The fiduciary's lawyer-client privilege: does it protect communications from discovery by a beneficiary?

• Author: Falk, Jr., Jack A.
• Position: Florida

Lawyers whose practice involves estates or trusts often assume that the lawyer-client privilege generally applicable to communications between a lawyer and client shields from discovery communications between a lawyer and a client who is a fiduciary. This article discusses whether a beneficiary may discover communications between a lawyer and fiduciary concerning the administration of a trust and the approaches used by courts to analyze the issue. It also includes suggestions on how a lawyer and fiduciary should consider practicing given the uncertainty in the law concerning whether the communications can be discovered by a beneficiary.

Florida Law

* The Lawyer-client Privilege

Florida recognizes a lawyer-client privilege that is applicable to confidential communications between a lawyer and client. (1) The lawyer-client privilege is the oldest of the privileges for confidential communications known in the common law and existed as part of the common law of Florida until its codification. (2) The privilege was first codified by statute in 1976 and remains so to this day. (3) The privilege promotes the administration of justice by encouraging full disclosure by clients to their counsel. (4)

A "client" is defined by statute in Florida's Evidence Code as "any person, public officer, corporation, association or other organization or entity, either public or private, who consults with a lawyer for the purpose of obtaining legal services by a lawyer." (5) A person, bank, or truest company who serves as a trustee or personal representative is unquestionably a "client" as that term is defined. It therefore appears from the plain wording of the statute that the privilege should apply to confidential communications between a lawyer and a fiduciary client no less than a nonfiduciary client. (6) But to ignore the nature and essence of the relationship between a fiduciary and beneficiary misses the mark when examining the lawyer fiduciary privilege.

* Fiduciary Obligations Owed to Beneficiary

A trustee is charged with a fundamental duty to "administer a trust diligently for the benefit of the beneficiaries." (7) A personal representative has a similar duty to administer an estate diligently for the benefit of the beneficiaries and creditors. (8) Of the array of duties owed to a beneficiary, a trustee has a duty to keep the beneficiaries reasonably informed about the trust and its administration. (9) At the reasonable request of a beneficiary, a trustee "shall provide a beneficiary with relevant information about the assets of the trust and the particulars relating to administration." (10) If requested, a fiduciary also is obliged to provide the beneficiary "complete and accurate information as to the nature and amounts of trust property, and permit him ... to inspect the ... accounts and vouchers and other documents relating to the trust." (11) Last but not least, the fiduciary owes the beneficiary duties of good faith and loyalty in administering the trust for the benefit of the beneficiaries. (12) Because the fiduciary's efforts must be driven and circumscribed by these duties, courts have come to differing conclusions about whether the lawyer-client privilege overrides the fiduciary's duties to a beneficiary.

* Florida Case Law: Who Is the Real Client, the Fiduciary or Beneficiary?

In the first case in Florida to directly address whether the lawyer-client privilege applies to a fiduciary from whom discovery is sought by a beneficiary, Barnett Banks Trust Company v. Compson, 629 So. 2d 849 (Fla. 2d DCA 1993), the court denied a beneficiary's discovery of communications between a lawyer and fiduciary client. The decedent's widow claimed ownership of assets that were part of the decedent's testamentary trust, of which the widow was a trust beneficiary. The lower court found that the widow was entitled to discovery of the communications. The Second District reversed finding that the documents were protected by the lawyer-client privilege and were not discoverable.

In reaching its conclusion, the Second District reasoned that although the widow was a beneficiary of the trust, "her position in this suit is antagonistic to the aligned beneficiaries and to her status as a beneficiary of the trust." (13) The court determined that the widow trust beneficiary was not the "real client" of the lawyer, but instead the trustee was the real client. Significantly, the Second District recognized and employed the analysis set forth in the seminal case decided in 1976 in Delaware, Riggs National Bank v. Zimmer, 355 A. 2d 709 (Del. Ch. 1976). In Riggs, the court held that communications between the lawyer and fiduciary about the administration of the trust were not privileged and were discoverable. The Riggs court justified its ruling because the fiduciary and its lawyer were in reality acting for the benefit of the beneficiary and therefore the beneficiary was the "real client" of the lawyer, not the trustee.

The implication of the Second District's use of the Riggs analysis is of great importance. Applying the Riggs reasoning, if a trust beneficiary's interest in a claim against a trustee is aligned with other beneficiaries, and if the claim is consistent with their status as a beneficiary, the suing beneficiary would be deemed the "real client" of the lawyer retained by the fiduciary. This would lead to the inescapable conclusion that communications between a lawyer retained by a trustee about the administration of a trust are discoverable by a trust beneficiary. (14)

In the same year Compson was decided, the Fourth District decided Paskoski v. Johnson, 626 So. 2d 338 (Fla. 4th DCA 1993), finding that the "trial court erred in determining that the trustee could not assert an attorney-client privilege or other privileges with respect to communications between the trustee and the trustee's lawyer and accountant in litigation between the trustee and a trust beneficiary." The court's opinion is brief and does not provide much insight, except that it cites to In re Estate of Gory, 570 So. 2d 1381 (Fla. 4th DCA 1990), in which the court examined the nature of the relationship between a personal representative's lawyer and beneficiaries of the estate.

In Gory, the court ruled that counsel for a personal representative did not have a conflict in representing the personal representative in a dispute with beneficiaries over the personal representative's compensation. Gory is significant because the court recognized that a fiduciary's counsel "owes fiduciary duties not only to the personal representative but also to the beneficiaries of the estate." (15) The court went on to explain that this did not establish a lawyer-client relationship between the lawyer for the personal representative and the beneficiaries. Quoting from the comment to Rule 4-1.7 of the Rules Regulating The Florida Bar, the court stated: "In Florida, the personal representative is the client rather than the estate or the beneficiaries." (16) If the rule articulated in Gory were applied to the lawyer fiduciary privilege, an absolute rule prohibiting discovery by a beneficiary of communications between a lawyer retained by a fiduciary would apply.

Outside the lawyer fiduciary context, the Fourth and Fifth districts have indicated that once the attorney-client privilege attaches it makes a communication absolutely immune from disclosure. (17) To support an absolute rule prohibiting disclosure, one could point to Florida's codified lawyer-client privilege that recognizes five exceptions to the privilege, but does not explicitly provide a fiduciary exception. This statutory construction argument was used in Corry v. Meggs, 498 So. 2d 508, 511 (Fla. 1st DCA 1986), rev. denied, 506 So. 2d 1042 (Fla. 1987), to determine the scope of the lawyer-client privilege not involving the fiduciary privilege. Significantly, the supreme courts of Texas and California emphasize the lack of a fiduciary exception in the codified language of their lawyer-client privilege statutes. (18) Both courts have determined that permitting a fiduciary exception to the statutory privilege would improperly expand the role of the judiciary by engrafting a judicial exception onto the statutes. (19) The same arguments could be forcefully advanced under Florida law.

Using similar language and reasoning to that found in Compson, the Fifth District in First Union Nat'l Bank v. Whitener, 715 So. 2d 979 (Fla. 5th DCA 1998), refused a trust beneficiary discovery of lawyer fiduciary communications...