The Attorney-Client Privilege and the Fiduciary Exception

by Sara Van Deusen

The abundance of television programs based on the legal profession leads many people to believe that any and all communications with their lawyer are protected from disclosure pursuant to the attorney-client privilege.  However, the privilege is not nearly as broad or far reaching as most presume it to be.  In essence, the attorney-client privilege protects communications made by the client to the attorney and the attorney’s advice given thereon in the course of professional employment, provided the statements are made in circumstances giving rise to a reasonable expectation that the statements will be treated as confidential.  C.R.S. § 13-90-107(1)(b); Wesp v. Everson, 33 P.3d 191, 197 (Colo. 2001).

It is important to have an understanding of which communications are privileged and which are not as there are several exceptions to the attorney-client privilege, including the “fiduciary” exception which recently received attention as a result of the United States Supreme Court decision in United States v. Jicarilla Apache Nation, 131 S. Ct. 2313 (2011).

Although there are no published decisions in Colorado recognizing the “fiduciary” exception, there have been a couple cases in the United States District Court of Colorado that have acknowledged the existence of the doctrine, albeit in very narrow, particular factual circumstances.  So while the question remains open under Colorado law, it is reasonably likely that a Court would adhere to the basic guidelines of the “fiduciary” doctrine if presented with the right factual circumstances.

As articulated by the Court in Jicarilla, “a trustee who obtains legal advice related to the execution of fiduciary obligations is precluded from asserting the attorney-client privilege against beneficiaries of the trust.”  Id. at 2319.  The Jicarilla Court cited heavily to Riggs Nat’l Bank of Washington D.C. v. Zimmer, 355 A.2d 709 (Del. Ch. 1976), in explaining the two essential underpinnings of the “fiduciary” exception.  First is the concept that a trustee obtains legal advice as a “mere representative” of the beneficiaries since the trustee’s fiduciary obligation runs to the beneficiaries vis a vis administering the trust.  Id. at 2322.  Therefore, the “real clients” are the beneficiaries.  Id.  In determining who the “real client” is, the Court set forth the following factors:

(1) when the advice was sought, no adversarial proceedings between the trustees and beneficiaries had been pending, and therefore there was no reason for the trustees to seek legal advice in a personal rather than a fiduciary capacity; (2) the court saw no indication that the memorandum was intended for any purpose other than to benefit the trust; and (3) the law firm had been paid out of trust assets.

Id.  The basic distinction is between “legal advice procured at the trustee’s own expense and for his own protection, which would remain privileged, and the situation where the trust itself is assessed for obtaining opinions of counsel where interests of the beneficiaries are presently at stake.”  Id.

The second tenet of the “fiduciary” exception is that the trustee’s fiduciary duty to furnish trust-related information to the beneficiaries outweighs the trustee’s interest in the attorney-client privilege.  Id.  The Jicarilla Court cited Riggs, noting “the policy of preserving the full disclosure necessary in the trustee-beneficiary relationship . . . is here ultimately more important than the protection of the trustees’ confidence in the attorney for the trust.”  Id.

The “fiduciary” exception to the attorney-client privilege is an area of the law which, as noted above, remains uncertain in Colorado, as well as in many other jurisdictions.  However, if you currently serve as a trustee and have questions regarding the nature of the attorney-client relationship as it pertains to your communications or if you are the beneficiary of a trust and have questions regarding this issue, please do not hesitate to contact the attorneys at Burns, Figa & Will, P.C.