Risk Update

I See IG Resources — One Video + One Podcast on Important IG, Security, Risk and Disposition Strategies

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A few interesting IG related media resources to share today. First, a recorded webinar presentation from Christopher Egan at Akin Gump:

  • Information Governance for the Modern Age — Where Vision Meets Execution” — Chris Egan (Assistant General Counsel for Information Governance at Akin Gump Strauss Hauer & Feld LLP) outlines his vision for modernizing law firm information governance, sharing insights from his firm’s journey to adapting policy, process and technology to deliver on that vision.

Next, from ILTA comes a podcast recording:

  • Disposition: Importance to Maintain a Modern Policy and Procedure” — Chuck Barth (Director of Information Governance at Davis Wright Tremaine LLP) reviews:
  • “The importance of records retention and disposition is even more acute now that we are in a time of transition. Law firms have had to quickly transition to a work from home digital environment recently, while some firms had already transitioned to a more digital environment prior to moving remote. It is important that records policies maintain relevancy by addressing the current state of where client data is located. Some firms may not have a policy and procedure in place or may be working with an older policy that does not take into consideration all of the new places and repositories that client data might be stored. This podcast will provide guidance on ways to structure and maintain a modern records policy and procedure.”
Risk Update

IG in the Time of COVID-19 — Insights from IG Experts and Practitioners on Navigating the Pandemic

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This caught my eye, as it addresses how risk teams are struggling and succeeding to manage their resources, charter and success with the firm: “The IG Elephant in the Room: Protecting Your Team and Your Firm in the Age of COVID-19” —

  • “The coronavirus pandemic is causing significant disruption, uncertainty and change across the globe. The legal profession isn’t unique in having to face monumental challenges — but many of the challenges it is facing are most certainly unique, and call for unique responses.”
  • “Over the past several weeks, I’ve been speaking regularly with information governance leaders at law firms nationally — to better understand the evolving issues they’re facing and the specific measures they’re taking to cope. While there’s tremendous pressure facing IG and records teams, there are also success stories to be told, and response strategies that we can all learn from. In this update, I’ll explore both, and share my own perspective on the unprecedented landscape we face.”
  • “The leaders I’m speaking with are all confronting varying obstacles based on their scope of responsibilities, the state of their firm, and the resources they have to work with. But when it comes to information governance there is indeed an urgent elephant in the room. And that’s the fundamental reality that IG teams — both the people comprising them and the functions they perform — are at risk.”
  • “They are at risk because many firms are in “cost-cutting” mode — searching for projects to put on hold and staff to furlough or even discharge. They are at risk because in a world that’s now 100% remote their role and function are unclear or misunderstood by management. And they are at risk because as firms adjust to new work patterns, some resources have just found themselves idle.”
  • “The good news is that this “elephant” is not unmovable. The world has changed, but IG remains a critical function.  And even during these incredibly challenging times, there is opportunity for IG to expand its support for firms in ways that help organizations improve efficiency, better support lawyers, and manage critical risk and compliance responsibilities that remain as relevant and urgent as ever.”
  • “I know this because firms are telling me about positive change that is already happening. Of course, not automatically. And definitely not without the determined, focused effort of committed IG leaders. But it is happening.”

See the full article for various interesting examples and advice shared.


Risk Update

Potential Clients — ABA Issues New Opinion on Confidentiality & Conflicts Guidance

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Thank you to the longtime reader who sent in: “Confidentiality obligations to prospective clients addressed in new ABA ethics opinion” —

  • “A prospective client is a person who consults a lawyer about the possibility of forming lawyer-client relationship but then doesn’t form such a relationship. The confidentiality duties owed to prospective clients are not as onerous as that owed to existing or former clients.”
  • “However, Rule 1.18(c) provides that a lawyer is prohibited from accepting a new client with interests materially adverse to a former prospective client in a matter that is the same or substantially related to the consultation with the former prospective client. This prohibition applies if the lawyer previously had received information from a prospective client that could be ‘significantly harmful’ to the prospective client.”
  • “Formal Opinion 492, released Tuesday by the ABA’s Standing Committee on Ethics and Professional Responsibility, sheds light on when information from a prospective client could be “significantly harmful” to that individual.”
  • “Under this ‘significantly harmful’ test, the prospective client seeking protection under Rule 1.18 ‘need not demonstrate that the harm is certain to occur in order to demonstrate a conflict.’ Instead, the rule focuses on information that ‘could be significantly harmful.'”
  • “Such information, according to the opinion, could include views on various settlement issues, the prospective client’s strategic thinking on litigation, sensitive and personal information in a divorce case, knowledge of a settlement position, or the possible terms and structure of a proposed bid by one corporation to purchase another corporation.”
  • “If a lawyer has acquired confidential information from a prospective client, that also disqualifies the lawyer’s firm unless the lawyer is screened and both the prospective and affected clients give informed consent in writing.”

