April 25, 2012

Attorney-Client Privilege in Trust Administration

Few areas of the law are as well-known to the public as the attorney-client privilege. The privilege allows for client communications with their lawyer to be held in strict confidence. Evid C §§952, 954. A lawyer may only disclose this information under very specific circumstances. The following two major cases addressed the applicability of the attorney-client privilege in trust administration cases.

Moeller v. Superior Court (1997) 16 C4th 1124

George Moeller and Grace Todd Moeller, husband and wife, created a trust in which George served as the initial trustee. George later resigned as trustee and Sanwa Bank assumed the office of trustee. The trust owned a parcel of land which was leased to a chrome plating business. 

During its operations, the business  severely contaminated the soil. This contamination appreciably depleted the trust estate whereby Sanwa Bank decided to resign as trustee because of presumably insufficient funds. Prior to its resignation, Sanwa Bank rendered a final accounting and deducted various fees from the trust. George's son Roger, Sanwa Bank's successor, objected to the accounting. 

Roger requested various documents from Sanwa Bank as support for the accounting it had rendered. Sanwa Bank responded that it had given Roger the appropriate documentation and the documents that were not provided was privileged information, i.e. communications from Sanwa Bank and its attorneys. Roger then petitioned to have this information disclosed nonetheless.

Roger's case weaved its way through the California court system before eventually ending up in the California Supreme Court. It held that "a successor trustee, unless the trust instrument otherwise provides, assumes the power to assert the attorney-client privilege as to confidential communications between an attorney and a predecessor trustee on the subject of trust administration, so long as the predecessor was acting in the official capacity of trustee rather than in a personal capacity."

In plain English, the Court held that Roger could request documents detailing the communications Sanwa Bank had with its attorneys because he was the successor trustee. 

Wells Fargo Bank v. Superior Court (2000) 22 C4th 201

William Couch established a trust in October 1991. He served as the sole trustee until his death in March 1992. Upon his death, Wells Fargo and Rosa Couch, William's surviving spouse, became the successor trustees. Years later, certain trust beneficiaries became agitated that the trustees were allegedly not making proper distributions. Consequently, the trust beneficiaries petitioned to have both trustees removed. During litigation, the trust beneficiaries asked for documents detailing the communications from Wells Fargo and its attorneys, O'Melveny & Myers, a prominent international law firm. Wells Fargo naturally balked at this request, citing the attorney-client privilege.

Like Moeller, Wells Fargo Bank meandered through the California court system before eventually landing in the California Supreme Court. However, the Court this time held that the petitioners were not entitled to discover client communications between Wells Fargo and its counsel because there is "no authority in California law for requiring a trustee to produce communications protected by the attorney-client privilege, regardless of their subject matter."

The distinguishing feature between these two cases is the person requesting the discovery of client communications. In Moeller, the successor trustee asked to discover the otherwise privileged communication. Conversely, in Wells Fargo, the beneficiaries requested to discover trustee communications with its lawyer.