ATTORNEY-CLIENT PRIVILEGE IN , ADMINISTRATION AND LITIGATION

Hon. Anne E. Lazarus Judge of the Superior Court of Pennsylvania

Adam T. Gusdorff, Esq. Heckscher Teillon Terrill & Sager, P.C. 1

Jennifer DiVeterano Gayle, Esq. Mannion Prior, LLP THE ATTORNEY-CLIENT PRIVILEGE

 In Pennsylvania, the attorney-client privilege is statutory:

In a civil matter counsel shall not be competent or permitted to testify to confidential communications made to him by his client, nor shall the client be compelled to disclosed the same, unless in either case the privilege is waived upon the trial by the client.

20 Pa. C.S.A. § 5928.

2 GENERAL PRINCIPLES

 The attorney-client privilege operates in a two- way fashion, protecting all:  confidential client-to-attorney communications and  confidential attorney-to-client communications made for the purpose of obtaining or providing professional legal advice.

Gillard v. AIG Ins. Co., 15 A.3d 44, 59 (Pa. 2011).

 The privilege is not affected by the Pennsylvania Rules of Evidence. 3 RATIONALE AND PURPOSE

The attorney-client Rather, the purpose of privilege is not concerned the attorney-client with: privilege is:

 prejudice;  to foster a confidence  the ascertainment of the between client and truth; or attorney that will “lead to a trusting and open  the reliability of attorney- attorney-client dialogue.” client communications.

“The aim of the attorney-client privilege is ‘to encourage full and frank communication between attorneys and clients thereby promoting broader public interests in the observance of law and administration of justice.’” U.S. v. Jicarilla Apache Nation, 564 U.S. 162, 169 (2011) (quoting 4 Upjohn Co. v. U.S., 449 U.S. 383, 389 (1981)) PRIVILEGE DISTINGUISHED FROM CONFIDENTIALITY

 Duty of Confidentiality under Pa. R.P.C. 1.6:  Broader than attorney-client privilege  Not substantive law  Applies in situations other than where evidence sought from attorney through compulsion of law

 “Derivative” duties of counsel to beneficiaries under Pew Trust:  Prohibit attorney from taking advantage of position to detriment of estate or beneficiaries  May require attorney to take affirmative action to protect interests of beneficiaries 5 PRIVILEGE DISTINGUISHED FROM WORK PRODUCT DOCTRINE

 Work Product Doctrine under Pa. R.C.P. 4003.3:  Broader than attorney-client privilege  Protects the mental impressions of a party’s attorney and his or her conclusions, opinions, memoranda, notes or summaries, legal research or legal theories.  Protects the mental impressions of the attorneys’ agent and his or her conclusions or opinions respecting the value or merit of a claim or defense or respecting strategy or tactics.  Belongs to the attorney, not the client  But, the client may waive the work product doctrine by invoking a good faith reliance on advice of counsel defense.

6 THE BASICS

 The client holds the privilege and has the right to assert it.  Four elements must be met to invoke the attorney- client privilege: 1. The person asserting the privilege is, or seeks to be, a client; 2. The communication is between the person and an attorney, or the attorney’s subordinate; 3. The communication relates to a fact of which the attorney was informed by the client, without the presence of strangers, for the purpose of seeking legal advice, and not for the purpose of committing a crime or tort; and 4. The privilege has been claimed and is not waived by the client. 7 GREGURY V. GREGURAS

 The attorney-client privilege may not be used as a shield during discovery, then waived at trial.  “An eleventh-hour waiver has considerable potential to create unfair surprise and prejudice to the other party, and it is the role of the trial court to prevent it by reasonable means.”

196 A.3d 619 (Pa. Super. 2018) (en banc), app. den. 205 A.3d 1230 (Pa. 2019)

8 THE BASICS, CONTINUED

 The attorney-client privilege survives:  the termination of the attorney-client relationship; and  the death of the client.

 However, death “substantially reduces” the possibility that the client’s rights and interests could be significantly affected by disclosure of the confidential communications.”

