Opinion ID: 2642720
Heading Depth: 1
Heading Rank: 4

Heading: analysis

Text: ¶19 This case raises three issues: (1) whether a petition for extraordinary relief is an appropriate mechanism for challenging the 7 SNOW et al v. HONORABLE LINDBERG Opinion of the Court district court’s order disqualifying SCM and compelling it to disclose privileged attorney-client information to the Special Fiduciary of the Reformed Trust, (2) whether SCM is required to disclose attorneyclient information to the Special Fiduciary, and (3) whether SCM can represent clients whose interests are materially adverse to the interests of the Reformed Trust. We address each of these issues in turn.
IS AN APPROPRIATE PROCEDURE TO CHALLENGE THE DISTRICT COURT’S ORDER ¶20 Judge Lindberg argues that a writ for extraordinary relief is not the appropriate procedural mechanism for challenging the district court’s ruling. Specifically, she argues that this case does not involve extraordinary circumstances. We disagree. ¶21 Rule 65B of the Utah Rules of Civil Procedure provides that “[w]here no other plain, speedy and adequate remedy is available, a person may petition the court for extraordinary relief on . . . grounds . . . involving the wrongful use of judicial authority.” UTAH R. CIV. P. 65B(a). A court wrongfully uses its judicial authority when it abuses its discretion. UTAH R. CIV. P. 65B(d)(2)(A). “[I]f a petitioner is able to establish that a lower court abused its discretion, that petitioner becomes eligible for, but not entitled to, extraordinary relief.” State v. Barrett, 2005 UT 88, ¶ 24, 127 P.3d 682. ¶22 The question of whether to grant a petition for extraordinary relief lies within the sound discretion of this court. Id. When considering whether to grant a petition, we may consider a variety of factors such as “the egregiousness of the alleged error, the significance of the legal issue presented by the petition, the severity of the consequences occasioned by the alleged error, and additional factors.” Id. ¶ 24. But these factors are neither controlling nor do they wholly measure the extent of our discretion. Id. ¶23 We conclude that SCM and Movants appropriately utilized a petition for extraordinary writ in challenging the district court’s order. As nonparties to the district court proceeding, SCM and Movants had “no other plain, speedy and adequate remedy . . . available” to challenge the district court’s order. Moreover, the consequences of the district court’s error—disgorgement of documents allegedly protected by attorney-client privilege and disqualification of counsel—are of sufficient severity to justify the writ. ¶24 Because SCM and Movants were not parties to the 8 Cite as: 2013 UT 15 Opinion of the Court proceeding below, they cannot appeal the district court’s order. Thus, outside of the extraordinary writ process, they have no “plain, speedy, and adequate remedy” to challenge it. As we have previously indicated, when an individual who is not a party to a district court proceeding is adversely affected by an order or judgment, the procedural mechanism for challenging the district court’s action is through a petition for extraordinary writ. See Soc’y of Prof’l Journalists v. Bullock, 743 P.2d 1166, 1168, 1171 (Utah 1987).3 ¶25 Second, an extraordinary writ is appropriate in this case because compelling SCM to turn over what is alleged to constitute privileged information has the potential to result in irreparable injury. “[A]ppellate courts cannot always unring the bell once the information has been released.” United States v. Sciarra, 851 F.2d 621, 636 (3d Cir. 1988) (internal quotation marks omitted); see also In re Perrigo Co., 128 F.3d 430, 437 (6th Cir. 1997) (“[F]orced disclosure of privileged material may bring about irreparable harm.”). ¶26 Finally, the order disqualifying SCM will result in irreparable injury to the Movants because it will separate them “from the counsel of [their] choice with immediate and measurable effect.” Zurich Ins. Co. v. Knotts, 52 S.W.3d 555, 560 (Ky. 2001); see, e.g., AlliedSignal Recovery Trust v. AlliedSignal, Inc., 934 So.2d 675, 681 (Fla. Dist. Ct. App. 2006). And in this case, SCM is not only the Movants’ counsel of choice, but is uniquely situated to represent the Movants because it has knowledge of the circumstances surrounding the creation of the UEP Trust, the trust documents, and the trust reformation. Because SCM and the Movants cannot appeal the 3 Judge Lindberg also argues that a petition for extraordinary writ is not an appropriate procedure to challenge the validity of the Reformed Trust because such a challenge implicates the rights of the Reformed Trust’s beneficiaries. We disagree that our decision here will implicate the validity of the Reformed Trust. Indeed, we explicitly decided in Fundamentalist Church of Jesus Christ of LatterDay Saints v. Lindberg that, because no one had challenged the district court’s reformation of the UEP Trust for three years, the validity of the Reformed Trust could no longer be challenged. 2010 UT 51, ¶ 35, 238 P.3d 1054. Although our decision in this case addresses the reformation of the Trust, it does so for the limited purpose of determining whether SCM should be required to turn over the subpoenaed information and whether SCM should be disqualified from representing the Movants. 9 SNOW et al v. HONORABLE LINDBERG Opinion of the Court district court’s order and because any error could result in irreparable harm to petitioners, we conclude that a petition for extraordinary relief was the correct procedure for challenging the district court’s order. We now turn to the question of whether SCM and Movants are entitled to the relief they seek.
