Kathryn Guinan, Successor Trustee et al. v. Mark Block et al. (2013)

MEMORANDUM OF DECISION ON OBJECTION TO PLAINTIFFS' REQUESTS FOR PRODUCTION

This matter is before this court on the defendants' objection to plaintiffs' requests for production, dated June 25, 2012.¹  This is a legal malpractice action against the defendants allegedly for their role in representing F. Robert LaSaracina in his capacity as Trustee of the Kauppinen Trusts ² in connection with a mortgage refinancing and also in proceedings related to the removal of LaSaracina as Trustee for the Kauppinen Trusts.

The defendants have objected to the requests on various grounds, but principally on the basis that such materials are covered by the attorney-client privilege and/or the attorney work product doctrine and also barred from disclosure by Rule 1.6 of the Connecticut Rules of Professional Conduct.

Standard of Review

“Our Supreme Court has noted:  ‘[The] rules of discovery are designed to make a trial less a game of blindman's bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent ․’ (Internal quotation marks omitted.)  Wexler v. DeMaio, 280 Conn. 168, 188–89, 905 A.2d 1196 (2006), quoting United States v. Procter & Gamble Co., 356 U.S. 677, 682, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958).”  Travelers Property & Casualty Co. v. Christie, 99 Conn.App. 747, 759, 916 A.2d 114 (2007).   Our Supreme Court has also long recognized that the granting or denial of a discovery request rests in the sound discretion of the trial court.   See Barry v. Quality Steel Products, Inc., 280 Conn. 1, 16–17, 905 A.2d 55 (2006).  “The court's discretion applies to decisions concerning whether the information is material, privileged, substantially more available to the disclosing party, or within the disclosing party's knowledge, possession or power ․ A complete denial of discovery, however, is seldom within the court's discretion unless the court finds that one or more of the limitations on discovery expressed above applies.”  (Citation omitted.)  Standard Tallow Corp. v. Jowdy, 190 Conn. 48, 59–60, 459 A.2d 503 (1983).

Discussion

The defendants have objected to the discovery sought by the plaintiffs on several grounds.   In addition to the more routine objections such as the discovery sought is overly broad or unduly burdensome, the defendants claim that the materials sought are protected by the attorney-client and/or work-product privileges.   In addition, they also claim that they are prohibited from disclosing such material because of rule 1.6 of Connecticut's Rules of Professional Conduct.

The five requests for production at issue seek copies of the following:

1. all e-mails, letters, notes, memoranda sent to or received from F. Robert LaSaracina in his capacity as Trustee of the Kauppinen Trusts;

2. defendants' closing file and Legal Opinion letter with respect to the April 29, 2009 loan from Chelsea Groton Bank to LaSaracina as Trustee for the Kauppinen Trusts;

3. defendants' IOLTA ledgers showing all transactions between January 1, 2009 to present, concerning or relating to LaSaracina, as Trustee for the Kauppinen Trusts;

4. all files, documents, memoranda, correspondence or communications wherein Mark Block, Esq. And/or Block, Janney and Pascal, LLC represented LaSaracina as Trustee of any or all of the Kauppinen Trusts;

5. all files, documents, memoranda, correspondence or communications within the defendants' possession, other than as set forth above, concerning, relating to and/or regarding the Kauppinen Trusts.

The defendants argue that the materials sought are protected by the attorney-client privilege and, therefore, not discoverable.   The plaintiffs argue that the question is not whether the materials are covered by the privilege but rather, who currently holds that privilege.   The plaintiffs argue that the privilege does not belong to an individual trustee but rather belongs to the office of the trustee and therefore belongs to the current Trustee of the Kauppinen Trusts.   They argue that because there is no Connecticut cases directly on point, the court should be guided by case law from California and New Jersey where such an issue has been addressed.   Specifically, the plaintiffs rely on Moeller v. Superior Court, 16 Cal.4th 1124 (Cal.1997) and In re Estate of Fedor, 356 N.J.Super 218, 811 A.2d 970 (N.J. Super 2001).

