J-A18011-19
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
IN RE: TRUST UNDER DEED OF : IN THE SUPERIOR COURT OF TRUST OF SARAH MELLON SCAIFE, : PENNSYLVANIA SETTLOR, DECEMBER 30, 1935 : : : APPEAL OF: H. YALE GUTNICK, : ESQUIRE, AND NON-PARTY : STRASSBURGER MCKENNA GUTNIK : & GEFSKY : No. 1415 WDA 2018
Appeal from the Order Dated September 17, 2018 In the Court of Common Pleas of Allegheny County Orphans' Court at No(s): No. 6469 of 2014
BEFORE: BOWES, J., NICHOLS, J., and MUSMANNO, J.
MEMORANDUM BY BOWES, J.: FILED DECEMBER 31, 2019
H. Yale Gutnick, Esquire, (“Gutnick”) and non-party Strassburger
McKenna Gutnick & Gefsky (“Law Firm”) appeal from the September 17, 2018
order directing them to produce documents identified in a privilege log as
subject to the attorney-client privilege and work product doctrine. We have
jurisdiction to entertain this appeal pursuant to the collateral order doctrine.
Pa.R.A.P. 313.1 For the reasons that follow, we vacate the order and remand
for in camera review.
____________________________________________
1 A non-final discovery order can be subject to appellate review under the collateral order doctrine if a colorable claim of the attorney-client privilege is raised. See Custom Designs & Mfg. Co. v. Sherwin-Williams Co., 39 A.3d 372, 376 (Pa.Super. 2012). In opining that the instant appeal should be quashed, the orphans’ court relied upon our decision in Estate of McAleer, 194 A.3d 587, 595 (Pa.Super. 2018), appeal granted, 201 A.3d 724 (Pa. 2019), in which the issue in controversy was the reasonableness of trustee J-A18011-19
The following facts are relevant to our review. In 1935, Sarah Mellon
Scaife settled a trust she designated as the “Richard Mellon Scaife Trust” (the
“Trust”) “for the benefit of my son, RICHARD MELLON SCAIFE.” Deed of Trust,
at 4 ¶2. The Trust document conferred upon the Trustees the power and
authority:
whenever and as often as they shall deem that the best interests of my said son shall require or make advisable further or additional provision to be made for him,
....
(c) To distribute to my said son, as his absolute property, all or such portion of the corpus of the Trust Estate as the Trustees shall deem to be for his best interests, and if, as and when the entire corpus of the Trust Estate may be so distributed to my said son, this trust shall terminate notwithstanding that the time of termination specified in Article 3 may not yet have arrived.
Id. at 9 ¶8.
The Trust instrument expressly defined the discretion of the Trustees as
follows:
That power given to the Trustees regarding distribution of income and/or corpus of the Trust Estate, shall be exercisable by them in their absolute and uncontrolled discretion, and I expressly direct ____________________________________________
and attorney fees. After concluding that trust beneficiaries had a right to such information, and that the trustee had not objected to the discovery on the basis of privilege, nor provided any facts in support of his attempt to invoke the attorney-client and work product privileges, we found no colorable claim of privilege that would render the non-final discovery order appealable as a collateral order. In contrast herein, Gutnick and the Law Firm objected on the basis of privilege, supplied detailed privilege logs, and thus raised a colorable claim of privilege that supports appellate review of the instant non-final discovery order under the collateral order doctrine.
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that the Trustees shall be the sole judges as to the necessity, advisability, propriety and amount of any such distribution . . . final and conclusive . . . binding upon all parties having any interest in the corpus of income of the Trust Estate, and shall not be open or subject to question in any manner or for any reason whatsoever.
Id. at 16 ¶11.
From 1996 through 2014, Mr. Scaife made requests for distributions
from the Trust until the $400 million principal was fully distributed. Trustees
Gutnick, PNC Bank, N.A. (“PNC”), and James M. Walton sought legal advice
over the years from three attorneys regarding their discretion to make
distribution of the Trust principal.
Richard Scaife died on July 4, 2014. Gutnick and Walton were appointed
co-executors of Mr. Scaife’s estate. Mr. Scaife’s two children, Jennie2 and
David (collectively “Petitioners”), were contingent remainder beneficiaries
under the Trust. They each filed Petitions for Citation to Show Cause Why an
Account Should Not be Filed. Thereafter, they filed Objections to the Trustees’
Account, incorporating their prior petitions, averring that distributions from
the Trust to Mr. Scaife were improper. They alleged that the Trustees wasted
Trust assets, that funding Tribune Total Media’s losses was not in Mr. Scaife’s
best interests, and that Mr. Scaife’s requested distributions were intended to
effectuate his estate plan to disinherit his children, Petitioners herein.