For more, see the complete text of Formal Opinion 492.

Risk Update

Data Breach — When Privilege Won’t Protect Vendor Incident Reports from Discovery or Disclosure

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This one caught my eye as something worth keeping on radar. While the focus is on client breaches and outside counsel/experts, we’ve read about a law firm or two that has faced similar incidents in recent times…

Data Breach Report in Capital One Litigation Not Privileged” —

  • “On May 26, the District Court found in the In Re: Capital One Consumer Data Security Breach Litigation, MDL No. 1:19md2915 (AJT/JFA)(ED VA) that a report prepared by Mandiant concerning the Capital One data breach (Breach Report) was not protected by the work product privilege and must be turned over to Plaintiffs.”
  • “The Breach Report was prepared by Mandiant at the direction of Debevoise & Plimpton, Capital One’s counsel. Debevoise & Plimpton hired Mandiant immediately after the breach to assist in likely litigation.”
  • “In July 2019, Capital One reported the breach and lawsuits started to be filed the following day. Mandiant performed the work and prepared the Breach Report in September 2019. So far this looks like the normal way experts are hired under the very real prospect of litigation for which the work product doctrine should attach. But as so many TV offers remind us ‘wait, wait, there’s more!'”
  • “The Court found the determinative issue was whether the Mandiant Breach Report would have been prepared in substantially similar form ‘but for the prospect of that litigation.’ The fact that the investigation was done at the direction of outside counsel and the Breach Report was initially provided to outside counsel did not satisfy the ‘but for’ test.”
  • “Capital One failed to demonstrate Mandiant would not have performed substantially similar services in the absence of litigation. In fact, Mandiant had a long-standing relationship with Capital One, going back to at least 2015… The only significant change from prior agreements were that Debevoise & Plimpton would direct the work and receive the Breach Report. Mandiant’s similar, prior work was deemed business critical and not a legal expense. The Breach Report was shared with four regulators. While the Court noted this did not necessarily constitute a waiver, it did not decide the case based on this factor and noted the ‘waiver argument may have some merit.'”
  • “Some clear lessons can be gleaned. When choosing a company to assist with data breach litigation response, clearly vet that company. Past work for the breached company, including prior work relationships and contracts, should be reviewed carefully to make sure the post-breach engagement is not more of or similar to the same. If in doubt, have one firm assist with litigation and the other in breach mitigation.”

I was curious and found a few related updates, including this interesting analysis from 2017: “Cyber Breach Forensic Reports: Is Your Report Discoverable?” —

  • “Due to the growing prevalence of data breaches and ransomware attacks, courts have been forced to interpret and nuance privilege in the context of post-breach forensic reports. One major consideration in the context of data breach litigation strategy is how to protect forensic reports prepared by outside forensic firms from discovery in civil litigation. If the forensic report is discoverable, it could be used by the opposing party and ultimately become part of the public record in litigation.”
  • ” Courts have held that, in certain circumstances, such forensic reports are protected by both attorney-client privilege and work product protection. Although there are few cases discussing these doctrines in the context of forensic reports, the cases provide guidance on what a company or organization can do to bolster claims that its post-breach forensic reports are shielded from discovery in civil litigation.”
  • “In Genesco, Inc. v. Visa U.S.A., Inc., a case involving a cyber-attack on a retail store, the defendant’s outside counsel engaged a forensic firm to assist with a privileged factual investigation as to how the cyber-attack occurred. The Middle District of Tennessee court found that the attorney-client privilege protects attorneys’ factual investigations, and the protection extends to attorneys’ communications with agents and experts who are retained for the purpose of providing legal advice. Accordingly, the court held that the report was protected from disclosure by the attorney-client privilege because it was: (1) prepared by the forensic firm at the direction of outside counsel; and (2) prepared to aide counsel in providing legal advice.”
  • “Multiple federal courts have held that in certain instances, forensic reports are protected by work product protection. Whether a document is work product generally comes down to whether the document was prepared in anticipation of litigation.”
  • “Companies should bear in mind that work product protection can be overcome by a finding of substantial need by the adverse party. To strengthen the argument against finding a substantial need, outside counsel should ensure that the forensic firm conducts its investigation based on documentation that can be provided to an adverse party for an independent investigation.”