In Moeller, the successor trustee objected to the final accounting and petition for settlement submitted by his predecessor trustee.  Moeller v. Superior Court, supra, 16 Cal.4th 1128.   The plaintiff served certain discovery requests upon his predecessor and the predecessor objected on the grounds that the materials sought were protected by the attorney-client privilege.  Id. The Supreme Court of California held that “the power to assert the attorney-client privilege with respect to confidential communications a predecessor trustee has had with its attorney on matters concerning trust administration passes from the predecessor trustee to its successor upon the successor's assumption of the office of the trustee.”  Id., 1139.   In coming to this conclusion, the Supreme Court of California reasoned that “the successor trustee inherits the power to assert the privilege only as to those confidential communications that occurred when the predecessor, in its fiduciary capacity, sought the attorney's advice for guidance in administering the trust.   If a predecessor trustee seeks legal advice in its personal capacity out of a genuine concern for possible future charges of breach of fiduciary duty, the predecessor may be able to avoid disclosing the advice to a successor trustee by hiring a separate lawyer and paying for the advice out of its personal funds.”  (Italics in original.)  Id., 1134.

At issue in the matter of In re Estate of Fedor, 356 N.J.Super 218, were claims by the beneficiaries of the Estate of Catherine M. Fedor and the Catherine M. Fedor Revocable Trust (“Estate”) against the former fiduciaries of the Estate alleging mismanagement and self-dealing.   The court had appointed a temporary successor trustee for the pendency of the litigation.   Both the successor trustee and the beneficiaries sought discovery of prior communications between the former fiduciaries and the Estate's attorneys and accountants.   The former fiduciaries objected on the grounds that the materials sought were protected by the attorney-client privilege.   Because this issue was a matter of first impression in New Jersey, the court looked to authority from other jurisdictions and also to New Jersey case law regarding corporate control for guidance.   Specifically, the court found more persuasive the reasoning in Moeller and Martin v. Valley National Bank of America, 140 F.R.D. 291, 318–19 (S.D.N.Y.1991) (court held new trustee of employee stock ownership plan could waive attorney-client privilege with respect to communications between former trustee and the trust's attorney) and, thus, granted the successor trustee's application for discovery over the objection of the former fiduciaries on attorney-client grounds.

“Connecticut has a long-standing, strong public policy of protecting attorney-client communications ․ This privilege was designed, in large part, to encourage full disclosure by a client to his or her attorney so as to facilitate effective legal representation ․ The attorney-client privilege seeks to protect a relationship that is a mainstay of our system of justice ․ It is obvious that professional assistance would be of little or no avail to the client, unless his legal adviser were put in possession of all the facts relating to the subject matter of inquiry or litigation, which, in the indulgence of the fullest confidence, the client could communicate.   And it is equally obvious that there would be an end to all confidence between the client and attorney, if the latter was at liberty or compellable to disclose the facts of which he had thus obtained possession;  and hence it has become a settled rule of evidence, that the confidential attorney, solicitor or counselor can never be called as a witness to disclose papers committed or communications made to him in that capacity, unless the client himself consents to such disclosure.”  (Citations omitted;  internal quotation marks omitted.)   Woodbury Knoll, LLC v. Shipman and Goodwin, LLP, 305 Conn. 750, 768, 48 A.3d 16 (2012).

“Exceptions to the attorney-client privilege should be made only when the reason for disclosure outweighs the potential chilling of essential communications.”  (Citations omitted;  internal quotation marks omitted.)   Hutchinson v. Farm Family, 273 Conn. 33, 38, 867 A.2d 1 (2005).  “It is important not to weaken the [attorney-client] privilege with various exceptions because, as the United States Supreme Court has explained, even the threat of disclosure would have a detrimental effect on attorneys' ability to advocate for their clients while preserving their ethical duty of confidentiality.   Hickman v. Taylor, 329 U.S. 495, 511, 67 S.Ct. 385, 91 L.Ed. 451 (1947) (where threat of disclosure, ‘[i]nefficiency, unfairness, and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial ․ [causing] the interests of the clients and the cause of justice [to] be poorly served’).”  Metropolitan Life & Casualty Co. v. Aetna Casualty & Surety Co., 249 Conn. 36, 48–49, 730 A.2d 51 (1999).

