(Reuters) - The U.S. Supreme Court on Monday wrestled with to what extent attorney-client privilege shields lawyers' communications with their clients from disclosure when the documents contain more than just legal advice and address other matters.

The justices heard arguments in a law firm's appeal of court orders holding it in contempt after it refused to comply with a federal grand jury subpoena in a criminal tax investigation of one of its clients and turn over certain communications.

The firm, whose name is sealed, specializes in international tax issues and advised a client that the government says was an early promoter of bitcoin who expatriated himself from the United States in 2014.

The law firm says it prepared the client's tax returns and also provided legal advice on how to determine ownership of cryptocurrency assets and value them.

In response to a grand jury subpoena seeking records related to the preparation of the client's tax returns, the firm produced over 20,000 pages of records but withheld others citing attorney-client privilege.

When a court ordered it to turn over about 54 others, it resisted. Those records, the firm said, were “dual-purpose” communications that contained legal advice as well as non-legal, advice concerning that preparation of its tax returns.

But the San Francisco-based 9th Circuit Court of Appeals upheld the lower-court judge in saying legal advice had to be the "primary" purpose of the communication to qualify for attorney-client privilege.

That ruling was at odds with what some other federal appeals courts have ruled in similar cases. The law firm's appeal of the 9th Circuit's ruling is being closely watched by lawyers' groups like the American Bar Association , which filed a brief supporting it.

Daniel Levin, a lawyer for the law firm at Munger, Tolles & Olson, argued the 9th Circuit's adopted an "inherently impossible" approach for judges to apply in sorting out whether a communication is protected.

He argued instead that it was enough to show legal advice was a "significant purpose," a standard that "protects clients' ability to seek bona fide legal advice from lawyers in situation where legal and non-legal purposes can't be separated."

Assistant Solicitor General Masha Hansford countered that the expansive standard Levin advocated would mean "any non-pretextual legal purpose, no matter how minor, will do."

But Chief Justice John Roberts said the Justice Department's narrow approach "really puts a lot of work on the judge" in requiring them to "parse" through records to determine if their main purpose was legal advice or not.

Conservative Justice Clarence Thomas, on the other hand, raised concerns about legal advice being a significant but "very minor subsidiary point" of a business communication, a point the court's three liberal justices echoed.

"I don't know why lawyer advice that's predominantly business should be protected simply because you sneak in some minor legal consideration," Justice Sonia Sotomayor said.

Liberal Justice Elena Kagan noted no federal appeals court until 2014 had suggested a different standard should apply. She jokingly asked Levin to comment on "the ancient legal principle, of if it ain't broke, don't fix it."

The case is In re Grand Jury, U.S. Supreme Court, No. 21-1397.

For the law firm: Daniel Levin of Munger, Tolles & Olson

For the United States: Masha Hansford of the U.S. Department of Justice

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