WHEN IT DETERMINED THAT SCM HAD AN ATTORNEY-CLIENT RELATIONSHIP WITH THE REFORMED TRUST ¶27 We next address whether the district court abused its discretion when it ordered SCM to disgorge privileged attorneyclient information to the Special Fiduciary. SCM argues that the district court abused its discretion because “charitable trusts are not entities capable of entering into an attorney-client relationship or holding a privilege.” It therefore reasons that the only attorneyclient relationship created by SCM’s prior representation of the UEP Trust was between SCM and the former trustees and not between SCM and the UEP Trust itself. Alternatively, SCM argues that even if an attorney-client relationship existed between SCM and the UEP Trust, the Reformed Trust is not the same client as the UEP Trust. Therefore, SCM cannot be disqualified from representing the Movants based on its former relationship with the UEP Trust. ¶28 We hold that the UEP Trust was an entity that was capable of forming an attorney-client relationship. Nevertheless, we hold that the Reformed Trust and the UEP Trust are not the same entity for purposes of analyzing the attorney-client relationship. We therefore conclude that the district court abused its discretion when it ordered SCM to disgorge privileged information to the Special Fiduciary and when it disqualified SCM from representing Movants.
Into an Attorney-Client Relationship ¶29 We first consider whether the UEP Trust was a client of SCM. SCM argues that the UEP Trust was never its client because a charitable trust is merely a fiduciary relationship and is not an entity capable of being a “client” for purposes of asserting an attorney-client privilege. SCM argues that it established an attorneyclient relationship with the trustees of the UEP Trust and not the UEP Trust itself. It therefore reasons that when the district court reformed the UEP Trust and removed its trustees, SCM was entitled to continue its attorney-client relationship with the former trustees. We disagree. 10 Cite as: 2013 UT 15 Opinion of the Court ¶30 The attorney-client privilege is defined by rule 504 of the Utah Rules of Evidence. “When interpreting [our rules of evidence], we use general rules of statutory construction.” Clark v. Archer, 2010 UT 57, ¶ 9, 242 P.3d 758. “[W]e consider the literal meaning of each term and avoid interpretations that will render portions of a [rule] superfluous or inoperative.” Hoyer v. State, 2009 UT 38, ¶ 22, 212 P.3d 547. “If a rule’s language is clear and unambiguous, analysis of the rule’s meaning ends.” Clark, 2010 UT 57, ¶ 9. We therefore begin with the plain language of rule 504. ¶31 Rule 504 provides that an attorney’s “client has a privilege to refuse to disclose and to prevent any other person from disclosing, confidential communications . . . made for the purpose of facilitating the rendition of professional legal services.” UTAH R. EVID. 504(b)(1). The rule defines client as “a person[,] . . . corporation, association, or other organization or entity . . . who is rendered professional legal services by a lawyer.” Id. 504(a)(1). The rule further provides that “[t]he [attorney-client] privilege may be claimed by . . . the successor, trustee, or similar representative of a client that was a corporation, association, or other organization, whether or not in existence.” Id. 504(c)(4). ¶32 For purposes of rule 504, a trust is an entity not unlike a corporation. Under the plain language of the rule, a trustee can claim the privilege on behalf of the entity that it represents just as a representative of a corporation can assert the privilege on behalf of the corporation. Interpreting rule 504 as stating that a trust could not hold the privilege is simply inconsistent with the language of provision (c), which specifies who can claim the privilege on behalf of an entity or organization. Under the plain language of rule 504, it is the trust that holds the actual privilege and the trustee who claims the privilege on behalf of the trust. ¶33 Having determined that the UEP Trust is capable of forming an attorney-client relationship and thereby holding the attorney-client privilege, we next address whether the privilege continued from the original UEP Trust to the Reformed Trust. We conclude that the district court’s reformation of the UEP Trust so significantly altered it that the UEP Trust was transformed into an entirely different entity. In other words, we conclude that the UEP Trust and the Reformed Trust are not the same client.
