Opinion
NO. 03-18-00079-CV
05-11-2018
In re Harlan Levien, Stephen Levien, Kenneth Ives, and Parvin Johnson, Jr.
ORIGINAL PROCEEDING FROM BASTROP COUNTY
MEMORANDUM OPINION
Kenneth Levien, Barry Levien, and Phillip Levien (the "Trustees") are seeking, among other things, to invalidate the adult adoptions of Kenneth Ives and Parvin Johnson, Jr., by Stephen Levien and Harlan Levien, respectively. After filing suit against Ives, Johnson, Stephen, and Harlan (cumulatively, the "Leviens"), the Trustees sought disclosure of an email exchange between Ives and Barnabus Breed, who is a lawyer from New York. In response, the Leviens asserted that the email exchange was not subject to disclosure because the exchange was protected by attorney-client privilege. After considering the arguments of the parties, the district court issued an order requiring the Leviens to produce the email exchange. Following that ruling, the Leviens filed a petition for writ of mandamus asking this Court to vacate the district court's order compelling the disclosure of the email exchange. After reviewing the petition and the responsive filings, we conditionally grant the Leviens' petition for writ of mandamus and direct the district court to vacate its order requiring the disclosure of the email exchange. See Tex. R. App. P. 52.8(c).
Many of the individuals involved in the underlying lawsuit share identical surnames. For ease of reading, we will refer to those parties by their first names where appropriate.
BACKGROUND
Harlan and Stephen are brothers who are beneficiaries under a family trust set up by their grandfather Arnold Levien. When the trust was created, three of Arnold's sons served as the trustees, but the current trustees are three of Arnold's grandsons: Kenneth, Barry, and Phillip. Under the terms of the trust, income payments were made to Arnold's children and then to his grandchildren with the remainder of the funds to be disbursed to Arnold's great-grandchildren when the last great-grandchild living at the time of Arnold's death turns 35. Accordingly, as Arnold's grandchildren, Harlan and Stephen were entitled to income payments for a period of time but were not entitled to receive a disbursement from the remainder of the trust.
In addition to providing income payments to Arnold's children and grandchildren, the terms of the trust permitted the trustees to make discretionary payments to the beneficiaries. After being diagnosed with muscular dystrophy, both Harlan and Stephen sought funds from the trust in order to cover their healthcare costs. Because the Trustees initially denied the request, Harlan and Stephen filed a suit against the trust, and the parties entered into a settlement agreement under which the trust gave Harlan and Stephen $350,000. In exchange, Harlan and Stephen agreed to relinquish their rights to income as beneficiaries to the trust and agreed to make no further requests from the trust. The settlement was finalized in July 2012.
Subsequent to the settlement being reached, Harlan sought to adopt Johnson, and Stephen sought to adopt Ives. The adoption proceedings were initiated in district court in Bastrop County, and the final adoption orders were issued in October 2012.
After the adoptions were finalized, Johnson and Ives sought to obtain access to the funds that were available to the great-grandchildren of Arnold under the trust. In response, the Trustees filed lawsuits in Bastrop County and in New York against the Leviens. Relying on a venue provision under the terms of the trust, Harlan and Stephen asked the district court to stay the proceedings in Bastrop County until the suit pending in the New York trial court was resolved, and the district court agreed to stay the proceedings.
In their New York suit, the Trustees sought declarations that Ives and Johnson were not entitled to trust distributions for various reasons. Stephen and Harlan moved to dismiss the suit, and the New York trial court dismissed most of the claims but did not dismiss a claim asserting that the adult adoptions were fraudulently entered into. Regarding that claim, the New York trial court explained that if there was fraud in the adoptions, that must be resolved by a Texas court. Accordingly, the proceedings in the New York case were put on hold pending a resolution of the claims in the Trustees' Texas suit.
Subsequent to the New York trial court's ruling, the district court reinstated the proceeding in Bastrop County. In their Texas suit, the Trustees initially asserted that the adoptions were fraudulent and also presented other grounds relating to the settlement agreement. After being informed of the claims that the Trustees were pursuing in Texas, the New York trial court issued an anti-suit injunction enjoining the Trustees from pursuing in Texas claims regarding the settlement agreement and regarding who benefits from the trust but explaining that it would defer to any determination by the district court regarding whether the adult adoptions "can be vacated or voided." In response, the Trustees amended their Texas petition multiple times, and the Leviens argued that those amended claims still violated the New York anti-suit injunction. The New York trial court agreed with the Leviens and ordered the Trustees on multiple occasions to amend their Texas petition to comply with the directives of the anti-suit injunction. In its most recent order, the New York trial court found the Trustees in contempt, instructed the Trustees that their subsequently revised petition must seek "only vacatur of the adoption orders[] or voiding of the adoptions," and issued the following directive:
Thus, in the revised petition to be filed by the [T]rustees in Texas in accordance with this decision and order, the [T]rustees may not seek damages—actual, special, consequential[,] or exemplary—against [the Leviens] for fraud, conspiracy[,] or tortious interference based on Stephen's and Harlan's alleged failure to disclose their intention to adopt Ives and Johnson.
