Opinion
BCD-CV-2018-00027
05-15-2022
FREDERIC J. POOR, et al., Plaintiffs v. ROBERT K. LINDELL, JR., et al., Defendants
Frederick J. Poor Frederic J. Poor Supplemental Needs Trust Christopher MacLean, Esq. Robert Kenneth Lindell, Jr. Pro-se Barbara Gray Patrick Mellor, Esq. Andrew Sarapas, Esq. Althena Latady John Simpson, Esq. Bar Harbor Trust Services Eric Wycoff, Esq. Kyle Noonan, Esq. Marianna Liddell, Esq.
Frederick J. Poor
Frederic J. Poor Supplemental Needs Trust
Christopher MacLean, Esq.
Robert Kenneth Lindell, Jr.
Pro-se
Barbara Gray
Patrick Mellor, Esq.
Andrew Sarapas, Esq.
Althena Latady
John Simpson, Esq.
Bar Harbor Trust Services
Eric Wycoff, Esq.
Kyle Noonan, Esq.
Marianna Liddell, Esq.
ORDER SUSTAINING BHTS'S OBJECTION TO DISCOVERY ON THE GROUNDS OF ATTORNEY-CLIENT PRIVILEGE
Plaintiffs Frederic Poor and the Frederic J. Poor Special Needs Trust ("Plaintiffs" or together the "Trust") are pursuing discovery of information against Defendant Bar Harbor Trust Services ("BHTS"), which BHTS maintains is protected by the attorney-client privilege. See M.R. Evid. 502. On January 27, 2022, pursuant to M.R. Civ. P. 26(g), the Court held a discovery conference. Among other issues, the discovery dispute raises the question of whether the Court can or should recognize a fiduciary exception to the attorney-client privilege. Concluding that the dispute presents complicated issues of privilege law, the Court asked counsel to brief the issues. The briefing schedule was completed on April 21, 2022. For the reasons discussed below, the Court sustains BHTS' objections on the grounds of the attorney client privilege.
Pursuant to M.R. Civ. P. 7(b)(7), the Court provides this Order without the need for further oral argument.
BACKGROUND
At all times relevant to this discussion, which the Trust agrees is the timeframe prior to July 1, 2018, BHTS served as administrative trustee of the Trust. The Trust was represented by its legal counsel, the law firm of Pierce Atwood. The Trust alleges that BHTS was negligent and breached its fiduciary duties and improperly used Trust funds to pay Pierce Atwood. As part of its discovery against BHTS, the Trust served the following discovery requests:
Request No. 7: All documents consisting of or relating to any communications between BHTS, on the one hand, and Pierce Atwood on the other hand relating to any legal services performed by Pierce Atwood for the benefit of the Frederic J. Poor trust or any other Plaintiff.
Request No. 20: All documents relating to legal fees paid to Pierce Atwood from the Frederic J. Poor SNT, including but not limited to any client engagement letter and detailed invoices.
Request No. 21: All documents relating to legal services performed by Pierce Atwood for the benefit of the Frederic J. Poor SNT including but not limited to the entire client file, any correspondence, notes, memoranda, attorney work product, internal communications, and invoices.
Interrogatory No. 24: Identify all individuals who suggested that Frederic J. Poor's guardian sign a waiver.
In response to each of these discovery requests, BHTS objected on the grounds that the requests seek documents or information protected from disclosure by the attorney-client privilege. The legal question is whether communications and information relating to Pierce Atwood's representation of BHTS while the latter was serving as administrative trustee to the Trust is protected by the attorney-client privilege. The Court concludes that it is.
DISCUSSION
BHTS objects to the discovery requests on the grounds of attorney-client privilege. Plaintiffs opposes the objection on several grounds. They primarily argue BHTS has not demonstrated that the privilege applies, because BHTS was acting as Poor's representative, the communications were not intended to be confidential, and BHTS has not demonstrated any exception applies. In the alternative, Plaintiffs argue BHTS has waived its privilege.
I. Existence of Attorney-Client Privilege
A. Overview
The attorney-client privilege is a fundamental protection for confidential communications between lawyer and client. Upjohn Co. v. U.S., 449 U.S. 383, 389 (1981); Harris Mgmt., Inc. v. Coulombe, 2016 ME 166, ¶ 21, 151 A.3d 7. Its purpose is to encourage full disclosure by clients to their attorneys and thereby enable attorneys to provide informed advice. Corey v. Norman, Hanson &DeTroy, 1999 ME 196, ¶ 18, 742 A.2d 933. The protection extends only to communications, not facts, meaning a client cannot refuse to disclose relevant information within his or her knowledge just because such information was also stated to an attorney. Upjohn Co., 449 U.S. at 396.