Trust Are not the Same Entity ¶34 To determine whether the UEP Trust and the Reformed 11 SNOW et al v. HONORABLE LINDBERG Opinion of the Court Trust are the same client for purposes of the attorney-client privilege, we begin by examining the Trust’s reformation. The district court reformed the trust using the doctrine of cy pres. When the purposes of a charitable trust “become[] unlawful, impracticable, impossible to achieve, or wasteful,” a “court may apply cy pres to [either] modify or terminate the trust by directing that the trust property be applied . . . in a manner consistent with the settlor’s charitable purposes.” UTAH CODE § 75-7-413(1). Cy pres is a doctrine that is sometimes invoked when there has been a gift or bequest for a charitable purpose, which for some reason cannot be literally carried out, and something closely analogous is done which comports with and fulfills what appears to be the donor’s intention and purpose. In re Gerber, 652 P.2d 937, 940 (Utah 1982) (emphasis omitted) (internal quotation marks omitted). ¶35 When employing the doctrine of cy pres, the donor’s intention “should be the aim of the court.” Id. (internal quotation marks omitted). The idea underlying the doctrine is that the donor may have a general charitable intent, and that the particular charitable institution is only an agent for effectuating that intent. Therefore, if it becomes impossible or illegal to effectuate the gift in the precise manner specified by the donor, the court may look for another agent that is of the same character as the one specified and that will effectuate the settlor’s general charitable intent. Id. at 937–40. Essential to the application of cy pres is the requirement that the court determine what “the settlor would have wanted to happen if he were aware of the contingency which has made the exact effectuation of his expressed intent impossible.” Howard Sav. Inst. of Newark, N.J. v. Peep, 170 A.2d 39, 43 (N.J. 1961). Thus, application of the cy pres doctrine requires a court to determine whether the settlor would have chosen the district court’s modifications over a simple termination of the trust. ¶36 Although we previously upheld the reformation of the Trust in Fundamentalist Church of Jesus Christ of Latter-Day Saints v. Lindberg, we did so exclusively on the basis of laches. 2010 UT 51, ¶ 35, 238 P.3d 1054. We did not evaluate whether the reformation was consistent with the principle or requirements of cy pres in that the Reformed Trust was of the same character as the UEP Trust or that the Reformed Trust was consistent with the settlor’s intent. 12 Cite as: 2013 UT 15 Opinion of the Court ¶37 In determining the settlor’s intent, a court considering reformation under the doctrine of cy pres looks first to the plain language of the trust. Makoff v. Makoff, 528 P.2d 797, 798 (Utah 1974). If the settlor’s intent is clear from the language of the trust, parol evidence is inadmissible to vary the terms of the instrument. Id. “However, in ascertaining the intention of the settlor[, the court] may consider the entire instrument aided by the surrounding circumstances existing at the time of creation of the trust.” Id. ¶38 In this case, the plain language of the Trust makes clear that advancement of the FLDS religion was an essential purpose of the Trust. This religious purpose permeates all aspects of the Trust, starting with the manner in which Trust assets were acquired. Trust assets were acquired through the “consecration” of property by FLDS members. The Trust described “consecration” as “an unconditional dedication to a sacred purpose.” The Trust’s religious purpose also was reflected in the manner in which trustees were appointed. Trustees were appointed by the President of the FLDS Church and the President of the Church was to serve as “a trustee and President of the Board of Trustees.” ¶39 In addition, Trust distributions were judged by religious standards. Whether beneficiaries were entitled to benefit from Trust property was evaluated based on their righteousness. Specifically, [t]hose who [sought] the privilege to . . . live upon the lands and in the buildings of the . . . Trust . . . commit[ed] themselves and their families to live their lives according to the principles of the United Effort Plan and the Church, and they and their families consent[ed] to be governed by the Priesthood leadership. Additionally, the beneficiaries of the Trust were required to “consecrate their lives, times, talents and resources to the