After the New York trial court issued its orders, the Trustees filed another amended petition with the district court. In their current petition, the Trustees assert, among other things, that the adoptions are void because Johnson and Ives were not fully informed of the legal consequences of their adoption, that Stephen's adoption of Ives is void because Stephen was not residing in Texas at the time of the adoptions, that Stephen and Harlan engaged in a fraudulent scheme to divert funds from the trust by entering into a settlement agreement without disclosing their plan to adopt Johnson and Ives and have Johnson and Ives receive a share of the trust, that Stephen and Harlan committed fraud by promising but never intending "to forego any further benefit from the trust at the time they negotiated and executed the" settlement agreement, and that the Leviens committed civil conspiracy by entering "into an agreement to defraud the Trustees by misrepresenting material facts and making promises without intending to fulfill them."
In their petition for writ of mandamus, the Leviens suggest that many of the Trustees' most recent claims also violate the anti-suit injunction.
Before the New York trial court issued its anti-suit injunction, the Trustees issued discovery requests, including a request for any communications "regarding any matter relating to the adult adoption and/or any potential interest . . . under the Last Will and Testament of Arnold Levien." The Leviens objected to this request on the ground that it impermissibly sought discovery regarding attorney-client communications. After conducting an in-camera inspection, the district court determined that an exception to attorney-client privilege applied to an email exchange between Ives and Breed initiated in August 2012. Essentially, the district court concluded that the exchange was subject to disclosure under the crime-fraud exception because it demonstrated fraud pertaining to the adoption proceedings.
Following that ruling by the district court, the Leviens filed a petition for writ of mandamus asking this Court to vacate the district court's order. See In re Levien, No. 03-14-00822-CV, 2015 WL 2059011 (Tex. App.—Austin Apr. 30, 2015, orig. proceeding [mand. denied]) (mem. op.). In response, the Trustees argued that the email exchange should be disclosed because it pertained to the Leviens' intent to engage in a fraudulent scheme to access the trust funds by having Johnson and Ives be awarded a distribution of the trust and then transfer those funds to Harlan and Stephen. Ultimately, this Court determined "that the district court abused its discretion when it ordered the Leviens to disclose the contents of the email under the crime-fraud exception" and that there was "no adequate remedy on appeal because appellate courts cannot cure discovery errors stemming from the release of privileged information." Id. at *2, *5. In resolving the issue presented, this Court noted "that the Leviens and the Trustees d[id] not take issue with whether the email falls under the attorney-client privilege." Id. at *2.
After this Court issued its ruling and after the New York trial court issued its anti-suit injunction, the Trustees again sought disclosure of the email exchange between Ives and Breed. In particular, the Trustees urged that subsequent discovery had revealed that Breed was not Ives's attorney at the time of the communication and that, therefore, attorney-client privilege does not prohibit the email exchange from being disclosed. At the end of a hearing addressing this issue, the district court explained that it was concluding that there was no attorney-client relationship. In particular, the district court stated as follows:
This Court finds that there was not an attorney/client relationship just sending an e-mail. You know, you can send an e-mail to ten attorneys and then all of a sudden you have an attorney/client relationship with ten attorneys? That doesn't make sense. There's got to be more. There's got to be some more objective factors. I want to hire you. Here, I want to come in and visit with you. Here's a retainer. Here's this. There's none of that.After the hearing, the district court issued an order requiring the Leviens to "produce the full, unredacted version" of the email exchange.
So looking at the totality of the factors, there was not a meeting of the minds of an attorney/client relationship. So, therefore, the Court will reverse its previous decision and grant the plaintiffs' request to compel that email.
Following that ruling, the Leviens filed another petition for writ of mandamus asking this Court to vacate the district court's order.