Cohen v. Jenkintown Cab. Co., 357 A.2d 689, 693 (Pa. Super. 1976). 9 THE JOINT CLIENT PRIVILEGE

 The joint client privilege applies when multiple clients hire the same attorney to represent them on matters of common interest.  A communication of either co-client that otherwise qualifies as privileged and relates to matters of common interest is privileged as against third parties.  The communications are not privileged as between co-clients.  The joint client privilege may only be waived by the consent of all joint clients.

10 REPRESENTATION OF MULTIPLE CLIENTS

 Rule 1.7(a). : Current Clients  A lawyer shall not represent a client if the representation involves a concurrent conflict of interest.  A concurrent conflict of interest exists if:  the representation of one client will be directly adverse to another client; or  there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person, or by a personal interest of the lawyer.

11 REPRESENTATION OF MULTIPLE CLIENTS

 Rule 1.7(b). Conflict of Interest: Current Clients  Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:  the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;  the representation is not prohibited by law;  the representation does not involve the assertion of a claim by one client against the other client in the same litigation; and  each affected client gives informed consent.

12 THE JOINT DEFENSE DOCTRINE

 The joint defense doctrine extends the attorney- client privilege to a group of two or more clients who have retained separate counsel when each has a common interest in the litigation.  The joint defense privilege protects communications between an individual and an attorney for another party if they form “part of an on-going and joint effort to set up a common defense strategy.”

13 THE JOINT DEFENSE DOCTRINE

 There are four factors for the privilege to apply: 1. the parties’ agreement; 2. a common interest in the litigation or jointly shared litigation strategy; 3. the communications were made pursuant to such agreement; and 4. the continued confidentiality of the communication.

Pennsylvania Public Utility Comm’n v. Sunrise Energy, LLC, 177 A.3d 438 (Pa. Commw. 2018).

 A written agreement is not necessary. 14 PROCEDURAL ISSUES

 Pennsylvania law imposes a shifting burden of proof in disputes over disclosure of communications allegedly protected by the attorney-client privilege.  The party invoking a privilege must initially set forth facts showing that the privilege has been property invoked.  The burden then shifts to the party seeking disclosure to set forth facts showing that disclosure will not violate the attorney-client privilege.

15 PROCEDURAL ISSUES

 During discovery:  Generally, a discovery order is not immediately appealable.  However, a court order requiring disclosure of privileged material is immediately appealable as a collateral order under Pa. R.A.P. 313 as:  the order is separable from and collateral to the main cause of action;  the right involved is too important to be denied review; and  the question presented is such that if review is postponed until final judgment in the case, the claim will be irreparably lost.

16 PROCEDURAL ISSUES

 At trial:  The court may not hear testimony or accept evidence subject to a later ruling on an objection based upon the attorney-client privilege.  The statute proscribes “not only giving evidentiary consideration to confidential communications, but also their very disclosure.”

Estate of Kofsky, 409 A.2d 1358, 1362 (Pa. 1979).

17 WAIVER OF THE ATTORNEY-CLIENT PRIVILEGE

 The attorney client privilege may be waived by:  The client’s own act  Disclosure to third party  Failing to object at the Trial Court level  Inadvertent disclosure in discovery  When the client puts the advice at issue:  Subsequent adversarial proceeding between the client and counsel; or  Client raises good faith reliance on advice of counsel as an affirmative defense in litigation.

18 THE TESTAMENTARY EXCEPTION

 United State Supreme Court recognized a “testamentary exception” for over a century:

[I]n a suit between devisees under a will, statements made by the deceased to counsel respecting the execution of the will, or other similar document, are not privileged.

Glover v. Patten, 165 U.S. 394, 406 (1897).

19 THE TESTAMENTARY EXCEPTION

 Theavos Estate, 30 Fiduc. Rep. 2d 140 (O.C. Centre 2010)  Recognized the “testamentary exception” for the first time in Pennsylvania, finding that such an exception “furthers the client’s intent.”  Concluded that such exception is proper where “deceased holder of attorney-client privilege is suspected of having been unduly influenced to change the planned disposition of his estate after his death.”  Acknowledged that the documentation sought may eliminate or affirm the caveator’s/contestant’s suspicions. 20 THE TESTAMENTARY EXCEPTION

 Hughes Estate, 8 Fiduc. Rep. 3d 169 (O.C. Cumb 2018)  Granted petition of putative beneficiary seeking waiver of attorney-client privilege, as “there is no doubt that the interests of justice would be frustrated by an exercise of the attorney-client privilege.”