building and establishment of the Kingdom of God on Earth.” And those beneficiaries “who[,] in the opinion of the Presidency of the Church, [did] not honor their commitments to live their lives according to the principles of the United Effort Plan and the Church [were to] remove themselves from the trust property and, if they do not, the Board of Trustees may in its discretion cause their removal.” ¶40 Finally, the Trust’s provisions regarding termination were meant to ensure that Trust property remained under the control of the FLDS Church. In the event of the Trust’s termination, “the assets of the Trust Estate at that time [were to] become the property of the 13 SNOW et al v. HONORABLE LINDBERG Opinion of the Court Corporation of the President of the Fundamentalist Church of Jesus Christ of Latter-Day Saints, corporation sole.” ¶41 In reforming the UEP Trust, the district court stripped the Trust of its essential religious purpose and required that the Trust be administered according to secular principles. In place of these essential religious principles, it seized upon a provision of the Trust requiring that the Trust be administered to “members according to their wants and their needs, insofar as their wants are just.” Although the district court relied on this provision to suggest that the Trust had a secular purpose of providing for the needs of its members, the language of the Trust makes clear that “just wants and needs” is a religious determination. And the Trust specifically states that the “Board of Trustees, in its sole discretion, shall administer the Trust consistent with its religious purpose to provide for Church members according to their wants and their needs, insofar as their wants are just.” (Emphasis added.) ¶42 The religious purpose of the Trust is also evidenced by the fact that the “just wants” provision was intended to promote the FLDS doctrine of communal property ownership: The United Effort Plan is the effort and striving on the part of Church members toward the Holy United Order. This central principle of the Church requires the gathering together of faithful Church members on consecrated and sacred lands to establish as one pure people the Kingdom of God on Earth under the guidance of Priesthood leadership. . . . [C]onsistent with its religious purpose [the Trust is to be administered to] Church members according to their wants and their needs, insofar as their wants are just. (Emphasis added.) Indeed, the “just wants” provision cites to FLDS scripture. ¶43 In short, the district court seized upon an isolated trust provision to find a secular component to the Trust where none existed. Because the settlor intended that the advancement of the FLDS religion was the essential purpose of the Trust, the district court’s reformation of the trust by stripping it of its religious purpose so changed its purpose and identity that it is a different entity. 14 Cite as: 2013 UT 15 Opinion of the Court
with the Entity Known as the Reformed Trust ¶44 We now address whether an attorney-client relationship existed between SCM and the Reformed Trust. The Special Fiduciary argues that because SCM previously represented the UEP Trust, the Reformed Trust is therefore the holder of any privileged information. We disagree. ¶45 Rule 504 of the Utah Rules of Evidence recognizes attorney-client communications as privileged. UTAH R. EVID. 504. It provides that “[a] client has a privilege to refuse to disclose, and to prevent any other person from disclosing, confidential communications . . . made for the purpose of facilitating the rendition of professional legal services to the client.” Id. 504(b). “The attorneyclient privilege is intended to encourage candor between attorney and client and promote the best possible representation of the client.” Doe v. Maret, 1999 UT 74, ¶ 7, 984 P.2d 980 (internal quotation marks omitted), (overruled on other grounds by Munson v. Chamberlain, 2007 UT 91, ¶ 10, 173 P.3d 848). Rule 504(c) states that “the successor, trustee, or similar representative of a corporation, association, or other organization, whether or not in existence” may claim the privilege. The advisory committee’s notes provide that “[w]here there is a dispute as to which of several persons has claims to the rights of a previously existing entity, the court will be required to determine from the facts which entity’s claim is most consistent with the purposes of this rule.” UTAH R. EVID. 504 advisory committee’s note. ¶46 In this case, we