MANDAMUS REQUIREMENTS
To obtain mandamus relief, the Leviens must show that the district court abused its discretion when it ordered them to release the contents of the email exchange in dispute and that they lacked an adequate remedy by appeal. See In re Southwestern Bell Tel. Co., 226 S.W.3d 400, 403 (Tex. 2007) (orig. proceeding). As an initial matter, we note that the Trustees concede that if this Court determines that the district court abused its discretion by ordering the release of the contents of the email, there is no adequate remedy on appeal because appellate courts cannot cure discovery errors stemming from the release of privileged information. See Walker v. Packer, 827 S.W.2d 833, 843 (Tex. 1992) (orig. proceeding) (providing that there is no adequate appellate remedy "when the trial court erroneously orders the disclosure of privileged information which will materially affect the rights of the aggrieved party, such as documents covered by the attorney-client privilege"); see also In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004) (orig. proceeding) (stating that mandamus is appropriate if trial court improperly orders disclosure of privileged information because error cannot be corrected on appeal and because client would lose benefit of privilege). But see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 469 (Tex. 2008) (orig. proceeding) (explaining that some privileged "matters may be so innocuous or incidental that the burden of reviewing an order to produce them outweighs the benefits of such a review").
However, the Trustees do contend that the district court did not abuse its discretion because attorney-client privilege does not apply to the email exchange at issue. "A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner or if it acts without reference to any guiding rules and principles." Reid v. Seton Hosp., No. 03-16-00301-CV, 2016 WL 7046843, at *2 (Tex. App.—Austin Nov. 30, 2016, no pet.) (mem. op.). "On mandamus review of factual issues, a trial court will be held to have abused its discretion only if the relator establishes that the trial court could have reached but one decision, and not the decision it made." In re Eurecat US, Inc., 425 S.W.3d 577, 582 (Tex. App.—Houston [14th Dist.] 2014, orig. proceeding). However, mandamus "review of legal issues is not deferential," and a "trial court abuses its discretion if it clearly fails to analyze the law or apply the law to the facts of the case." Id. "A trial court has no discretion in determining what the law is or applying the law to the facts." Icon Benefit Adm'rs II, L.P. v. Mullin, 405 S.W.3d 257, 263 (Tex. App.—Dallas 2013, orig. proceeding [mand. denied]).
DISCUSSION
In their petition, the Leviens assert that New York law should be applied when considering whether the email exchange in question is a privileged communication but also contend that the communication is privileged under Texas law as well. Alternatively, the Leviens urge that even if the email exchange is not protected by attorney-client privilege, the email communication is not discoverable because "it is not reasonably calculated to lead to the discovery of admissible evidence." In supporting the district court's ruling, the Trustees urge that a determination regarding whether an attorney-client relationship existed at the time that the email exchange occurred should be made under Texas law. Further, the Trustees contend that there was a factual dispute regarding whether an attorney-client relationship existed and that the district court did not abuse its discretion by determining "there was no attorney-client relationship between Ives and Breed at the time" of the email exchange and, accordingly, by ordering the disclosure of the email exchange. When addressing the Leviens' alternative basis for seeking mandamus relief, the Trustees assert that the email is relevant to the underlying issues and reasonably calculated to lead to the discovery of admissible evidence.
New York or Texas Law
As set out above, the Leviens contend that New York law should govern the determination of whether the email exchange is protected by attorney-client privilege. In contrast, the Trustees assert that Texas law should be used when determining if an attorney-client relationship exists because "Texas has the most significant relationship" to the disputed issue. More specifically, the Trustees note that the adult-adoption proceeding occurred in Texas, that the email exchange was initiated in August 2012 after Stephen and Harlan had retained lawyers to handle the adult adoptions in Texas, that Ives's affidavit states that he sought legal advice regarding being adopted by Stephen, and that Ives appeared at the adult-adoption proceeding. Furthermore, the Trustees point to the privilege log prepared in the underlying proceeding, which refers to the email exchange as "Attorney-client communications re: questions about adoption." Finally, the Trustees highlight that the New York trial court ordered that the claims regarding the adult adoptions be decided by the district court, that the underlying lawsuit will be governed by the Texas Rules of Civil Procedure, and that the district court determined that the email exchange was relevant to their Texas claims.
In their response, the Trustees note that in ruling on the prior mandamus petition filed by the Leviens, this Court applied Texas law to the determination of whether the crime-fraud exception to attorney-client privilege applied to the email exchange at issue. See In re Levien, No. 03-14-00822-CV, 2015 WL 2059011 (Tex. App.—Austin Apr. 30, 2015, orig. proceeding [mand. denied]) (mem. op.). However, no assertion was made in the prior proceeding that resolution of the mandamus proceeding should depend on New York law.