The privilege provides that a "client has a privilege to refuse to disclose, and to prevent any other person from disclosing, the contents of any confidential communication" between the client and the client's lawyer or between their representatives, among others. M.R. Evid. 502(b). A "client" is defined as a person, corporation, or other entity "[t]o whom a lawyer renders professional legal services, or who consults with a lawyer with a view toward obtaining professional legal services from the lawyer." M.R. Evid. 502(a)(1). A communication is "confidential" when "it is made to facilitate the provision of legal services to the client and is not intended to be disclosed to any third party other than those to who the client revealed that information in the process of obtaining professional legal services." M.R. Evid. 502(a)(5). A client's "representative" is a person who has authority on behalf of a client to obtain professional legal services and act on advice rendered as part of those services. M.R. Evid. 502(a)(2). The party asserting the privilege has the initial burden and the party seeking to show an exception applies has the burden of proving the elements requisite for the exception exist. Harris Mgmt., Inc., 2016 ME 166, ¶ 24, 151 A.3d 7.
B. Arguments
According to BHTS, the attorney-client privilege applies to and protects communications between BHTS and Pierce Atwood, including those made prior to July 1, 2018, because BHTS had engaged Pierce Atwood for advice concerning its obligations to respond to requests for information about the Trust. As such, the argument goes, BHTS was Pierce Atwood's "client," in contrast to Poor, who was represented through his guardians by separate attorneys. BHTS's communications with Pierce Atwood were made to facilitate the latter's provision of legal services and neither party intended their contents to be revealed. Because of that purpose and intent, and because the contents were in fact not revealed to anyone outside Pierce Atwood, BHTS claims the communications were confidential.
Plaintiffs point to M.R. Evid. 502(c)(1)(D), which provides that a trustee or other agent authorized to act on behalf of a legal entity may claim attorney-client privilege in legal matters or in communicating with an attorney for the entity, as contemplating that a trustee is functionally the representative of the beneficiary in an attorney-client context. If BHTS was seeking legal advice in its capacity as representative of the Trust and of Poor, argue Plaintiffs, then the "real" clients were the Plaintiffs, and they have a right to Pierce Atwood's communications. The fact that Plaintiffs had their own attorneys would not seem to render it impossible for Pierce Atwood to also serve them concerning different matters. Moreover, Plaintiffs argue that BHTS could not have reasonably expected the documents and information requested to be kept confidential from the beneficiaries of the Trust when the Will specifically provides that the trust's "books and records along with all trust documentation shall be available and open at all reasonable times to the inspection of the trust beneficiaries and their representative." Plaintiffs assert that communications with attorneys regarding trust matters should be considered "trust documentation." As such, according to Plaintiffs, BHTS was not the true client and the documents were not confidential, meaning BHTS cannot claim attorney-client privilege here.
C. Analysis
BHTS was clearly Pierce Atwood's client as of July 21, 2017, when it first engaged Pierce Atwood to advise it in relation to its role as administrative trustee for Poor's Trust. BHTS remained Pierce Atwood's client through July 1, 2018, the timeframe here under consideration. Plaintiffs' arguments that they were nevertheless the "true" clients of Pierce Atwood during this period are not convincing. Rule 502(c)(1)(D) does not make the beneficiary or the Trust the functional equivalent of the trustee for purposes of the privilege. Pierce Atwood was not the Trust's law firm, it was BHTS's law firm. The parties do not cite Maine law specifically on point, but in Symmons v. O'Keefe, the Massachusetts Supreme Judicial Court held that where a trustee engages a lawyer to provide opinions about the trustee's role, the trustee can invoke the attorney-client privilege against the trust beneficiaries to protect those opinions, despite the fact they concern the trust. 419 Mass. 288, 301 (1995). The rationale for this approach lies in the inherent potential for conflicting loyalties:
In the course of administering a trust, a trustee may be required to make difficult decisions with regard to his or her duties to the beneficiaries. A trustee's attorney guides the trustee in this decisionmaking process. That the interests of the trustee and the interests of the beneficiaries may at times conflict cannot seriously be disputed. Should we decide that a trustee's attorney owes a duty not only to the trustee but also to the trust beneficiaries, conflicting loyalties could impermissibly interfere with the attorney's task of advising the trustee. This we refuse to do....