conclude that allowing the Special Fiduciary to claim the privilege for communications between SCM and the UEP Trust would be inconsistent with the purpose of rule 504 because the Reformed Trust and the UEP Trust are so different that they cannot be considered the same entity. Indeed, the purposes of these two trusts are inconsistent. The UEP Trust existed solely for the purpose of “preserv[ing] and advanc[ing] the religious doctrines and goals of the [FLDS Church].” In contrast, the purpose of the Reformed Trust is secular. It is “separate and distinct from . . . the FLDS Church, as well as other religious efforts, objectives, doctrines or organizations.” Additionally, the Reformed Trust is administered “based on neutral principles of law,” independent of Priesthood input. This is in stark contrast to the administration of the UEP Trust in which Priesthood input was critical. In addition, the beneficiaries of the trusts are different. While participation in the UEP Trust was limited to faithful FLDS members, the Reformed 15 SNOW et al v. HONORABLE LINDBERG Opinion of the Court Trust beneficiaries include individuals “who can demonstrate that they had previously made Contributions to either the Trust or the FLDS Church.” Therefore, the beneficiaries of the Reformed Trust can include individuals who have left the FLDS Church, joined a rival sect, and/or have been critical of the FLDS Church. ¶47 Our conclusion that the Reformed Trust cannot be considered the successor of the UEP Trust is also supported by the differences in trust administration. The administration of the UEP Trust has been characterized as “sociological and psychological war” with FLDS Church members. And the Special Fiduciary has admitted that a determination of whether property should be conveyed outright or subject to a spendthrift trust depends in part on whether the transferee is likely to continue to advance the FLDS Church’s United Holy Order. In other words, a determination of whether a beneficiary will be given ownership of trust property outright or merely use of that property can depend on whether that beneficiary will promise not to advance a specific FLDS doctrine. It is clear that the settlor did not intend that the Trust that it created to advance the FLDS religion be reformed and administered in a manner that is hostile to that same religion. ¶48 The Special Fiduciary correctly notes that the Reformed Trust and the UEP Trust are holding primarily the same property. However, we do not find this fact determinative. Generally, when a court reforms a trust cy pres, the reformation is considered a modification of the trust. See UTAH CODE § 75-7-413 (1)(c) (Supp. 2010). But in this case where the Reformed Trust is so different from the original Trust that it cannot be deemed a continuation for purposes of the attorney-client privilege, the assets of the original Trust are deemed to have been purchased by the Reformed Trust. ¶49 The Special Fiduciary also argues that if an attorney-client relationship does not exist between the Reformed Trust and SCM, any time an entity undergoes a “change of corporate management or control,” or amends its bylaws or corporate mission, it will risk severing the attorney-client relationships that have been formed. The Special Fiduciary’s argument is misplaced because this case does not involve a mere change in the management of the UEP Trust. Rather, this case involves the district court’s reformation of a charitable trust that, absent the defense of laches, would have been set aside because the Reformed Trust does not effectuate the settlor’s intent. Unlike a corporation or similar entity, a charitable trust’s very existence is tied to the settlor’s intent. See UTAH CODE § 75-7- 16 Cite as: 2013 UT 15 Opinion of the Court 413 (noting that a “court may apply cy pres to modify or terminate the trust . . . in a manner consistent with the settlor’s charitable purposes”); cf. id. § 75-7-410(1) (“A trust terminates to the extent the . . . purposes of the trust have become unlawful, contrary to public policy, or impossible to achieve.”). If a charitable trust cannot be reformed in a manner that is consistent with the settlor’s intent, it should be terminated. In this case, the district court reformed the trust rather than terminate it. Because the district court’s reformation of the UEP Trust drastically altered the purpose and identity of the Trust, we hold that the district court’s modifications transformed it into an entirely different entity.