With these principles in mind, this court finds more persuasive the reasoning of the dissent in Moeller.   In that opinion, the court (Chin, J.) framed the issue as one of evidentiary privilege rather than of probate procedure or of any particular trust instrument.   Specifically, the court reasoned that, “[t]he Legislature has given the client ‘a privilege to refuse to disclose, and to prevent another from disclosing, a confidential communication between client and lawyer.’  (Evid.Code, § 954) With exceptions that are not relevant here (Evid.Code, § 953, subds.(b), (c), (d)), the person who controls the privilege is the client who confidentially communicated with the lawyer.   Therefore, when a trustee consults a lawyer for legal advice, that person, not a successor trustee, controls disclosure of communications with the lawyer ․ Nothing in these statutes suggests a trustee's privilege to withhold confidential attorney-client communications is an appendage of legal title to trust assets, an accessory to be stripped from the client who consulted the lawyer and passed along to the next person on the job.”  Moeller v. Superior Court, supra, 16 Cal.4th 1140.  “Although a successor trustee may assume its predecessor's powers and duties with respect to the trust estate, that does not mean the successor also acquires the privilege the Evidence Code conferred on its predecessor.   The predecessor holds the privilege because it was a person who sought legal advice or services from an attorney, not because it was a trustee with a question about trust administration.”  Id.

“The attorney-client privilege serves the same important purpose in the trustee-attorney relationship as it does in other attorney-client relationships.   A trustee must be able to consult freely with his or her attorney to obtain the best possible legal guidance.   Without the privilege, trustees might be inclined to forsake legal advice, thus adversely affecting the trust.   Alternatively, trustees might feel compelled to blindly follow counsel's advice, ignoring their own judgment and experience.”  (Citation omitted;  internal quotation marks omitted.)   Hubbell v. Ratcliffe, Superior Court, judicial district of Hartford Complex Litigation Docket at Hartford, Docket No. X04 HHD CV 08 4038824S (November 8, 2010, Shapiro, J.) (50 Conn. L. Rptr. 856), quoting Spinner v. Nutt, 417 Mass. 549, 553, 631 N.E.2d 542 (Mass.1994).   For all of the reasons stated above, the court finds that LaSaracina is the holder of the privilege and is the only one who can choose whether or not to waive said privilege.

The plaintiffs also argue that the crime-fraud exception to the attorney-client privilege applies to the materials they seek.   In Olson v. Accessory Controls & Equipment Corp., 254 Conn. 145, 757 A.2d 14 (2000), the Connecticut Supreme Court adopted a two-prong test to determine when the crime-fraud exception may apply to pierce the attorney-client privilege.   Specifically, the Court stated, “the crime-fraud exception permits abrogation of the attorney-client privilege solely upon a determination by the trial court that there is probable cause to believe that the privileged communications were made with the intent to perpetrate a civil fraud and that the communications were made in furtherance of that fraud.”  Id., 174.

In support of their contention that the crime-fraud exception applies, the plaintiffs rely on the findings of the Norwich Probate Court proceeding and the plea agreement LaSaracina entered into with United States Department of Justice (“US DOJ”).   The Norwich Probate Court found that “the former Trustee has engaged in a practice and pattern of self-dealing with regard to the trust assets ․ engaged in a practice of encumbering the real property assets of the trusts with ill-advised and excessively expensive loans taken out by the former Trustee for no reasonable purpose discernable by this court ․ has willfully encumbered the real property assets of the trusts, which had previously been free of mortgage encumbrance at the inception of the former Trustee's acceptance of fiduciary responsibility, to produce cash proceeds which were diverted by the former Trustee to his personal uses, and in derogation of his fiduciary responsibilities.”   See Exhibit B to Plaintiff's Response to Defendants' Memorandum of Law (Docket # 108.00), Decree of the Norwich Court of Probate In Re Kauppinen Revocable Trusts, dated September 21, 2010.   Furthermore, as part of the July 21, 2011 plea agreement entered into between LaSaracina and the U.S. DOJ, LaSaracina stipulated to the following:

