Several states have adopted a fiduciary exception to the attorney-client privilege, which prevents a fiduciary such as a trustee or personal representative from asserting the attorney-client privilege against beneficiaries of a trust or estate on matters of administration. These states include Arizona and Pennsylvania. In the May 2020 case of Canarelli v. Eighth Judicial District Court, the Nevada Supreme Court held that no fiduciary exception to the attorney-client privilege exists under Nevada law.
The Facts of Canarelli
Scott Canarelli was the beneficiary of an irrevocable trust. The Trust contained minority interests in several business entities of Scott’s parents, Lawrence and Heidi, who also served as trustees. The Trust also had an independent trustee, Edward Lubbers.
Scott asserted that the trustees were unlawfully withholding trust distributions for Scott’s health, education, maintenance, and support. Scott threatened litigation.
Lawrence and Heidi eventually resigned as trustees, and Lubbers became the successor family trustee. A week after Lawrence and Heidi resigned, Lubbers entered into a purchase agreement exceeding $25 million on behalf of the Trust to sell off the Trust’s ownership interest in their business entities.
Scott filed a petition demanding that Lubbers provide all information relating to the purchase agreement, as well as an inventory and a trust accounting. Lubbers hired attorneys and responded to the petition in October 2013. Lubbers had conversations with his attorneys regarding the potential response and took notes regarding those conversations. Lubbers resigned as trustee in 2017 and died six months later.
The Fight Over Inadvertently Produced Documents
During discovery, Lubbers’ attorneys mistakenly disclosed documents containing Lubbers’ notes. Lubbers’ attorneys attempted to “claw back” the mistakenly produced documents based on the attorney-client privilege and the work-product doctrine.
There were two groups of documents in dispute:
- Lubbers’ notes related to his phone call with his attorneys regarding his potential response to Scott’s petitions and other matters and strategies (Group 1 documents);
- Lubbers’ notes memorializing an in-person meeting with the other trustees, counsel, Scott, and an independent trust appraiser (Group 2 documents).
A fight arose concerning privilege. The district court generally adopted the discovery commissioner’s findings that:
- A portion of the Group 1 documents were protected by the attorney-client privilege and the work-product doctrine, but other portions were discoverable because Lubbers’ notes contained factual statements or information unrelated to the Trust, and, alternatively, because of the fiduciary and common-interest exceptions to the attorney-client privilege and the substantial-need exception to the work-product doctrine
- Group 2 documents were discoverable because even if the documents constituted work product, the substantial-need exception to the work-product doctrine applied
Lawrence, Heidi, and Lubbers petitioned the Nevada Supreme Court for a writ of prohibition preventing the district court from compelling production of the disputed documents and a writ of mandamus directing the district court to find the disputed documents undiscoverable and order their return or destruction.
What Is Protected By The Attorney-Client Privilege In Nevada?
“The attorney-client privilege is a long-standing privilege at common law that protects communications between attorneys and clients.” Wynn Resorts, Ltd. v. Eighth Judicial Dist. Court, 133 Nev. 369, 374, 399 P.3d 334, 341 (2017).
The purpose of the attorney-client privilege “is to encourage clients to make full disclosures to their attorneys in order to promote the broader public interests of recognizing the importance of fully informed advocacy in the administration of justice.”
The Nevada legislature has codified the attorney-client privilege in NRS 49.095, which states:
A client has a privilege to refuse to disclose, and to prevent any other person from disclosing, confidential communications:
1. Between the client or the client’s representative and the client’s lawyer or the representative of the client’s lawyer.
2. Between the client’s lawyer and the lawyer’s representative.
3. Made for the purpose of facilitating the rendition of professional legal services to the client, by the client or the client’s lawyer to a lawyer representing another in a matter of common interest.
Are A Client’s Notes “Communications” Covered By The Attorney-Client Privilege?
Yes. The documents at issue in this case were notes taken by Lubbers related to phone calls and meetings with his lawyers. The Nevada Supreme Court concluded that under NRS 49.095, the physical delivery of the notes to an attorney is not required for the notes to constitute “communications.” As long as the content of the notes was communicated between a client and counsel, the notes are communications subject to the attorney-client privilege. This makes sense because holding otherwise would discourage a client from diligently preparing for a conversation or meeting with the attorney, or to memorialize and advice received.
Does the Fiduciary Exception To The Attorney-Client Privilege Exist In Nevada?
No, there is no fiduciary exception to the attorney-client privilege in Nevada. Canarelli argued that the trustee could not claim the attorney-client privilege applied to the notes, because the notes concerned trust administration and therefore the fiduciary exception to the attorney-client privilege applied. The Nevada Supreme Court rejected the argument and stated:
The fiduciary exception, as adopted in other states, “provides that a fiduciary, such as a trustee of a trust, is disabled from asserting the attorney-client privilege against beneficiaries on matters of trust administration.” Murphy v. Gorman, 271 F.R.D. 296, 305 (D.N.M. 2010). NRS 49.015 provides that privileges in Nevada are recognized only as “required by the Constitution of the United States or of the State of Nevada” or by a specific statute. NRS 49.115 expressly lists five exceptions to the attorney-client privilege, none of which are the fiduciary exception.
The Nevada Supreme Court recognized that the legislature has the ability to draft privilege statutes with very precise parameters, and that the maxim “EXPRESSIO UNIUS EST EXCLUSIO ALTERIUS’, the expression of one thing is the exclusion of another, has been repeatedly confirmed in Nevada. The Nevada Supreme Court declined to adopt a fiduciary exception to the attorney-client privilege by “judicial fiat.”
The Nevada Supreme Court ultimately granted the petition and directed the issuance of a writ of prohibition prohibiting the district court from compelling or allowing the production of the disputed documents, stating:
Because petitioners showed that Lubbers communicated the content of the Group 1 documents to counsel, we determine that these documents are protected by the attorney-client privilege and are therefore undiscoverable. In doing so, we explicitly refuse to recognize by judicial decree the fiduciary exception to the attorney-client privilege and conclude that the common-interest exception to the attorney-client privilege does not apply to this case. Because Lubbers took the notes contained in the Group 2 documents in anticipation of litigation and the substantial-need exception to the work-product doctrine is inapplicable, we determine that the Group 2 documents are protected by the work-product doctrine and are therefore undiscoverable. Accordingly, the district court acted in excess of its jurisdiction in compelling the partial production of the disputed documents. We therefore grant this petition and direct the clerk of this court to issue a writ of prohibition prohibiting the district court from compelling or allowing the production of the disputed documents.