Selected by Texas Bar Today as a “Top 10 Blog Post”

In In re Alexander, a beneficiary filed suit against the trustee based on multiple allegations of breach of fiduciary duty, including an allegation that the trustee attempted to transfer the trustee position to successors in violation of the trust’s terms. No. 14-18-00466-CV, 2019 Tex. App. LEXIS 6474 (Tex. App.—Houston [14th Dist.] July 30, 2019, original proc.). The beneficiary filed a motion to compel trust documents and emails regarding same that were drafted by an attorney, but which were never executed. After the trial court granted the motion to compel, the trustee filed a petition for writ of mandamus, challenging the order on the basis of the attorney-client privilege and attorney work product.

The court of appeals first discussed the concept of an attorney representing multiple clients:

The “joint client” or “co-client” doctrine, applies in Texas “[w]hen the same attorney simultaneously represents two or more clients on the same matter.” “Joint representation is permitted when all clients consent and there is no substantial risk that the lawyer’s representation of one client would be materially adversely affected by the lawyer’s duties to the other.” “‘Where [an] attorney acts as counsel for two parties, communications made to the attorney for the purpose of facilitating the rendition of legal services to the clients are privileged, except in a controversy between the clients.'”

Id. The court stated that the trustee filed affidavits proving that the drafts and communications were prepared in the course of the attorney’s representation of the trustees and were for legal advice. The court then discussed the concept of a trustee’s communications with its counsel being privileged:

In Huie, the [Texas Supreme Court] considered whether the attorney-client privilege protects communications between a trustee and his or her attorney relating to the administration of a trust from discovery by a trust beneficiary. There, a trust beneficiary sued the trustee, alleging that he had mismanaged the trust, engaged in self-dealing, diverted business opportunities from the trust, and commingled and converted trust property. The beneficiary noticed the deposition of the trustee’s attorney, who appeared but refused to answer questions about the management and business dealings of the trust. After an evidentiary hearing, the trial court held that the attorney-client privilege did not prevent the beneficiary from discovering the attorney’s pre-lawsuit communications. The court in Huie observed that trustees “owe beneficiaries ‘a fiduciary duty of full disclosure of all material facts known to them that might affect [the beneficiaries’] rights.'” Furthermore, this duty exists independently of the rules of discovery and applies even if no litigious dispute exists between the trustee and beneficiaries. While the attorney-client privilege protects confidential communications between a client and the attorney made for the purpose of facilitating the rendition of professional legal services to the client, a person cannot cloak a material fact with the attorney-client privilege merely by communicating it to an attorney. The Huie court illustrated the point with the following hypothetical:

Assume that a trustee who has misappropriated money from a trust confidentially reveals this fact to his or her attorney for the purpose of obtaining legal advice. The trustee, when asked at trial whether he or she misappropriated money, cannot claim the attorney-client privilege. The act of misappropriation is a material fact of which the trustee has knowledge independently of the communication. The trustee must therefore disclose the fact (assuming no other privilege applies), even though the trustee confidentially conveyed the fact to the attorney. However, because the attorney’s only knowledge of the misappropriation is through the confidential communication, the attorney cannot be called on to reveal this information.

Nonetheless, the court flatly rejected the beneficiary’s argument that a trustee’s duty of disclosure extends to any and every communication between the trustee and his attorney. The court explained that (1) its holding did not affect the trustee’s duty to disclose all material facts and to provide a trust accounting to the beneficiary, even as to information conveyed to the attorney; (2) the beneficiary could depose the attorney and question him about his handling of trust property and other factual matters involving the trust; and (3) the attorney-client privilege did not bar the attorney from testifying about factual matters involving the trust, so long as he was not called on to reveal confidential attorney-client communications.

Although a trustee owes a duty to a trust beneficiary, the trustee in Huie did not retain the attorney to represent the beneficiary but to represent himself in carrying out his fiduciary duties. Contrary to Preston’s point, the Huie court recognized that communications between a trustee and the trustee’s attorney made confidentially and for the purpose of facilitating legal services remain protected. The hypothetical in Huie involved the trustee’s misappropriation of trust funds, which he revealed to his attorney for purpose of obtaining legal advice. The trustee’s misappropriation was a material fact of which the trustee knew independent of the communication.

In contrast to the circumstances in Huie, and as explained above, HHS and all the Co-Trustees had an attorney-client relationship at the relevant time, and any communications among HHS and their joint clients regarding the contents of the draft documents were made for the purpose of obtaining legal services from HHS, and the Co-Trustees’ knowledge of the draft documents was not gained independent of receiving legal advice. Accepting Preston’s view of the discoverability of the subject documents would strip the attorney-client privilege and joint-client doctrine of their core purpose and meaning. Therefore, relators had no duty under Huie to disclose the draft documents to Preston.

Id. The court also held that the trustee had not waived the privilege by testifying in a deposition about the drafts of the documents. The court held that the testimony was not specific enough to constitute a waiver. The court granted the petition and ordered the trial court to reverse its order compelling production of the documents and communications.