“From in or about November 2001 and continuing until in or about September 2010, in the District of Connecticut and elsewhere, defendant FELIX ROBERT LASARACINA willfully, knowingly, and with intent to defraud, devised and intended to devise a scheme and artifice to defraud and to obtain money and property by means of materially false and fraudulent pretenses, representations, and promises ․ The purpose of the scheme was for LASARACINA to enrich himself and F. Robert LaSaracina CPA, LLC by defrauding individuals and a number of trusts that he controlled out of money and property ․ It was further part of the scheme to defraud that LASARACINA, while acting as Trustee for the above described Trusts, encumbered certain parcels of real estate owned by the Trusts by taking out a series of mortgage using the real estate that was owned by the Trusts as collateral.   Thereafter, he diverted the proceeds of the mortgage funds for his own personal use and benefit ․” See Exhibit A to Plaintiff's Response to Defendants' Memo of Law.

The plaintiffs argue that the above findings and plea agreement:  1) constitute probable cause that LaSaracina's communication with Block were made with the intent to perpetrate a civil fraud, i.e., to keep the plaintiffs unaware of his conduct;  and 2) show that the communications between LaSaracina and Block were in furtherance of his fraud because they were all part of LaSaracina's efforts to keep his conduct hidden from the plaintiffs.   The defendants argue that this evidence does not support the inference that LaSaracina perpetrated a fraud in connection with the Chelsea Groton refinancing or that his communications with Block were made with the intent to perpetrate a fraud.   In fact, they claim that these communications came after the fraud had already been committed.

The court agrees with the plaintiffs.   The defendants are correct in pointing out that, at the time of the Chelsea Groton refinancing, another bank had begun foreclosure proceedings on two mortgages that were secured by Trust assets, and that the Chelsea Groton loan did benefit the Trusts by avoiding foreclosure and lowering the interest rate the Trusts had to pay.   These ancillary benefits to the Trusts though are not inconsistent with a finding that there is probable cause to believe that LaSaracina's intent in communicating with Block was to continue to perpetrate his fraud on the Trusts.   A finding of probable cause merely requires that there is a “reasonable basis” to conclude that the purpose of the communication was the perpetration of a fraud.  Olson v. Accessory Controls & Equipment Corp., supra, 254 Conn. 174.   Here, the Norwich Probate Court's findings and LaSaracina's plea agreement provide more than a sufficient reasonable basis for this court to conclude that any alleged benefits from the Chelsea Groton refinancing to the Trusts were merely coincidental to LaSaracina's primary motivation for the refinancing, that is, to continue to cover up his ongoing scheme to defraud the Trust.   Similarly, the court finds that the communications were made in furtherance of the fraud.   Based on the above, this court finds that the plaintiffs have satisfied the two-part test established in Olson to show that the materials they seek are subject to the crime-fraud exception.

The defendants also argue that the materials sought are subject to the attorney work product doctrine.  Practice Book § 13–3 addresses the attorney work product doctrine.   Work product includes “documents ․ prepared in anticipation of litigation or for trial” and encompasses material prepared “by or for” another party or that other party's representative.   See Practice Book § 13–3(a).  “Work product can be defined as the result of an attorney's activities when those activities have been conducted with a view to pending or anticipated litigation.”  (Internal quotation marks omitted.)  Ullmann v. State, 230 Conn. 698, 714, 647 A.2d 324 (1994).  “The work product rule protects an attorney's interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs and countless other tangible and intangible items.”  (Internal quotation marks omitted.)  Id.

