The Pennsylvania Supreme Court is set to decide whether attorney-client privilege and the work product doctrine apply to a trustee's legal bills in litigation with the trust's beneficiaries.

The justices granted allocatur Feb. 4 in In re Estate of McAleer, in which two beneficiaries of the William K. McAleer Revocable Living Trust, Michael and Stephen Lange, have accused the trustee—their stepbrother, William McAleer—of mismanaging the trust, including paying excessive counsel fees to two law firms, Julian Gray Associates and K&L Gates.

The beneficiaries had sought attorney invoices from McAleer but received only heavily redacted versions. An Allegheny County trial judge ordered McAleer to turn over unredacted versions, but McAleer appealed, arguing that the documents were protected by attorney-client privilege and the work product doctrine.

In its August 2018 opinion, the Pennsylvania Superior Court ultimately found that the trial court's order was not appealable, but also registered its agreement with the trial court that the information sought was not privileged.

Allegheny Court of Common Pleas Judge Kathleen Durkin had relied on fellow Allegheny County Judge R. Stanton Wettick Jr.'s 2002 ruling in Follansbee v. Gerlach, which found that legal advice provided to a trustee relating to administration of the trust is discoverable by beneficiaries of the trust.

“Pursuant to Follansbee and the logic set forth in that opinion, the billings that are the subject of this appeal should be shared in full, since the beneficiaries, in effect, paid for the legal services rendered by Gray and K&L,” Durkin ruled.

Judge Jacqueline Shogan, writing for a three-judge panel of the Superior Court that also included Judge John Bender and Senior Judge Eugene Strassburger III, said the panel was “constrained to agree” with Durkin.

The appellate court also noted that the Restatement (Third) of Trusts and the state Supreme Court's ruling in Estate of Rosenblum both dictate that trustees have a duty to share with beneficiaries complete information concerning the administration of a trust.

Comment f of Section 82 of the Restatement (Third) of Trusts provides that a “'trustee is privileged to refrain from disclosing to beneficiaries or co-trustees opinions obtained from, and other communications with, counsel retained for the trustee's personal protection in the course, or in anticipation, of litigation (e.g., for surcharge or removal),'” according to Shogan.

“However, appellant neither argued nor presented evidence to establish that the redacted information pertained to communications from counsel retained for appellant's personal protection in the course of litigation,” Shogan continued. ”Accordingly, there is no evidence that the information qualifies as privileged under comment f to the Restatement (Third) of Trusts. Hence, we are left to conclude that the information contained in the attorney invoices qualifies as communications subject to the general principle entitling a beneficiary to information reasonably necessary to the prevention or redress of a breach of trust or otherwise to the enforcement of the beneficiary's rights under the trust.”

In its one-page order granting allocatur, the Supreme Court agreed to hear arguments on a single question: “Do the attorney-client privilege and work product doctrines protect communications between a trustee and counsel from discovery by beneficiaries when the communications arose in the context of adversarial proceedings between the trustees and beneficiaries?”

Counsel for McAleer, William Shaw Stickman IV of Del Sole Cavanaugh Stroyd in Pittsburgh, could not be reached for comment. Counsel for the beneficiaries, Arnold Caplan of Caplan & Chester in Pittsburgh, also could not be reached for comment.