21 THE TESTAMENTARY EXCEPTION

 Fasick Estate, 3 Fiduc. Rep. 3d 89 (O.C. Cumb. 2012)  Petition to obtain copies of prior Wills under which charity believed it would receive larger share of estate granted.  Court analogized the petition to one for pre-complaint discovery, and held that it would be inequitable to require the charity to file “a premature will contest before it has access to the predicate documents necessary to maintain such an action.”  Concluded that testamentary exception to attorney- client privilege “renders the prior wills discoverable.” 22 THE TESTAMENTARY EXCEPTION

 Collautt v. Li, Civ. No. 14-632, 2014 WL 6988657 (E.D. Pa. Dec. 11, 2014)  Applying Pennsylvania law, declined to extend testamentary exception to attorney-client communications concerning the beneficiary designation on a life insurance policy.  Held that designation of beneficiaries of life insurance are contractual in nature, and not subject to the testamentary exception.  But see, Estate of Rood, 121 A.3d 1104 (Pa. Super. 2015) (concluding that pay-on-death accounts are “testamentary dispositions” subject to spousal election, notwithstanding language in statute stating that such accounts are “not testamentary”.) 23 THE FIDUCIARY EXCEPTION

 Under the fiduciary exception to the attorney- client privilege, the beneficiaries of a trust are entitled to discover communications between the fiduciary and trust counsel generated in the course of administering the trust.  The fiduciary exception was first recognized in the United States in Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970) (denying protection of attorney- client privilege for legal advice sought by corporate managers in shareholders’ derivative action).

24 THE FIDUCIARY EXCEPTION

 Riggs Nat’l Bank v. Zimmer, 355 A.2d 709 (Del. Ch. 1976)  Granted beneficiaries’ motion to compel production of memorandum prepared by trust counsel and paid for from the trust funds, concluding that beneficiaries were “real clients” of the lawyer.  Reasoned that advice had been obtained by the trustee at a time when there was no adversity between the trustees and the beneficiaries and there was no indication that the memorandum was intended for any purpose but to benefit the trust (as opposed to the trustees individually).  Distinguished advice at issue from advice obtained “at the trustee’s own expense and for his own protection.” 25 THE FIDUCIARY EXCEPTION

 Follansbee v. Gerlach, 56 Pa. D. & C.4th 483, 22 Fiduc. Rep. 2d 319 (C.C.P. Allegh. 2002)  Recognized the fiduciary exception for the first time in Pennsylvania “because of the obligation the law places on a trustee to furnish to the beneficiaries full and complete information regarding the trust.”  Concluded that the attorney-client privilege never attached to communications between trustees and trust counsel because “the Code provides that the trustee has a duty to produce all such information.”

26 THE FIDUCIARY EXCEPTION

 Follansbee v. Gerlach, continued  Concluded that “where a request is made in good faith, the beneficiary is entitled to inspect ‘all documents in the hands of the trustee pertaining to the trust.’”  Found that the duty to produce documents relating to the administration of a trust extends to “opinions of counsel procured by the trustee to guide the trustee in the administration of the trust.”  Rejected notion that beneficiaries were the “real client” or included within client group.

27 THE FIDUCIARY EXCEPTION

 Follansbee v. Gerlach, continued  Recognized the exception to the fiduciary exception, explaining that “legal advice obtained by a trustee, where its interests differ from the interests of the beneficiaries, is protected by the attorney-client privilege.”  Consistent with the Second and Third Restatements of Trusts:  Restatement (Second) of Trusts § 173, cmt. b recognizes protection of information obtained by trustee at his own expense for his own protection.  Restatement (Third) of Trusts § 82, cmt. recognizes protection of opinions and communications with counsel retained for the trustee’s protection in court or in 28 anticipation of litigation. THE FIDUCIARY EXCEPTION

 There are four policy reasons that support recognition of the fiduciary exception: 1. The beneficiary is, in effect, paying for the advice; 2. Trust counsel owes derivative duties to the beneficiary by virtue of the fiduciary relationship; 3. The beneficiary has a right to information regarding the trust to protect his interest in the trust; and 4. The exception to the fiduciary exception maintains the attorney-client privilege for true adversarial relationships.