Court Applies Work Product Protection to Breach Investigation Reports” —

  • “In October 2015, Experian announced that it suffered a data breach. A class action was filed the next day. Experian immediately hired legal counsel who in turn hired Mandiant, one of the world’s leading forensic firms, to investigate the data breach and identify facts that would allow outside counsel to provide legal advice to Experian.”
  • “The plaintiffs requested a copy of Mandiant’s report and documents related to that investigation. Experian objected, arguing that the documents are privileged and protected by the work-product doctrine because they were prepared in anticipation of litigation for the purpose of allowing counsel to advise Experian on its legal obligations. The plaintiffs moved to compel production of the documents.”
  • “The court held that the documents were protected from discovery by the work-product doctrine. Plaintiffs had argued that Experian had an independent business obligation to investigate the data breach, and it hired Mandiant to do that after realizing its own experts lacked sufficient resources. The court rejected this argument because Mandiant conducted the investigation and prepared the report for outside counsel in anticipation of litigation, “even if that wasn’t Mandiant’s only purpose.” The court pointed to, among other things, the fact that Mandiant’s full report was not provided to Experian’s internal incident response team.”

For even more, see the ACC’s: “Protecting Privilege in a Cyber Breach Incident Response.

Risk Update

Conflicts Accusations Overcome — Sidley Stays In, Keller Rohrback Continues Suit Against Former Client

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Sidley Austin Beats Hiring Challenge in Boy Scouts Bankruptcy” —

  • “Sidley Austin LLP was approved to serve as bankruptcy counsel for the Boy Scouts of America after overcoming a conflict of interest objection raised by an insurance provider the law firm previously represented.”
  • “The firm has shown it’s a disinterested adviser and has established appropriate firewalls in the Boy Scouts’ Chapter 11 case, Judge Laurie Selber Silverstein of the U.S. Bankruptcy Court for the District of Delaware said in an oral ruling issued Friday.”
  • “Sidley’s retention by the Boy Scouts, which filed for bankruptcy in February to deal with the fallout from hundreds of child sexual abuse claims, came under fire because of the firm’s prior engagements with Century Indemnity Company, one of the organization’s insurers.”
  • “Convinced that any sensitive information Sidley learned during the course of its work for Century ‘has not and will not be passed on to BSA’s restructuring team,’ Silverstein said in her ruling Friday that disqualification isn’t necessary.”

Keller Rohrback May Represent Homeowner Against Former Client” —

  • “Seattle-based law firm Keller Rohrback LLP may continue to represent homeowners suing USAA Casualty Insurance Co. over its alleged bad-faith refusal to pay for expenses after a house fire, the Washington Supreme Court said in a matter of first impression.”
  • “The case is factually distinct from Keller’s previous defense of USAA in a bad-faith insurance suit involving a house fire, the high court said Thursday. Its decision interpreting changes to professional conduct rules reverses a state appeals court ruling disqualifying Keller and reinstates the trial court’s order.”
  • “USAA sought to have the Keller attorneys disqualified. A team at the firm represented USAA in over 165 matters from 2007 to 2017, was privy to its litigation strategy and many other confidential matters, and handled a bad faith claim involving an alleged refusal to provide alternative housing after a house fire, it said.”
  • “The court looked to other states’ interpretations of the American Bar Association’s version of the rule on conflicts of interest and its comments, which Washington ‘effectively adopted’ in 2006, it said. The rule bars a lawyer from representing someone ‘in the same or a substantially related matter in which that person’s interests are materially adverse’ to a former client’s interests, without the former client’s consent.”
Risk Update

Lateral Hiring — Recruiter Conflicts, Intrigue, Interesting Data & News

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Not ethical conflicts (well, not in the sense we typically think about and cover them) but interesting developments and insights into the lateral market that caught my eye and I thought worth sharing:

Headhunter’s Case Against Freshfields Over Lateral Hire Narrowed” —

  • “Headhunting agency Boston Executive Search Associates Inc.’s case against Freshfields Bruckhaus Deringer US LLP over the law firm’s lateral hiring of a partner will be narrowed, but not dismissed entirely, a Massachusetts federal court said.”
  • “The international law firm contacted the headhunter in August of 2018 to discuss potential help in recruiting for one of its practice groups, according to the complaint. The agency sent the firm a copy of its standard agreement for recruiting services, but Freshfields didn’t sign it. Instead the firm sent back its own contingency fee agreement which differed materially from the agency’s, including by imposing a fee cap. Boston Executive countered with its standard agreement again, but Freshfields still didn’t sign.”
  • “While these negotiations were ongoing, Boston Executive contacted Ethan Klingsberg, a partner at Cleary Gottlieb Steen & Hamilton, who responded positively to the possibility of joining Freshfields, the agency said. When told of this, Freshfields allegedly expressed great interest in recruiting Klingsberg, but soon after asked the agency to hold off its recruiting efforts.”
  • “In October 2019 Freshfields announced it had hired Klingsberg and three associates from Cleary. Freshfields reportedly told Boston Executive the agency had played no role in the introduction or placement of Klingsberg and wasn’t owed any compensation.”

Headhunter Lawsuits Shed Light On Fierce Lateral Market” —

  • “And because of the slowdown caused by the COVID-19 pandemic, D’Amore and recruiters in other markets said they are expecting the competition for these partner candidates to be even greater, especially now that a number of law firms are putting a pause on recruiting associates.”
  • “‘So, people who can bring revenue, particularly in tough times like this, are in very high demand,’ D’Amore said. ‘Firms often will pay a premium, even in difficult times, because of how important revenues are [to the firms] now.'”
  • “Because law firms are private entities, it allows the attorneys to keep their compensation figures under wraps. Recruiters, however, have access to that information. Therefore, the lawsuits they file often provide a glimpse of some lawyers’ compensation.”
  • “ESA is seeking 25% of Klingsberg’s first-year compensation, which is reportedly $10 million. The recruiting firm also claims it should get 25% of the first-year compensation for each member of the team Klingsberg brought with him, which included three other attorneys from Cleary Gottlieb.”

I was curious about general trends in lateral movement, and a quick search found note of one such “spree”: “Cozen O’Connor, on Lateral Hiring Spree, Adds New Corporate Governance, Securities Chair From Ballard Spahr” —

  • “In an effort to grow its corporate practice, which it cites as a generator of business and client relationships across the firm, Cozen O’Connor has brought on a new practice group leader from a fellow Philadelphia-based law firm… There are about 10 attorneys in the group, and the firm has plans to grow it. Cozen O’Connor’s strategy is to grow its corporate group, with about 70 attorneys to date.”
  • “Cozen O’Connor has brought on 13 corporate attorneys in the last month, 10 of whom are based in Philadelphia, including Jaffari’s hire and its acquisition of nine-lawyer tech and corporate boutique Baer Crossey McDemus. The firm also announced last week that it added a five-lawyer group of litigators from Akin Gump Strauss Hauer & Feld, also in Philadelphia.”
Risk Update

Conflicts Response — King & Spalding Answer WhatsApp Side-switching Accusations

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King & Spalding Resists WhatsApp’s ‘Drastic’ Disqualification Bid in Cyber Case”