The attorney-client privilege is one of "'the oldest of the privileges for confidential communications known to the common law.'" United States v. Zolin, 491 U.S. 554, 562 (1989) (quoting Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). "The purpose of the privilege is to ensure the free flow of information between attorney and client, ultimately serving the broader societal interest of effective administration of justice," and "[a] client must be able to confide in an attorney secure that the communication will not be disclosed." Ford Motor Co. v. Leggat, 904 S.W.2d 643, 647 (Tex. 1995) (orig. proceeding). Due to "the nature and purpose of the attorney-client privilege," it is "governed by the law of the state with the most significant relationship to the communication." Id.; see In re Arterial Vascular Eng'g, No. 05-99-01753-CV, 2000 WL 1726287, at *12 (Tex. App.—Dallas Nov. 21, 2000, orig. proceeding). Generally speaking, "the state where the communication took place . . . is the state of most significant relationship." Leggat, 904 S.W.2d at 647. For written statements, the state with the most significant relationship will typically be the state where the written statement was received. In re Arterial Vascular Eng'g, 2000 WL 1726287, at *12.
According to the record presented to this Court, at the time of the email exchange, Breed was practicing law in New York, and Ives was living in New York. Moreover, Breed was in New York when he received an email from Ives, and nothing in the record indicates that the parties had a relationship prior to the day that the email exchange was initiated or that Breed had ties to Texas. For these reasons, we must conclude that New York had the most significant relationship to the communications and that New York law must be applied when determining whether attorney-client privilege bars disclosure of the email exchange. See Leggat, 904 S.W.2d at 647; In re Arterial Vascular Eng'g, 2000 WL 1726287, at *12; cf. Gonzalez v. State, 45 S.W.3d 101, 102, 106 (Tex. Crim. App. 2001) (applying California privilege law to communication between defendant and pastor that took place in California and pertained to offense allegedly committed in Texas where there was no evidence of previous relationship between parties prior to communication, where evidence showed that defendant "confided in" pastor in pastor's "capacity as a clergyman serving the state of California," and where evidence showed that pastor "had no apparent ties to Texas").
Attorney-Client Relationship Under New York Law
In their petition for writ of mandamus, the Leviens contend that the district court abused its discretion by determining that the email was not subject to attorney-client privilege. In response, the Trustees argue that there was no attorney-client relationship between Ives and Breed based on an objective review of what the parties "did and said" because "there is no evidence of an express agreement between Ives and Breed to form an attorney client relationship at or near" the time that the email exchange occurred. In fact, the Trustees contend that Breed did not make a formal appearance "as Ives['s] counsel" until months later. Moreover, although the Trustees acknowledge that Ives indicated in an affidavit prepared as part of the underlying dispute that he considered Breed to be his attorney at the time that he initiated the email exchange and that he sent an email for the purpose of obtaining legal advice from Breed, the Trustees insist that the statements in the affidavit are insufficient because they are "subjective and conclusory." Further, the Trustees assert that Ives's affidavit was inconsistent with his prior deposition testimony in which, according to the Trustees, Ives provided "vague and uncertain answers" regarding when Breed became his lawyer and when Ives first contacted Breed. In addition, the Trustees point to portions of Breed's testimony in which he stated that he could not recall whether he represented Ives in August 2012 when the email exchange occurred and that he did not meet with any of the parties until January 2013. Additionally, the Trustees note various legal actions that Breed performed on behalf of Harlan and Stephen around the time of the email exchange and argue that Breed's conduct was consistent with the existence of an attorney-client relationship with Stephen and Harlan but not with Ives. In light of the preceding, the Trustees contend that there was a factual dispute regarding the existence of an attorney-client relationship between Breed and Ives and that the district court's resolution of this dispute did not constitute an abuse of discretion.
In addition to protecting communications between a lawyer and his or her client, New York law also extends attorney-client privilege to certain types of communications between lawyers and their prospective clients. See Fierro v. Gallucci, No. 06-CV-5189 (JFB)(WDW), 2007 WL 4287707, at *6 (E.D.N.Y. Dec. 4, 2007) (mem. op.). In other words, "where one consulted an attorney with a view to employing him, communications in the course of such preliminary discussions are subject to the attorney-client privilege." New York Univ. v. Simon, 498 N.Y.S.2d 659, 661 (N.Y. Civ. Ct. 1985). "[I]f the privilege depended on the chance of whether the attorney after hearing the statement of the facts decided to accept the employment or decline it, 'no person could ever safely consult an attorney for the first time.'" Id. (quoting In re DuPont's Estate, 140 P.2d 866, 873 (Cal. Dist. Ct. App. [1st Div.] 1943)).