“The burden of establishing that the information sought constitutes work product is upon the party asserting such a claim ․ but the burden of showing ‘substantial need’ and ‘undue hardship’ falls upon the party seeking the discovery.  Practice Book § 13–3.”  (Citations omitted.)   Matos v. Allstate Insurance Co., Superior Court, judicial district of Stamford–Norwalk, Complex Litigation Docket at Stamford, Docket No. X08 CV 05 5002298 (December 3, 2008, Jennings, J.) (46 Conn. L. Rptr. 771).  “The attorney's work must have formed an essential step in the procurement of the data which the opponent seeks, and the attorney must have performed duties normally attended to by attorneys.”  (Citation omitted.)  Stanley Works v. New Britain Redevelopment Agency, 155 Conn. 86, 95, 230 A.2d 9 (1967).

“Since Rule 26 of the Federal Rules of Civil Procedure addresses work product in like terms Connecticut courts have looked to federal decisional law in order to adjudicate work product issues arising under Practice Book § 13–3.”   Amica Mutual Ins. Co. v. Fassarella Pro Painting & Design, LLC, Superior Court, judicial docket of Stamford–Norwalk at Stamford, Docket No. FST CV 10 6003636 S (July 21, 2011, Jennings, J.T.R.).   Federal courts have “cautioned against protecting documents from discovery simply because of a ‘ritualistic incantation’ ․ that documents are prepared in preparation for litigation and [draws] a ‘fact specific’ distinction between documents prepared in the ordinary course of ․ business ․ and documents created ‘because of’ anticipated litigation.”  Id. The defendants have failed to meet their burden to establish that all the materials sought by the plaintiffs were “prepared in anticipation of litigation or for trial” and thus covered by the work product doctrine.   They argue that, because of the exceedingly broad nature of the requests, the court may rely on the requests alone to find that said requests seek privileged materials as the defendants were LaSaracina's legal counsel.   This argument, however, misses the mark vis-a-vis the work product doctrine.   That doctrine only protects materials and documents “prepared in anticipation of litigation or for trial,” unlike the attorney-client privilege which protects all information exchanged between a client and his attorney.   Not all work done by an attorney on behalf of a client necessarily is done in preparation for litigation or for trial.   An attorney or firm may be retained by a client for a myriad of reasons, including performing transactional work such as drafting a contract or for estate planning purposes.   As such, the defendants have failed to establish, with sufficient specificity, that all the materials sought by the plaintiffs are covered by the work product doctrine.

The defendants also argue that Rule 1.6 of Connecticut's Rules of Professional Conduct prevents them from disclosing the materials sought by the plaintiffs.  Rule 1.6(a) states, “[a] lawyer shall not reveal information relating to representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by subsection (b), (c), or (d).”  However, subsection (c)(2) explicitly permits a lawyer to “reveal such information to the extent the lawyer reasonably believes necessary to ․ [p]revent, mitigate or rectify the consequence of a client's criminal or fraudulent act in the commission of which the lawyer's services had been used.”   In addition, subsection (c)(4) permits a lawyer to reveal such information in order to comply with other law or a court order.   Should the court determine that neither the attorney-client privilege nor the work product doctrine applies and order disclosure of the requested materials, Rule 1.6 would not be an additional bar to such disclosure.

Lastly, the defendants object to request for production # 3 on the basis that the information sought is immaterial and irrelevant to the claims being made.   Request # 3 seeks a copy of defendants' IOLTA ledgers showing all transactions between January 1, 2009 to present, concerning or relating to LaSaracina, as Trustee for the Kauppinen Trusts.   The defendants argue that the financial transactions between the defendants and LaSaracina would not shed any light on whether the defendants were negligent in not discovering LaSaracina's misconduct nor are they relevant to submission of the accountings prepared by LaSaracina for the probate court.   The plaintiffs counter that the information they seek would show, among other things, whether and how many payments were made on LaSaracina's account as Trustee of the Kauppinen Trusts, what payments were processed through their IOLTA accounts on LaSaracina's behalf, any payments made by the defendants to LaSaracina during the relevant time period, etc.   The plaintiffs argue that their requests for such documents are reasonably calculated to lead to the discovery of admissible evidence.