  • “A team from King & Spalding, including former partner and now FBI Director Christopher Wray, provided legal services to WhatsApp in a sealed matter four years ago. WhatsApp’s counsel at Cooley says the firm acquired confidential information relevant to a pending case where King & Spalding represents a WhatsApp adversary.”
  • “WhatsApp’s lawyers contend King & Spalding’s work for the company in a sealed matter four years ago has given the firm an unfair advantage in the pending case in Oakland’s federal trial court. The Cooley lawyers argued in their disqualification papers that the lawsuit against NSO is substantially related to the earlier sealed matter and that King & Spalding acquired confidential information material to the pending litigation.”
  • “On Friday, King & Spalding’s lawyers at Long & Levit disputed that the two cases are related, and they argued that three of the four King & Spalding lawyers who worked on the earlier sealed matter are no longer at the law firm. One of those attorneys, Christopher Wray, a former white-collar partner, was confirmed in 2017 as the FBI director.”
  • “‘Disqualification is a drastic, disfavored and disruptive remedy that is unwarranted here,’ San Francisco lawyer Jessica MacGregor of Long & Levit said in the new court filing. MacGregor argued that ‘depriving NSO of highly skilled counsel of its choice will impose significant hardship and prejudice.'”
  • “Cooley lawyers representing WhatsApp assert that King & Spalding acquired information about confidential aspects of the messaging service’s platforms when the firm provided legal advice to the company in 2015 and 2016. The current case ‘involves the very technology that WhatsApp previously hired King & Spalding to analyze and protect,’ the Cooley lawyers said.”
  • “‘King & Spalding is violating a bedrock requirement of attorney loyalty: the duty to avoid switching sides and opposing a client that it once represented,’ Cooley partner Michael Rhodes said in a filing in April.”
  • “Rhodes said in the filing: ‘Put simply, no client would ever expect to reveal the proprietary and nonpublic details of its product to its lawyers, only to find those lawyers acting adversely to it a few years later on a case involving the same technology and on behalf of a client that marketed and sold the ability to attack and exploit its network.'”
Risk Update

Covid Risk Management — On “Post-pandemic” Malpractice Mitigation

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5 Ways To Reduce Post-Pandemic Legal Malpractice Exposure” —

  • Stay in your lane. The current pandemic has upended the legal industry in ways never before seen. Many firms have been forced to cut salaries, defer or withdraw partner compensation, and/or lay off attorneys and staff, all of which puts pressure, either real or perceived, on firm attorneys to generate new business. This can lead to attorneys accepting work that falls outside their area of expertise simply in an effort to keep themselves or others in the firm busy. Lawyers must resist the temptation to take on cases they are not qualified to handle or that fall outside their sphere of expertise.”
  • Define the scope of the representation of your engagement letter. While most states require engagement letters under their rules of professional conduct, reducing malpractice exposure is an important driver of this risk management tool. Clear and concise engagement letters define the parameters of the relationship and representation and remove any doubt or confusion about such things as who the client is and who the client is not, clearly establishing to whom the lawyer owes a duty… Engagement letters should also discuss and explain the conflict of interest checks run by the firm and potential conflicts that could arise during the representation, as well as the attorney’s right to withdraw from the representation for nonpayment.”
  • “Communicate frequently with clients and properly manage expectations. Lawyers should not create a situation where they can easily be second-guessed, and therefore should communicate early and often to set forth all the information available at the time and create a paper trail. Responsiveness to a client’s needs and demands in a timely fashion will keep clients happy and informed. When clients are not kept in the loop, they are more likely to bring an action against their lawyer if they don’t get the results they expected. Making a contemporaneous record protects against one person’s word being pitted against the other later on.”
  • Institute a comprehensive docketing system that assures the proper calendaring of events and deadlines. Courts nationwide have instituted COVID-19 scheduling changes, which effectively delay proceedings, stay deadlines, and in some cases prohibit new filings. In many courts, statutes of limitations have been tolled and filing deadlines extended. With each court and jurisdiction instituting different and distinct orders regarding filings and deadlines, it becomes more incumbent upon the attorney to stay abreast of all new filing deadlines.”
Risk Update

Former Client Conflicts Allegations — One Successful DQ, One Not

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Latham & Watkins Disqualified From Defense Logistics Protest” —

  • “Latham & Watkins LLP can’t represent Quantico Tactical Inc. in a pre-award protest of a defense logistics procurement because the law firm previously represented another bidder, Atlantic Diving Supply Inc., the U.S. Court of Federal Claims ruled.”
  • “If allowed to continue in this case, Latham, which previously prepared an SEC form for Atlantic Diving, would be seeking to hurt Atlantic Diving’s position based on information it learned about the company’s corporate structure, Judge Eric G. Bruggink said in a decision released Tuesday.”
  • “‘The same attorneys who once had unfettered access to ADS’ proprietary information should not be sitting across the table at deposition inquiring into the same issues,’ the court said.”

