Chapter 7 The “fiduciary Exception”

• Library: A Virginia-Specific Summary Guide: Attorney-Client Privilege & Work Product Doctrine (Virginia CLE) (2016 Ed.)

Chapter 7

THE "FIDUCIARY EXCEPTION"

7.1 INTRODUCTION

In some situations, the law considers a fiduciary's lawyer's real "client" to be the beneficiary, rather than the fiduciary. This concept implicates the attorney-client privilege's ownership.

7.2 HISTORIC TRUST PRINCIPLE

Traditional trust doctrine rooted in English law considered a trust's beneficiary to be the trustee's lawyer's real client. This approach meant that the trustee could not withhold from the beneficiary communications between the trustee and his or her lawyer about the trust's administration.

7.3 SHAREHOLDERS' RIGHT TO PRIVILEGED COMMUNICATIONS

Traditional English trust principles eventually merged with a somewhat parallel approach that United States courts initially took in derivative litigation. [7.301]

This doctrine is known as the Garner doctrine, named for a 1970 Fifth Circuit case. ¹ In Garner, the court recognized that in some limited situations a corporation's shareholders should be considered the true "client" of the company's lawyer. [7.302]

• This made sense in derivative lawsuits, in which the shareholders essentially step into the shoes of management and pursue some action that they claim management wrongfully failed to pursue.

• Many courts now accept the Garner doctrine.

Some courts have rejected the Garner doctrine. [7.303]

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Unlike the traditional trust principle in which a trust's beneficiaries were nearly automatically entitled to seek communications between the trustee and its lawyer, the Garner doctrine includes a requirement that shareholders establish "good cause" for access between management's communications with the company's lawyer. [7.304]

Courts disagree about whether plaintiffs seeking to apply the Garner doctrine have to prove that they were shareholders at the pertinent time. [7.305]

The Garner doctrine recognizes that shareholders can renew their request for such access, based on changed circumstances. [7.306]

Courts disagree about the doctrine's application to work product. ² [7.307]

Some courts later expanded the Garner doctrine beyond derivative lawsuits—applying the same basic principle even in shareholders' direct lawsuits against their company. However, some courts have rejected such an expansion. [7.308]

7.4 NAMING THE EXPANDED DOCTRINE

Courts relying on both the traditional trust principle and the more recent Garner doctrine eventually relied on their common theme in applying the same approach to other fiduciaries who receive...