The court agrees with the plaintiffs.   The claims being made in this action involve alleged improper financial transactions by LaSaracina as Trustee while he was being represented by the defendants.   Thus, the information sought in request # 3 is directly relevant and is likely to lead to the discovery of admissible evidence.   The defendant's objection to request # 3 is overruled.

Conclusion

Because the court has determined that the crime-fraud exception applies, and because the defendants have failed to meet their burden to establish that all the information sought by the plaintiffs are covered by the work product doctrine, the defendants are ordered to produce all materials requested that are not covered by the work product doctrine, that is, not prepared in anticipation of litigation or for trial.   The defendants are further ordered to create a privilege log of any documents they claim fall under the work product doctrine.

Bright, J.

FOOTNOTES

FN1. This matter was originally filed in the New London Superior Court.   On September 8, 2012, the court (Parker, J.) denied without prejudice, the defendants' objections (102.01) On October 4, 2012, the defendants filed a motion to reargue (110.00).   The court (Parker, J.) held a hearing on the defendants' motion to reargue on November 5, 2012 and vacated the September 8, 2012 ruling. (102.02).   On December 10, 2012 the parties appeared before the court (Parker, J.) to present oral argument on the matter Pursuant to Practice Book § 11–19, a ruling on the objections heard at the December 10, 2012 argument was due on or before April 9, 2013 No such ruing was issued, thus on April 23, 2013, the defendants filed a motion for reassignment pursuant to PB § 11–19 (129.00) Thereafter, the matter was transferred to the X04 Complex Litigation Docket..  FN1. This matter was originally filed in the New London Superior Court.   On September 8, 2012, the court (Parker, J.) denied without prejudice, the defendants' objections (102.01) On October 4, 2012, the defendants filed a motion to reargue (110.00).   The court (Parker, J.) held a hearing on the defendants' motion to reargue on November 5, 2012 and vacated the September 8, 2012 ruling. (102.02).   On December 10, 2012 the parties appeared before the court (Parker, J.) to present oral argument on the matter Pursuant to Practice Book § 11–19, a ruling on the objections heard at the December 10, 2012 argument was due on or before April 9, 2013 No such ruing was issued, thus on April 23, 2013, the defendants filed a motion for reassignment pursuant to PB § 11–19 (129.00) Thereafter, the matter was transferred to the X04 Complex Litigation Docket.

FN2. The “Kauppinen Trusts” refers to the following:  the Frederick Kauppinen Revocable Trust Indenture f/b/o Frederick V Kauppinen, Jr.;   the Lillian I. Kauppinen Trust Indenture f/b/o Frederick V. Kauppinen, Jr.;   the Frederick Kauppinen Revocable Trust Indenture f/b/o Ilona Korsu–Kauppinen, the Lillian I. Kauppinen Trust Indenture f/b/o Ilona Korsu–Kauppinen;  the Frederick Kauppinen Revocable Trust Indenture f/b/o Riita Haley, the Lillian I. Kauppmen Revocable Trust f/b/o Riita Haley;  the Frederick V. Kauppinen, Jr. Spray Trust, and the Riita Haley Spray Trust..  FN2. The “Kauppinen Trusts” refers to the following:  the Frederick Kauppinen Revocable Trust Indenture f/b/o Frederick V Kauppinen, Jr.;   the Lillian I. Kauppinen Trust Indenture f/b/o Frederick V. Kauppinen, Jr.;   the Frederick Kauppinen Revocable Trust Indenture f/b/o Ilona Korsu–Kauppinen, the Lillian I. Kauppinen Trust Indenture f/b/o Ilona Korsu–Kauppinen;  the Frederick Kauppinen Revocable Trust Indenture f/b/o Riita Haley, the Lillian I. Kauppmen Revocable Trust f/b/o Riita Haley;  the Frederick V. Kauppinen, Jr. Spray Trust, and the Riita Haley Spray Trust.

Bright, William H., J.