29 THE FIDUCIARY EXCEPTION

 Warriner Trust, 6 Fiduc. Rep. 3d 223 (O.C. Susq. 2016)  Concluded that beneficiaries are “entitled to the documents that were paid for with trust monies.”  Found that there was nothing in the record to establish whether there had been any cost, to the trust or otherwise, for the opinions obtained from the corporate trustee’s in-house counsel, and, therefore, held that they could not be excluded from production under the fiduciary exception.  Restatement (Second) of Trusts § 173, cmt. b  Recognizes protection of information obtained by trustee at his own expense for his own protection. 30 THE FIDUCIARY EXCEPTION

 Trust counsel’s derivative duties to beneficiaries:  Pew Trust, 328 A.2d 158 (Pa. 1974)  Concluded that estate counsel owes “derivative duties” to beneficiaries and has obligation to rectify situation counsel observes his client taking that is improper.

 Pa. Ethics Op. 91-62A (1991)  Counsel retained by administrator of estate represents the estate and not the administrator “where the interests of the estate diverge from those of the administrator.”

31 THE FIDUCIARY EXCEPTION

 The beneficiary’s right to information:  Uniform Trust Act, 20 Pa. C.S.A. §7780.3  The trustee of an irrevocable trust has a duty to respond to “reasonable requests” from the settlor or from a beneficiary for information related to the trust’s administration.  The beneficiary has a right to receive periodic written financial reports at least annually, upon request.  Estate of Rosenblum, 328 A.2d 158 (Pa. 1974)  Adopted Section 173 of the Restatement (Second) of Trusts  Held that the right of access to records is an essential part of a beneficiary’s right to complete information concerning the administration of the trust.

32 THE FIDUCIARY EXCEPTION

 Pa. R.C.P. 1.6. Confidentiality of Information  Comments explain that “other law” may require the lawyer to disclose confidential information about a client.  Whether such law supersedes Rule 1.6 “is a question beyond the scope of these Rules.”  Thouron Estate (No. 2), 3 Fiduc. Rep. 3d 443 (O.C. Chester 2013)  Applied the fiduciary exception to a decedent’s estate.  Distinguished between communications with counsel regarding administration and those related to the defensive interests of the fiduciary. 33 THE FIDUCIARY EXCEPTION

 Warriner Trust, 6 Fiduc. Rep. 3d 223 (O.C. Susq. 2016)  Trustee can only withhold documents based upon the attorney-client privilege and/or the work product doctrine when such documents were generated when there was threatened or pending litigation.

“It is difficult to comprehend a scenario where a fiduciary should be permitted to hide anything from the beneficiaries, aside from an active litigation between the parties where the fiduciary relationship has already been impaired.”

34 THE FIDUCIARY EXCEPTION

 In re Estate of McAleer, 194 A.3d 587 (Pa. Super. 2018, app. granted, 201 A.3d 724 (Pa. 2019)  Quashed trustee’s appeal of order directing production of attorney invoices because counsel had not raised “colorable claim” of privilege before trial court.  Considered trustee’s duty to provide information to beneficiary under Rosenblum and the Restatement (Third) of Trusts.  Distinguished communications made for the purpose of administration and those for the purpose of litigation, but observed that record lacked evidence that communications related to litigation. 35 THE FIDUCIARY EXCEPTION

 In re Estate of McAleer, continued  Petition for Allowance of Appeal granted, with the issue on appeal framed as follows:

Do the attorney-client privilege and work product doctrines protect communications between a trustee and counsel from discovery by beneficiaries when the communications arose in the context of adversarial proceedings between the trustees and beneficiaries?

36 THE END 37