The plaintiffs argue that the interests of the trustees and the interests of the beneficiaries in the circumstances presented here do not differ, and thus, conflicting duties are not a concern. We disagree. Our decisions make clear that it is the potential for conflict that prevents the imposition of a duty on the [attorneys] to the trust beneficiaries.Spinner v. Nutt, 417 Mass. 549, 553-54 (1994) (internal citations omitted). The Court finds these cases persuasive and concludes that a law firm retained by a trustee does not have an attorney-client relationship with the Trust or trust beneficiary from which duties or privileges may arise.
Pierce Atwood's legal services to BHTS related to the latter's duties and obligations as trustee. There is nothing in the record to indicate BHTS thought its communications would be revealed to Plaintiffs. Communications between BHTS and Pierce Atwood are not "trust documentation;" they are, if anything "trustee documentation." Poor and the Trust would tangentially benefit from this relationship if Pierce Atwood's advice enabled BHTS to properly administer the Trust, but the advice was always targeted at and restricted to BHTS's interests, not those of the Plaintiffs. BHTS hired Pierce Atwood on its own behalf, not that of Plaintiffs, and can thus claim attorney-client privilege against the discovery attempts of Plaintiffs.
II. Exceptions to the Attorney-Client Privilege
The Maine Rules of Evidence enumerate six areas of exception to attorney client privilege:
i) communications in furtherance of crime or fraud;
ii) claimants though the same deceased client;
iii) breach of duty by either lawyer or client;
iv) document attested by lawyer;
v) matter of common interest between joint clients;
vi) public officer or agency.
M.R. Evid. 502(d). According to Plaintiffs, two of the exceptions are implicated here, along with an exception not explicitly recited in the Rule. For the reasons discussed below, the Court determines that none of the exceptions apply.
A. Fiduciary Exception
Not included in the Maine Rules of Evidence is the so-called "fiduciary exception," whereby a trustee cannot shield from disclosure communications with the trustee's attorney regarding the trustee's duties owed to beneficiaries. See Riggs Nat'l Bank v. Zimmer, 355 A.2d 709 (Del. Ch. 1976). In Riggs, a Delaware court held that the trustee was not the "real" client of the attorney because the trustee was consulting about duties owed to beneficiaries and the intention of the communication was to aid said beneficiaries. Id. at 714. That court held that a policy of preserving full disclosure in a trustee- beneficiary relationship is more important than protecting the trustee's confidence in an attorney for the trust. Id.
i. Arguments
BHTS argues that the modern trend across many states is not to recognize the common-law fiduciary exception and rather to maintain the traditional scope of the attorney-client privilege. See United States v. Jicarilla Apache Nation, 564 U.S. 162, 171 n.3 (2011) (quoting A. Newman, G. Bogert &G. Bogert, Law of Trusts and Trustees § 962, p. 68 (3d ed. 2010)). BHTS cites numerous cases from a variety of states rejecting the fiduciary exception, including a decision by this Court (Murphy, J.) which expressly declined to adopt it. See Gleichman v. Scarcelli, No. BCD-CV-17-11, 2017 Me. Bus. &Consumer LEXIS 15, at *9 (June 30, 2017). BHTS also argues that this Court is not empowered to recognize a new exception because that power is reserved for the Supreme Judicial Court. 4 M.R.S. § 9-A ("The Supreme Judicial Court shall have the power and authority to prescribe, repeal, add to, amend or modify rules of evidence."). The Law Court has declined to recognize a new evidentiary privilege on appeal, stating it is only able to do so pursuant to its rule-making powers when sitting as the Supreme Judicial Court. Citizens Commc'n Co. v. Attorney General, 2007 ME 114, ¶ 14, 931 A.2d 503. Even if this Court did find it could add an exception to Rule 502, BHTS says it should not, first because of general policy considerations and second because in the instant case BHTS was Pierce Atwood's "real" client, not Poor. The fact that the Trust paid for the legal services Pierce Atwood provided to BHTS prior to July 1, 2018 is irrelevant because (i) the Will expressly provides trustees will be reimbursed for reasonable costs and expenses; (ii) the Maine Rules of Professional Conduct recognize a third party can pay for legal services without becoming a client, M.R. Prof. Conduct 1.8(f); and (iii) other jurisdictions have held that payment of fees does not determine the ownership of the attorney-client privilege. See Wells Fargo Bank v. Super. Ct., 990 P.2d 591, 598 (Cal. 2000).