Advanced Text of Brief of Appellee David Zywiec, at 3. The Trustees
responded that they acted in good faith and in accordance with the law, ____________________________________________
2Jennie Scaife died on November 29, 2018. Her personal representative, David Zywiec, has been substituted for her in these proceedings.
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pursuant to the Settlor’s directives as set forth in the Deed of Trust, and in
reliance upon the opinion of several counsel.
Discovery proceeded. Petitioners served a request for production upon
Gutnick seeking all documents that referred to administration of the Trust,
communications with attorneys or accountants with regard to the Trust, and
Gutnick’s entire file on the Trust. Gutnick agreed to provide non-privileged
documents in his custody and control responsive to the request.3
Shortly thereafter, Petitioners subpoenaed the Law Firm to produce
documents not only related to the Trust, but to other family trusts, and Mr.
Scaife’s estate plan as well. The Law Firm objected to the subpoena, but
agreed to produce documents that were not privileged pursuant to the
attorney-client privilege, the work product doctrine, or any other privilege or
immunity. Over 39,000 pages of documents were produced in response to
the subpoena. On November 2, 2016, Gutnick and Law Firm submitted the
Law Firm Privilege Log, accounting for documents responsive to the requests
but which were being withheld on the basis of privilege.
3 According to co-trustee PNC, prior to the production of any documents, the parties entered a consent order, approved by the court, that provided that Trustees would include documents “reflecting requests for legal advice and opinions of counsel paid for by the 1935 Trust or the Family Trusts.” Consent Order, 9/15/15, at 1 ¶2. PNC states that the Trustees complied with the consent order and did not produce any documents related to legal advice and work product that was not paid for by the Trust and that were not shared among the Trustees. See Advanced Text of Brief of Appellee PNC Bank, NA, at 7.
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In December 2017, Petitioners filed a motion seeking to compel the
production of attorney-client and work product privileged documents
regarding Mr. Scaife’s estate planning file, or alternatively, seeking that the
documents be subjected to in camera review.4 The Law Firm and Gutnick
provided a supplemental privilege log, and consented to in camera review.
They also stated they were amenable to appointment of a special discovery
master for purposes of resolving the issues attendant to the requested
documents. The orphans’ court heard oral argument on the motion to compel
on January 12, 2018, but reserved decision pending this Court’s decision in
Estate of McAleer, 194 A.3d 587, 595 (Pa.Super. 2018), appeal granted,
201 A.3d 724 (Pa. 2019). Six weeks after our decision, in September 2018,
the orphans’ court granted Petitioners’ motion to compel and ordered
production of all of the documents subject to claims of privilege without
conducting in camera review. In doing so, the court relied upon Judge R.
Stanton Wettick’s decision in Follansbee v. Gerlach, 56 Pa. D & C 4th 483
(Alleg. Co. 2002), holding that legal advice given to the trustee relating to the
4 Gutnick and the Law Firm maintained throughout that Mr. Scaife’s estate planning had no bearing on the question whether they breached a fiduciary duty in their administration and management of the Trust. Moreover, Gutnick and the Law Firm argued that there was no reason to delve into Mr. Scaife’s estate planning documents to prove, as Petitioners contended, that Gutnick knew Mr. Scaife intended to disinherit his children. As Gutnick aptly notes, he admitted that Mr. Scaife had several motives for requesting principal distributions, among them, that his children had sufficient wealth that they did not need any more money from the Trust. Answer and New Matter of Respondent, H. Yale Gutnick, to Jennie Scaife’s Petition for Citation to Compel Recording of Trust Agreement and Filing of an Account, 12/12/14, at ¶32.
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trust must be shared with trust beneficiaries, and cannot be withheld by
invoking attorney-client privilege.
Gutnick and the Law Firm clarified that the documents that the court
had ordered them to produce involved estate planning, not trust management,
and were not governed by Follansbee. In response, the orphans’ court added
an additional basis for compelling production: that Gutnick and the Law Firm
waived their privilege claims by failing to assert them in their response to the
motion to compel. It also relied upon In re Estate of McAleer, supra, for
the proposition that its order was not appealable.
Gutnick and the Law Firm filed the within appeal, basing appellate
jurisdiction to review the interlocutory order on the collateral order doctrine.
They present three issues for our review:
I. Whether the lower court erred in holding that Appellants waived their attorney-client and work product objections to producing Richard Scaife’s estate planning file?
