and B are targets of a grand jury investigation.  A has engaged attorney X, and B has engaged you.  You and X are considering a JDA in which X will share with you otherwise privileged information he receives from A, and you likewise will share with X otherwise privileged information you receive from B.  A and B, and their respective attorneys, will commit under the JDA to maintain the confidentiality of the information so shared.  Is this really an attorney-client relationship between you and A?  If that is the case, can A object to your representing B if both are subsequently indicted or, worse, can the prosecutor urge that X and you are conflicted out in the criminal case because of that JDA?  Even if there is not strictly speaking a traditional full-bore attorney-client relationship between you and A, do you still have responsibilities to A with respect to using the information received from A or A’s attorney - specifically, can you use the information to benefit your client (B) even if it is adverse to A? n1675  On a more mundane level, do you have to do a conflicts check with respect to A and will you thereafter be conflicted in future representation based upon the relationship between you and A under the JDA?  Can you continue to represent B if A’s and B’s interests diverge?  Should your client decide to plea bargain, can you bring to the negotiating table the information you learned from A (either directly or through A’s lawyer, X)?  Do you have malpractice exposure to A?
   n1675 See ABA Comm. on Ethics and Prof'l Responsibility,  Formal Op. 95-395 (1995), titled “Obligations of a Lawyer who Formerly Represented a Client in Connection with a Joint Defense Consortium.”  This opinion reasons that, while the attorney has no ethical duties typical of the attorney-client relationship to the other parties to the JDA, the attorney does have fiduciary responsibilities limiting his use of information obtained pursuant to the JDA.  
I cannot provide here anything approaching a definitive discussion of these issues, but do address the more immediate ones that are raised by a JDA.  I do note at the outset, however, that, whatever the full ramifications of the JDA are, at a minimum, an attorney considering having his client enter a JDA should perform a conflict check for each client in the JDG and insist that each of the attorneys in the JDG do so likewise.  Furthermore, if possible, the issues raised above should be discussed and dealt with in the JDA in a way that all parties understand how the risks in the JDA are assigned among the parties.
In my now discontinued treatise, I discuss some of the subtleties of the JDA which are also present in the general common interest area but become accentuated in the criminal investigation or prosecution context.

In Schaeffler, the parties entered a common interest agreement (see p. 6, fn. 3):
3. When the Schaeffler Group and the Consortium agreed to share legal analyses, they signed an agreement, styled the “Attorney Client Privilege Agreement.” Of course, the title of that agreement was not binding on the district court and is not binding on us. The Agreement is relevant, however, to the issues of whether the Schaeffler Group and the Consortium maintained confidentiality with regard to third parties and were pursuing a common legal interest.
This is the same as a JDA which is the terminology used in criminal investigations and prosecutions. The following from the discussion of JDA's may be helpful in this respect (footnotes omitted):
2. Types of JDAs. 
There is no standard JDA.  The terms and scope of the JDA vary with the needs and risk-tolerances of the members of the JDG.  One author has noted: 
The cooperative arrangement can take a variety of shapes. Sometimes the lawyers exchange legal or factual memoranda without sharing client confidences. Sometimes the lawyers meet and disclose, either orally or via memoranda, their respective clients' confidential statements. Other times, the lawyers and co-defendants find it best to meet together to discuss joint defense strategy.  It also happens that in pursuit of a joint defense, the lawyer for one co-defendant, or one of the lawyer's agents - such as a criminal investigator or an accountant - may meet separately or communicate directly with a co-defendant who is not his client in the absence of that co-defendant's lawyer.  
My experience reflects other potential uses of the JDA.  In a document intensive investigation or prosecution, the parties may agree to keep a jointly accessible collection or database of documents and research which may be divided up among the lawyers in order to minimize costs and maximize efficiency.  The precise shape and terms of the JDA will be negotiated among counsel for the members of the JDG. 
Because there is no standard JDA, an informal oral JDA raises a real risk that the parties will be unable to prove the existence of a JDA with sufficient terms clearly agreed upon that a court would find the JDA existed.  That does not mean that a JDA must be written in all cases.  Oral JDAs the terms of which can be proved will perform the intended function (depending upon the terms).  Moreover, sometimes the ebb and flow of communication between counsel simply does not permit the time and effort required to hammer out a written JDA. Such informal JDAs should be entered only with an understanding that the benefits to be achieved by foregoing the effort to hammer out the written JDA outweigh the benefits of getting it in writing.
Work Product Privilege.

The Schaeffler also held that the work product privilege applied to an EY Tax Memo.  The Court held that its precedent in United States v. Adlman, 134 F.3d 1194 (2d Cir. 1998) controlled because there was sufficient nexus between the work performed and the prospect of litigation over the major transaction.
[The EY Tax Advice] was specifically aimed at addressing the urgent circumstances arising from the need for a refinancing and restructuring and was necessarily geared to an anticipated audit and subsequent litigation, which was on this record highly likely. See Adlman, 134 F.3d at 1195 (predicted litigation was virtually inevitable because of size of transaction and losses). 
We also disagree with the district court's characterization of the form of the advice EY would be ethically and legally required to give appellants even in the absence of anticipated litigation. Neither professional standards, tax laws, nor IRS regulations required that appellants' tax advisors provide the kind of highly detailed, litigation-focused analysis and advice included in the EY Tax Memo. Cf. id. at 1195 (noting extraordinary detail in 58-page memorandum). The standards relied upon by the district court all target concerns over the "audit lottery," in which aggressive tax advisers might recommend risky tax positions solely because the particular clients were statistically unlikely ever to be audited. See ABA Formal Op. 85-352 (1985) (establishing a governing standard requiring lawyers to advise clients whether a position is likely to withstand litigation). That policy concern is simply not implicated here where appellants would not have sought the same level of detail if merely preparing an annual routine tax return with no particular prospect of litigation.