Plaintiffs counter that BHTS has provided only dicta and general policy concerns regarding the fiduciary exception, not analogous cases, though they do not mount an argument that the fiduciary exception actually does apply here. They distinguish Gleichman because in that case, the plaintiffs incorrectly claimed to be minority shareholders and the LLC operating agreement in question explicitly stated the manager had total discretion to withhold information from other LLC members, so the fiduciary exception was inapplicable. Gleichman, 2017 Me. Bus. &Consumer LEXIS 15, at *7-9. Additionally, Plaintiffs note that they disagree that this Court lacks the authority to recognize a new exception because they believe the Supreme Judicial Court's power is only stated as relating to adding a new privilege, not defining exceptions to existing privileges. See 4 M.R.S. § 9-A, Citizens Commc'n Co., 2007 ME 114, ¶ 14, 931 A.2d 503.
ii. Analysis
As an initial matter, this Court likely does not have the power to recognize a new exception to the attorney-client privilege established in Maine law. By statute, only the Supreme Judicial Court has the power to "add to, amend or modify rules of evidence," 4 M.R.S. § 9-A, and that exclusive authority extends to the creation of new exceptions. Second, Justice Murphy in her decision stated simply that she was unaware of any basis in Maine caselaw for adopting the fiduciary exception, so the details of the Gleichman v. Scarcelli case are not relevant. And in a U.S. Supreme Court case from 2011, Riggs was limited to its facts. See Jicarilla Apache Nation, 564 U.S. at 178-79. Thus there appears no basis in the statute or case law for the Court to recognize a fiduciary exception to the attorney-client privilege.
There is a Maine trial court case, Lessard v. Metropolitan Life Insurance Company, which cites Riggs for guidance but specifically attaches its analysis to attorney-client privilege asserted by ERISA plan fiduciaries. 1986 Me. Super. LEXIS, at *11-12 (June 16, 1986). On its facts, Lessard's interpretation of the fiduciary exception has no application to the current case.
B. Joint Client Exception
i. Arguments
In lieu of the fiduciary exception, Plaintiffs argue that BHTS's objection is misguided in part because BHTS assumes that it and Poor were not joint clients. Plaintiffs rely on BHTS's denial of ¶ 42 of Plaintiffs' Second Amended Complaint, to argue that BHTS considered at least one Plaintiff to have been a client or joint client of Pierce Atwood. Plaintiffs further argue that BHTS's shifting position on whether Pierce Atwood represented joint clients should estop BHTS from now arguing Pierce Atwood's services were provided solely to BHTS.
BHTS asserts that it was Pierce Atwood's only relevant client and that both BHTS and Pierce Atwood understood this to be true, as did Plaintiffs. The Trust itself could not retain counsel because a trust is not a legal entity, it is a fiduciary relationship. Americold Realty Tr. v. Conagra Foods, Inc., 577 U.S. 378, 383 (2016). As such, only the trustee and beneficiary could retain counsel, and each retained separate counsel. BHTS notes that Plaintiffs do not argue they ever requested legal advice from Pierce Atwood, only that they are clients by implication. BHTS asserts that its denial of ¶ 42 means only that Pierce Atwood's representation of BHTS was not adverse to Plaintiffs.
ii. Analysis
The beliefs of the parties as to their attorney-client relationships do not necessarily govern the legal reality of their relationships. Lessard, 1986 Me. Super. LEXIS 214, at *8-10 (Sept. 30, 1986). Nevertheless, it is instructive that prior to this discovery dispute, it appears none of the parties or attorneys in this case considered either of the Plaintiffs to be the sole or joint client of Pierce Atwood. At the very least, BHTS's position has been consistent throughout, and there is no basis for estopping BHTS from arguing against the joint client exception. In any event, the conduct of the parties here is dispositive. No communications were made between Plaintiffs and Pierce Atwood, Plaintiffs never sought legal services from Pierce Atwood, and Plaintiffs never granted BHTS the authority to seek such advice on their behalf. The point of the attorney-client privilege is "that the interests of justice are best served by encouraging clients to make full disclosure to their attorneys and thus enable their attorneys to serve them more effectively." Id. (quoting Field &Murray, Maine Evidence, p. 94). Where no such disclosures were made between Plaintiffs and Pierce Atwood, it can hardly be claimed that Plaintiffs were Pierce Atwood's clients. As such, Plaintiffs cannot be considered joint clients and the rationale for the joint client exception has no place here.
