Friday, January 11, 2013
Molly S. Magee recently published her comment entitled Who is the Client? Who Has the Privilege?: The Attorney Client Privilege in Trust Relationships in Arkansas, 65 Ark. L. Rev. 637 (2012). The introduction to the comment is available below:
A trustee often encounters complex issues administering a trust. The trustee is presumably retained because of expertise in a particular area or because of confidence the settlor has in the trustee. The role of an attorney for a trust is to assist the trustee in making decisions regarding the trust. The attorney discusses his professional opinions and various options for trust administration with the trustee. The trustee then makes decisions based on that information, coupled with personal experience. Fees are generally paid from the funds of the trust, which exist for the sole benefit of the beneficiaries.
Suppose that subsequent to actions taken by the trustee, the beneficiaries sue the trustee for decisions made relating to the trust. Then, in litigation, the beneficiaries seek to discover communications between the attorney and trustee. Can the attorney-client privilege in Arkansas protect those communications?
Jurisdictions are split on whether a trustee, when selecting and corresponding with an attorney for the trust, is representing himself or the beneficiaries, and therefore, whether the communications between an attorney and trustee are protected by the attorney-client privilege. The Uniform Trust Code has not declared whether a trustee may claim attorney-client privilege in these situations. As a result, when litigation ensues, it is difficult in many jurisdictions to determine if the attorney-client privilege protects the communications, and, if so, which communications will be protected.
Although courts in a majority of jurisdictions have adopted a “fiduciary exception” to the rule of attorney-client privilege, Arkansas courts have yet to rule on this issue. Over thirty years ago, the Arkansas Supreme Court held that, in some cases, the trustee and the beneficiaries fall under a “joint-clients” exception to the attorney-client privilege. However, since then, legislation in Arkansas has applied the principle of privity to define the relationship between the attorney, trustee, and beneficiaries, altering the analysis. Moreover, in jurisdictions around the country, there has been a trend toward moving away from the fiduciary exception to the minority rule, under which the attorney-client privilege protects communications between the attorney and trustee.
It is important that there is clear law in Arkansas on this issue because without predictability, the attorney-client privilege is ineffective. The attorney-client privilege is ineffective if the parties do not know in advance who is subject to its protection. Part II of this comment examines the three different approaches courts take concerning the application of the attorney-client privilege in litigation between trustees and beneficiaries. Part III discusses Arkansas law governing trust relationships and the attorney-client privilege. Part IV analyzes the various approaches as compared to current Arkansas law. Part V recommends that Arkansas follow the minority approach and protect communications between trustees and attorneys. Finally, this comment proposes a rule to create predictability and certainty for attorneys and their clients in these situations.