United States v. Sanmina Corporation and Subsidiaries, 3:15-cv-00092

Background

Sanmina claimed a $503 million worthless-stock deduction for its stake in Sanmina International AG on its 2009 tax return and attached a DLA Piper valuation report supporting the deduction.
DLA Piper’s 102‑page report referenced two internal Sanmina memoranda (July 2006 and March 2009) that analyzed legal/tax issues concerning intercompany claims and the AG liquidation.
The IRS issued a summons seeking the two memoranda; Sanmina withheld them as attorney‑client privileged and work product and refused to produce them after being summoned.
The IRS filed to enforce the summons, making the Powell prima facie showing required for enforcement; Sanmina timely asserted privilege, submitted a privilege log, and provided declarations describing the memoranda.
The court reviewed the parties’ submissions and oral argument and denied the IRS’s petition, holding the memoranda were protected by attorney‑client privilege and the work product doctrine and that no waiver occurred.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the memoranda are protected by the attorney‑client privilege	Memoranda were business/valuation materials, not legal advice; therefore not privileged	Drafted by in‑house tax lawyers, contain legal analysis and were distributed confidentially to those who needed legal advice	Privilege attaches — memoranda are legal advice from attorneys and thus privileged
Whether disclosure (via DLA Piper report or sharing with auditors/tax preparers) waived privilege	DLA Piper report’s reliance and transmittal to outside auditors waived privilege as to subject matter	DLA Piper was counsel; disclosures were to tax practitioners or counsel and did not reveal content — no subject‑matter waiver	No waiver — limited distribution and DLA Piper’s report did not disclose memoranda content
Whether the memoranda are protected as work product (prepared in anticipation of litigation)	Not prepared because of litigation or audit; were for tax return preparation or routine business purposes	Size/complexity of transaction and likelihood of IRS scrutiny meant materials were prepared because of anticipated IRS challenge	Work product protection applies under the "because of" standard — memoranda prepared with an eye toward potential IRS dispute
Whether disclosure to DLA Piper, auditors, or production of DLA Piper report waived work product protection	Production of the DLA Piper report to IRS (an adversary) waived work product	Disclosures were consistent with maintaining secrecy from adversaries; DLA Piper report referenced but did not reveal privileged work product	No waiver of work product — disclosure did not substantially increase adversaries’ opportunity to obtain the protected information

Key Cases Cited

Upjohn Co. v. United States, 449 U.S. 383 (U.S. 1981) (attorney‑client privilege protects internal corporate communications to counsel)
United States v. Powell, 379 U.S. 48 (U.S. 1964) (requirements for prima facie enforcement of IRS summons)
United States v. Dynavac, Inc., 6 F.3d 1407 (9th Cir. 1993) (discussion of IRS summons enforcement and burden)
United States v. Adlman, 134 F.3d 1194 (2d Cir. 1998) (work product doctrine reaches documents prepared "because of" anticipated litigation)
United States v. Roxworthy, 457 F.3d 590 (6th Cir. 2006) (anticipation of IRS audit can suffice for work product protection)