In this case, the Trustees sought the disclosure of an email exchange between Breed and Ives. That email exchange was initiated by Ives and was sent only to Breed. In his email, Ives confirmed that he had spoken with Breed on the phone earlier that day; related that Stephen was going to adopt him; provided background information relating to his decision to agree to be adopted; mentioned the possibility of legal challenges after the adoption was finalized; listed several legal questions for Breed to answer, including questions regarding what effect being adopted as an adult might have on his inheritance rights from his biological family; related that he could meet with Breed at Breed's office to discuss the matter further; and discussed the manner in which Breed would be paid for any services that he provided. In response, Breed wrote that he was reviewing the matter and the questions posed by Ives and suggested a day and a time for Ives to come to Breed's office to discuss the matter further. Moreover, Ives responded that he would be able to make the suggested appointment. Furthermore, although Breed stated in his deposition that he could not recall when he began representing Ives and that he did not meet with Ives until after the adoption had been finalized, the email exchange chronicled a planned in-person meeting shortly after the emails were sent, and Ives stated in his affidavit that he met with Breed at Breed's office approximately two weeks after sending the email, that he "sought and obtained legal advice regarding the issues [that he] raised in the" email, that he "had a few follow-up telephone calls and meetings with . . . Breed" that were private in nature, and that he "received legal advice from [Breed] regarding [his] adoption" during the follow-up meetings and phone calls.
Even assuming for the sake of argument that no formal attorney-client relationship had been established at the time of the email exchange, we must still conclude in light of the preceding that the exchange is still protected by attorney-client privilege because the communications pertained to legal issues and were between a lawyer and a prospective client who intended to have the lawyer perform legal services on his behalf. See Pellegrino v. Oppenheimer & Co., Inc., 851 N.Y.S.2d 19, 24 (N.Y. App. Div. [1st Dep't] 2008) (explaining that "the attorney-client relationship can encompass a preliminary consultation even where the prospective client does not ultimately retain the attorney" where consultation was undertaken with aim of retaining attorney); In re Kaufman, No. 355054/H., 2013 WL 4605989, at *1, *2 (Surr. Ct. Nassau Cty. Aug. 28, 2013) (concluding that attorney-client privilege applied to consultation between individual and attorney even though attorney was not ultimately retained when, among other things, individual had phone conversations with attorney and sent attorney emails related to legal questions, when lawyer responded by saying that he would review matter before meeting with client, and when lawyer and individual met); see also Fierro, 2007 WL 4287707, at *7 (determining that preliminary discussion with lawyer "related to a legal analysis of the potential claims that could be brought" was protected by attorney-client privilege even though individual ultimately "decided not to retain" lawyer); Green v. Montgomery Cty., 784 F. Supp. 841, 847 (N.D. Ala. 1992) (concluding that attorney-client privilege applied to telephone consultation with attorney where individual consulted attorney "with the intent of seeking legal advice about the possibility of brining a lawsuit"; where individual had used attorney in past; where individual "assumed that he could speak honestly, freely, and confidentially"; and where individual provided outline of "the basic facts of the situation"). Accordingly, we must conclude that the district court abused its discretion when it ordered the Leviens to disclose the contents of the email exchange.
Having determined that the email exchange is protected from disclosure by attorney-client privilege, we need not reach the Leviens' alternative contention that the email is not subject to disclosure because the communication "is not reasonably calculated to lead to the discovery of admissible evidence." However, we do note that many of the Trustees' current claims seem to rest on the concept that the adult adoptions can somehow be invalidated because the parties involved in the adoptions had the intention of using those adoptions to make a claim against the trust. Whether the motivations of the parties involved in the adult-adoption proceeding were entirely selfless, entirely selfish, or something in between, their reasons for pursuing the adoptions would not seem to be relevant considerations when deciding whether the elements of the adult adoption statute have been met. See In re Levien, 2015 WL 2059011, at *4 (discussing how intent—either good or bad—"does not bear upon the adoption process" or on whether requirements for adult adoption have been satisfied).
CONCLUSION
Having determined that the district court abused its discretion by ordering the disclosure of the email exchange and that the Leviens do not have an adequate remedy by appeal, we conditionally grant the Leviens' petition for writ of mandamus and direct the district court to vacate its order requiring the disclosure of the email exchange. See Tex. R. App. P. 52.8(c). The writ will only issue if the district court fails to enter a modified order in accordance with this opinion.
/s/_________
David Puryear, Justice Before Justices Puryear, Pemberton, and Bourland
Justice Pemberton Dissenting Without Opinion Filed: May 11, 2018