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Estate planning often involves multiple professionals who must exchange confidential information regarding their clients’ affairs. The Illinois Court of Appeals provides an insightful opinion regarding when such privileges terminate, who can waive them after the client’s death, and what actions, if any, would put confidential information “at issue” and thus make discoverable.  (This article also appeared in Law360.)

When an estate planning client dies, the attorney client privilege continues to bind the attorney regarding communications with third parties, just as it did while the client lived.  What does change upon the death of a client, however, is the status of that client’s agents—such as accountants, financial advisers, bankers and others who, prior to the client’s death, were privy to confidential communications without resulting in a waiver of the privilege.  Because the death of the principal ends the agency relationship, post death communications to such agents become discoverable to third parties.

The Illinois First District Court of Appeals recently examined the effect of the client’s death on privilege claims in Adler v. Greenfield, 2013 IL App (1st) 121066; 2013 Ill. App. LEXIS 323 (1st Dist. May 24, 2013).  In Adler an estate planning law firm was sued for malpractice by disappointed third party beneficiaries alleging that the intentions of the testator were not followed to their detriment.

Plaintiffs (beneficiaries) sought both pre and post death communications between the decedents, the law firm, and a bank that assisted the decedents in estate planning.  The document requests included direct communications between the attorney and the bank, both before and  after the decedents’ death, and between the bank and the decedents.  The law firm and the bank both refused to turn over the communications, asserting attorney client privilege. After a lengthy exchange of motions to compel and reconsider, the law firm ultimately refused to turn over a limited number of documents despite a discovery order to do so and requested the imposition of a nominal monetary contempt sanction to permit an appeal. The trial court obliged, and the Court of Appeals reviewed the matter de novo.[1]

Specifically, the firm withheld 22 documents that were communications with the bank; the bank itself produced five of these, leaving 17 attorney-bank communications at issue.  The court’s inquiry centered on the role of the bank as an agent for the decedents—a status that conveyed attorney client privilege protection to its communications with counsel, and which removed the “third party” status that would have otherwise waived the privilege claim. The bank assisted the decedents in formulating an estate plan and eventually became co-executor and co-trustee.  Ultimately, the court determined that prior to the decedents’ death, the bank was acting as decedents’ agent, thus bringing communications with their attorney within the privilege.  The pre-death communications directly concerned instructions and concerns of the clients expressed through the bank relative to their estate planning. Many began with a clarifying statement, such as, “As you may know [bank] has been assisting [decedents] with their investments….”

However, after the decedents’ death, that agency relationship terminated, the result being that post-death communications by the attorney to the bank were unprivileged communications with a third party.   “[U]nder agency principles, the death of the principal terminates the authority of the agent.” Id. at 1233.

Having found that such pre-death communications fell within the attorney client privilege, the court then examined whether that privilege was somehow waived. Two grounds were offered—that plaintiffs, as successor co-trustees and co-executors of the estate, were the holder of the privilege and could therefor waive it; and, that the attorney’s conduct in representing the estate was at issue in the case. Id. at 1234.

As to the holder of the privilege issue, the court noted that the privilege survives the death of the client.  “The only context in which a client’s death might affect the viability of the privilege is a will contest…[because] a decedent would (if one could ask him) waive the privilege in order that the distribution scheme he actually intended be put into effect.”  Id. at 1234 [citing Hitt v. Stephens, 285 Ill.App.3d 713, 717-718 (4th Dist. 1996)]. In this case, the issue of which will to enter into probate had been previously determined in another venue, leaving only malpractice claims, “brought by beneficiaries in their individual capacities against [attorney]…[the] estate was not even a party to the action.” Id. at 1235.  Indeed, the estate itself suffered no damages, but only the beneficiaries, thus plaintiffs’ status as co-trustee would not have conveyed standing to pursue the malpractice claim in any case. Id. at 1235.

Importantly, as to the argument that the attorney’s representation continued with respect to the decedents’ estate so that the co-trustees now controlled the privilege, the plaintiff “offered no case law and we have discovered none, that would permit a trustee to assert or waive a decedents’ privilege outside the context of a will contest.” Id. at 1235.

With regard to the claim that the attorney’s performance is “at issue”, the court noted that the privilege does not belong to the attorney but to the client.  Therefore the attorney may not “waive” the privilege due to his or her own conduct.  It is, rather, the client who, by virtue of pleading, puts privileged information “at issue” such as by alleging the time of discovering an injury in the context of the statute of limitations issue.[2]  Given the analysis in those precedents, “it is the client, not the attorney, that places the attorney’s advice at issue for the purposes of waiving the privilege.  Accordingly, we cannot find that [attorney] waived the privilege by placing his conduct at issue.”  Id. at 1236.

The lessons of  Adler are relatively clear.  Most importantly:

  • Attorney communications with a client’s agent ceases to be privileged upon the death of the client, thus negating the privilege for subsequent disclosures;
  • Clearly communicating the context and purpose of communicating with a third party to establish agency is beneficial to establish privilege claims;
  • The remaining privilege is not controlled by the beneficiaries or the executor/trustees of the estate except in the sole context of a will contest;
  • No action by the attorney, nor any issue raised by anyone but the actual client, can put privileged material “at issue” and thus subject to disclosure.

The importance of understanding bullet point one cannot be overemphasized.  Once your client has joined the Choir Invisible, anything you disclose to anyone outside your office, including, but not limited to, your client’s own agents, relatives, executors, administrators, bankers, accountants or other associates is no longer privileged and is entirely discoverable as a result. While it is true that “dead men tell no tales”—the dead man’s agents may well be compelled to.

 


Mike Castellaneta, a paralegal with Johnson & Bell, assisted in drafting this article.

[1] The sanction order was appealable because “the correctness of a discovery order can be tested through contempt proceedings.” Id. at 1230.  Though discovery sanctions are determined on an abuse of discretion standard, any order which violates an actual privilege is, by definition, an abuse of discretion. Thus the Court reviewed the matter de novo. Id. at 1230.

[2] Citing Lama v. Preskill, 353 Ill.App.3d 300 (2nd  Dist. 2004) (patient asserts the date of her discovery of medical malpractice issue, opening up her communications with her attorney as to that fact);  and Fischel & Kahn v. van Straaten Gallery, Inc., 189 Ill.2d 579 (2000) (lawfirm suit for fees counterclaimed by client for malpractice).