In a dispute over legal fees paid by a trustee, the Orphans’ Court had ordered the trustee to turn over to the beneficiaries unredacted invoices for legal fees paid, and an evenly divided Supreme Court has affirmed the order. In re: Estate of William K. McAleer, 248 A.3d 416, ___ Pa. ____, 6 WAP 2019 (4/7/2021) (per curiam order, opinion of Wecht, J., opinion of Saylor, J., opinion of Donohue, J.).
The procedural history is somewhat complicated because the Superior Court had quashed the appeal, holding that the the order was not appealable as a collateral order under Pa.R.A.P. 313(a) because the order was not separable from the merits of the fee dispute. In the alternative, the Superior Court concluded that the attorney-client privilege did not apply. In re: Estate of William K. McAleer, 194 A.3d 587, 2018 PA Super 227 (2018).
The Supreme Court reversed the quashal, but then split on the issue of whether the attorney records were privileged. The opinion of Justice Wecht, explains the reversal of the quashal and presents his opinion in support of affirmance on the merits, with which Justices Todd and Dougherty joined. The opinion of Justice Saylor supported reversal on the merits, and the opinion of Justice Donohue, joined by Justice Mundy, also supported reversal on the merits. Chief Justice Baer did not participate in the consideration or decision of the matter.
The Superior Court had concluded that the trustee had a duty to share information about the administration of the trust, and the trustee is privileged to refrain from disclosing opinions of counsel and communications with counsel only if counsel is retained for the personal protection of the trustee in connection with surcharge or removal. This is referred to by Justice Wecht as the “fiduciary exception” to attorney-client privilege, and Justice Wecht’s opinion concludes that, “where legal counsel is procured by a trustee utilizing funds originating from a trust corpus, the beneficiaries of that trust are entitled to examine the contents of communications between the trustee and counsel, including billing statements and the like.”
Some lawyers have said that, as a result of the evenly divided court, the issue of the “fiduciary exception” is not settled in Pennsylvania, but that is not consistent with the per curiam order. The order of the court says that “the Superior Court’s alternative substantive rationale for affirming the trial court’s disclosure order is hereby affirmed by operation of law.” Furthermore, the Superior Court affirmed the principle of the fiduciary exception, and that part of the opinion was not reversed and so remains binding on both the Superior Court and Orphans’ Courts. It is therefore difficult to escape the conclusion that the fiduciary exception is the law in Pennsylvania until the Supreme Court should decide to revisit the issue.