With the highest duties in law and significant liability exposure, fiduciaries generally are entitled and, in the exercise of due care may be required, to engage counsel at trust expense for guidance as to the proper administration of their responsibilities. When the fiduciary’s conduct is contested, she may be able to defend the claims by asserting that, regardless of whether her conduct was advantageous to the beneficiaries, she exercised due care by engaging and relying on the guidance of competent counsel. Reliance on counsel is a defense that can raise difficult attorney-client privilege, expert witness, and conflict issues. In an earlier post, I discussed the NH Trust Docket’s treatment of the defense in Randall v. Mahan and now offer some comments on the Trust Docket’s Order in In re: Mongan Revocable Trust of 2004. Together, Randall and Mongan are important reading for counsel considering or confronting this defense.
The relevant proceedings in Mongan arose after the Court had disallowed an accounting by the trustee and removed and replaced him with a trustee appointed by the Court. The trust beneficiaries sought an order surcharging the former trustee damages and sought discovery of the communications between the former trustee and his former counsel, arguing that he had the waived the attorney-client privilege by defending his conduct in part on his reliance on counsel. The trustee argued that no privilege waiver had occurred because he had not asserted “such reliance as a ‘complete defense,’ but rather as a ‘mitigating circumstance.'” In thoughtful scholarship, the Court found that an at-issue waiver had occurred and ordered the trustee to produce for in camera review various documents so that the Court could determine on a per document basis the extent to which each should be produced and further ordered that the trustee’s former counsel could be asked at deposition questions within the scope of the waived privilege. This Order and Randall provide helpful guidance to the law governing discovery and other implications of the advice of counsel defense.
(Note: Ralph Holmes is currently retired from McLane Middleton. For information on this or other probate litigation issues, please contact Alexandra Cote at alexandra.cote@mclane.com.)