PRIVILEGED ATTORNEY-CLIENT INFORMATION TO THE REFORMED TRUST ¶50 We next consider whether SCM is required to disgorge privileged attorney-client communications to the Reformed Trust. Rule 1.9 of the Utah Rules of Professional Conduct describes the duties lawyers owe to former clients. Specifically, “[a] lawyer who has formerly represented a client in a matter shall not thereafter . . . reveal information relating to the representation except as these Rules would permit or require with respect to a client.” UTAH R. OF PROF’L CONDUCT 1.9(c). An attorney’s duty of confidentiality is the “hallmark of the client-lawyer relationship.” By safeguarding attorney-client communications, a client is “encouraged to seek legal assistance and to communicate fully and frankly with the lawyer even as to embarrassing or legally damaging subject matters.” Id. 1.6, cmt. 2 advisory committee’s notes. In turn, the client’s frankness facilitates the effectiveness of a lawyer in representing the client. ¶51 In this case, not only is SCM not required to disgorge privileged attorney-client information related to its representation of the UEP Trust, it is prohibited by rule 1.9(c) from so doing. The Reformed Trust is not the same entity as the UEP Trust and therefore it is not entitled to the UEP Trust’s privileged attorney-client information. Requiring the UEP Trust to disgorge privileged information to the Reformed Trust would be contrary to the underlying purpose of the attorney-client privilege in encouraging candor between lawyer and client. It would require the UEP trust to turn over possibly embarrassing or legally damaging material to an entity that it perceives as hostile to the FLDS Church and thus hostile to the very purpose of the UEP Trust. 17 SNOW et al v. HONORABLE LINDBERG Opinion of the Court ¶52 The Special Fiduciary argues that disgorgement is necessary because without the records relating to the underlying management and property of the UEP trust, he cannot effectively manage the Reformed Trust. But we disagree. The attorney-client privilege protects communications, not facts. Munson v. Chamberlain, 2007 UT 91, ¶ 15, 173 P.3d 848. The property records that the Special Fiduciary requests are therefore not privileged and are available through discovery. The Special Fiduciary has not pointed us to any privileged communications that are required for the administration of the Reformed Trust. And while we can imagine some circumstances where privileged attorney-client communication may facilitate the administration of the Reformed Trust, we believe the importance of safeguarding the confidentiality of attorney-client communications justifies any minor inconvenience that will result. Because requiring SCM to disgorge privileged attorney-client communication is inconsistent with rule 1.9 of the Utah Rules of Professional Conduct, we hold that the district court erred when it ordered SMC to disgorge privileged communications related to its representation of the UEP Trust.
PARTIES ADVERSE TO THE REFORMED TRUST ¶53 We finally address whether SCM is disqualified from representing Movants under rule 1.9 of the Utah Rules of Professional Conduct. The Special Fiduciary argues that SCM cannot represent the Movants because their interests are materially adverse to those of the Reformed Trust. We disagree. ¶54 Rule 1.9 of the Utah Rules of Professional Conduct provides that “[a] lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client.” UTAH R. PROF’L CONDUCT 1.9(a). ¶55 In this case, SCM is not disqualified from representing the movants in matters that are materially adverse to the Reformed Trust because SCM has never represented the Reformed Trust. As previously discussed, SCM represented the UEP Trust. When the district court reformed the UEP Trust in a manner that was inconsistent with the settlor’s intent, the Trust was transformed into an entirely new entity for purposes of the attorney-client relationship. The Reformed Trust is therefore not the same client as the UEP 18 Cite as: 2013 UT 15