Keller Rohrback May Represent Homeowner Against Former Client” —

  • “Seattle-based law firm Keller Rohrback LLP may continue to represent homeowners suing USAA Casualty Insurance Co. over its alleged bad-faith refusal to pay for expenses after a house fire, the Washington Supreme Court said in a matter of first impression.”
  • “The case is factually distinct from Keller’s previous defense of USAA in a bad-faith insurance suit involving a house fire, the high court said Thursday. Its decision interpreting changes to professional conduct rules reverses a state appeals court ruling disqualifying Keller and reinstates the trial court’s order.”
  • “The court looked to other states’ interpretations of the American Bar Association’s version of the rule on conflicts of interest and its comments, which Washington ‘effectively adopted’ in 2006, it said. The rule bars a lawyer from representing someone ‘in the same or a substantially related matter in which that person’s interests are materially adverse’ to a former client’s interests, without the former client’s consent.”
  • “The resolution here ‘depends on just how related the former and current representation must be,’ the high court said in an opinion by Justice Sheryl Gordon McCloud.”
Risk Update

Family Conflicts of Interest — Multiple Representations, Trusts & Beneficiaries & More

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In $100M Suit, a Moody Alleges Galveston Firm Used ‘Parasitic Relationship’ to Get Rich at His Family’s Expense” —

  • “A member of Galveston’s prominent Moody family has sued Greer, Herz & Adams, alleging that the boutique law firm represented the Moodys in too many different interests, making so much money off his family that it wouldn’t exist in its current form without that work.”
  • “Moody Jr.’s allegations raise questions about conflicts of interest that may arise when a firm or lawyer represents numerous related business entities and family members at the same time. He is seeking more than $100 million in damages, and he is represented by Houston trial lawyer Anthony Buzbee.”
  • “‘This is an egregious case of a trustee and lawyer taking advantage of his position to exponentially enrich himself, his law firm and his family,’ Moody Jr. alleged in a petition filed May 21 in state district court in Harris County. In a footnote, the suit referred to the ties between the firm and the family as a ‘parasitic relationship’ that existed for more than 35 years.”
  • “But, Moody Jr. alleged, after his father stepped down from numerous business and charitable boards that control billions of dollars worth of Moody family interests, Herz and Ross Moody used that power of attorney as an opportunity to enrich themselves and their law firm.”
  • “In a 35-page petition, Moody Jr. alleged that Greer Herz “simply would not exist” in its present form without Moody Sr. and the ‘sprawling’ Moody interests as clients. He alleged that members of the firm are routinely appointed to boards that manage Moody business interests, and most of the legal work is provided without a formal fee agreement that would include a waiver to the ‘innumerable conflicts of interest inherent in the multiple representations.'”
  • “According to the petition, Herz simultaneously is legal counsel to the testator of the Moody trust; legal counsel to multiple beneficiaries of the trust; general counsel to two major competing publicly traded corporate entities controlled directly or indirectly by the trust; and legal counsel to every corporate entity within the trust, among other Moody-related representations.”

Pa. Justices Ask If Trust Conflicts Warrant Separate Attys” —

  • “When conflicts arise between the people running a trust and its beneficiaries, Pennsylvania’s Supreme Court justices wondered Wednesday why the parties wouldn’t all retain and pay for their own lawyers rather than fight over whether the beneficiaries get to see legal bills paid for by the trust or if they’re protected by attorney-client privilege.”
  • “In arguments held via videoconference, members of Pennsylvania’s highest court probed what made trust attorneys special in a conflict where a deceased Allegheny County man’s two stepsons accused the trustee of his estate — the man’s biological son and a co-beneficiary of the trust — of overspending the trust’s money on attorney fees to resolve their other disputes.”
  • “The trustee claimed that much of the legal billing his stepbrothers demanded was protected by attorney-client privilege, but two of the justices asked why the trustee and the beneficiaries hadn’t all retained new, separate attorneys. Justice Sallie Mundy compared it to a criminal case, where the same attorney could represent more than one defendant up until the point that some conflict arises.”
  • “Del Sole replied that trustees need to be able to consult their attorneys on matters of running the trust without worrying about disclosures to beneficiaries or other parties, so there is an attorney-client relationship and privilege between them. He urged the court not to create a so-called fiduciary exception that would require otherwise-protected information to be turned over to beneficiaries when a client was acting in a fiduciary capacity.”