C. Crime-Fraud Exception
Under Rule 502, the attorney-client privilege does not apply if the client sought or obtained the lawyer's services in furtherance of what the client knew or reasonably should have known was a crime or fraud. M.R. Evid. 502(d)(1). The party seeking to establish this exception must show that (i) the client was engaged in or planning criminal or fraudulent activity at the time the privileged communication took place, and (ii) the communications were intended by the client to facilitate or conceal that crime or fraud. Harris Mgmt. Co., 2016 ME 166, ¶ 24, 151 A.3d 7. The requisite showing of fraud for the purposes of this exception "falls short of fully realized civil tort fraud" and need only be activity which is deceptive and fraudulent." Id. ¶ 30.
Plaintiffs claim BHTS was engaged in deceptive actions and its communications with Pierce Atwood were intended to facilitate and/or conceal these actions. They cite several examples of this alleged activity, but provide no affidavits in support of their allegations, and the exception cannot be established on the basis of unsupported claims alone. Even if the Court were to credit the claims, BHTS responds that (i) it did not withhold any records from Plaintiffs aside from those over which it is claiming privilege; (ii) BHTS did not attempt to coerce Plaintiffs into signing any waivers and did release all Trust funds in the end; and (iii) there is nothing fraudulent about using Trust funds to pay for BHTS's legal counsel because the Will and relevant statutes authorize BHTS to be reimbursed for trust administration costs. Because BHTS has a plausible explanation for its conduct, Plaintiffs' broad statement that "BHTS was engaged in or planning deceptive actions" is insufficient for this Court to apply the crime-fraud exception.
III. Waiver
Where a privilege exists and no exception applies, the privilege holder can waive the privilege if he or she voluntarily discloses or consents to the disclosure of any significant part of the privileged matter (unless the disclosure itself is privileged). M.R. Evid. 510. The determination of "significant part" is at the discretion of the judge. See Jacques v. Pioneer Plastics, 676 A.2d 504, 509 (1996) (citing Field, McKusick &Wroth, Maine Civil Practice § 26.18b at 212 (2d ed. Supp. 1981)). In some situations, the privilege holder's conduct "should in fairness amount to a waiver. Field &Murray, Maine Evidence § 510.1 at 253 (6th ed. 2008); see Jensen v. S.D. Warren Co., 2009 ME 35, ¶ 34, 968 A.2d 528 (holding assertion of attorney-client privilege by plaintiff improper when used to avoid disclosing timeline of understanding cause of injury and thereby circumvent statute of limitations).
In this case, part of the Plaintiffs' Complaint is that BHTS improperly used Trust funds to pay for its own legal defense against Plaintiffs while serving as their fiduciary. By asserting that all legal services related to BHTS's fiduciary duties as administrative trustee are subject to privilege, the Plaintiffs say they are unable to obtain the documents which would actually prove that BHTS improperly used Trust funds in this manner. They also say that BHTS's Answer, interrogatory responses, 26(g) letter, and informal correspondence put the documentation relating to legal services into issue in connection with essential facts, and that because BHTS has already stated the "nature" of the documents, the privilege is not being invoked to keep the information confidential but simply to prevent inquiry into their contents.
BHTS responds that it has consistently and actively asserted the attorney client privilege since before the litigation was even filed and points to the Second Amended Complaint as including allegations by Plaintiffs that BHTS was refusing to provide documents it alleged were privileged. See Pls.' Second Am. Compl. ¶¶ 45-46 (alleging Plaintiffs were "forced to serve BHTS with a subpoena to produce documentation related to these fees ... because BHTS would not disclose such information voluntarily"). It also distinguishes Jensen because in that case the plaintiff was trying to have it both ways: he disclosed the most significant part of the communication to show the lawsuit was timely but otherwise sought to protect related communications from disclosure. Jensen, 2009 ME 35, ¶¶ 29, 34, 968 A.2d 528. As for its Answer and other documents, BHTS merely responded to Plaintiffs' filings, which does not mean it put its legal services from Pierce Atwood into issue, and has not revealed the substance of any communication over which it asserts privilege. Accordingly, BHTS has not waived its attorney-client privilege with Pierce Atwood.
CONCLUSION
For all these reasons, the Court sustains BHTS's objection to the aforementioned discovery requests on the grounds of attorney-client privilege.
So Ordered.
Pursuant to M.R. Civ. P. 79(a), the Clerk is instructed to incorporate this Order by reference on the docket for this case.