II. Whether the lower court erred in holding that the Follansbee decision, which involved trust administration documents, even applied to the production of estate planning documents?
III. Whether the lower court erred in ordering the production of Mr. Scaife’s entire estate planning filed without conducting an in camera review as to which Appellants raised claims of privilege?
Appellants’ brief at 8 (unnecessary capitalization omitted).
Before we address the issues raised by Gutnick and Law Firm, we must
first address David’s argument that the instant appeal should be quashed for
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lack of jurisdiction.5 While David concedes that discovery orders compelling
the disclosure of allegedly privileged communications may be appealable as
collateral orders pursuant to Pa.R.A.P. 313, he claims that Gutnick and the
Law Firm are not aggrieved parties, i.e., parties who are adversely affected
by the ruling, with standing to appeal from the order. He contends that
Gutnick and the Law Firm are not aggrieved by an order compelling them to
produce estate planning, tax, and corporate documents containing advice
given by a non-party, Attorney Allan Finegold, for the benefit of Mr. Scaife.
Gutnick and the Law Firm counter that David’s argument improperly
conflates standing to appeal an adverse order, and standing to invoke a
privilege, which were held by this Court to be distinct inquiries in Knopick v.
Boyle, 189 A.3d 432, 437 (Pa.Super. 2018) (holding that appellant who had
asserted privilege as to an email had standing to seek review of the court’s
order compelling him to disclose the email).
We find no merit in David’s argument. As Knopick demonstrates, a
party is aggrieved within the meaning of Pa.R.A.P. 501, when an order
requires him to produce and disclose allegedly privileged materials. The order
directing Gutnick and the Law Firm to produce documents claimed to be
5 David and Jennie are separately represented and they filed separate briefs. When an argument is advanced only by one of the Petitioners, we will note which Petitioner. Where the argument is advanced by both Petitioners, we will simply ascribe the argument to Petitioners.
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privileged rendered them aggrieved for purposes of contesting the order on
appeal, and quashal on this ground is unwarranted.
David offers a second basis for quashal of the appeal. He contends that
the privilege belongs to Mr. Scaife’s executors to assert. Although Gutnick is
a co-executor, David maintains that Gutnick did not appeal in his capacity as
executor, and further, that he could not appeal unilaterally without co-
executor James Walton. He cites no authority in support of his position.
David’s argument lacks merit for several reasons. As Gutnick and the
Law Firm point out, David did not challenge below the standing of these parties
to assert the attorney-client and work product privileges. Thus, that issue is
not before us.6 Furthermore, for the reasons stated supra, standing to invoke
a privilege and standing to appeal are distinct, and lack of standing to assert
a privilege does not mandate quashal of an appeal from an order compelling
disclosure of allegedly privileged documents.7
6 Even if the issue were preserved, the courts of this Commonwealth have been willing to overlook the capacity in which a party purports to proceed where he has standing to do so in some other capacity. See e.g., In re Estate of Hain, 346 A.2d 774 (Pa. 1975) (holding that a party who erroneously challenged an order as executor, but could have proceeded in some other capacity, was entitled to the benefit of having appealed in the proper capacity); In re Estate of Blumenthal, 812 A.2d 1279 n.1 (Pa.Super. 2002) (holding that while co-executors did not have standing to file exceptions in that capacity, the error was not fatal as they had standing to take such action in their individual capacities as beneficiaries).
7 In support of their contention that they have standing to assert the privileges, Gutnick and the Law Firm maintain that they are duty-bound to
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We turn now to the merits. We are reviewing an order from the orphan’s
court.
The findings of a judge of the orphans’ court division, sitting without a jury, must be accorded the same weight and effect as the verdict of a jury, and will not be reversed by an appellate court in the absence of an abuse of discretion or a lack of evidentiary support. This rule is particularly applicable to findings of fact which are predicated upon the credibility of the witnesses, whom the judge has had the opportunity to hear and observe, and upon the weight given to their testimony. In reviewing the Orphans’ Court’s findings, our task is to ensure that the record is free from legal error and to determine if the Orphans’ Court’s findings are supported by competent and adequate evidence and are not predicated upon capricious disbelief of competent and credible evidence.
When the trial court has come to a conclusion through the exercise of its discretion, the party complaining on appeal has a heavy burden. It is not sufficient to persuade the appellate court that it might have reached a different conclusion if, in the first place, charged with the duty imposed on the court below; it is necessary to go further and show an abuse of the discretionary power. An abuse of discretion is not merely an error of judgment, but if in reaching a conclusion the law is overridden or misapplied, or the judgment exercised is manifestly unreasonable, or the result of partiality, prejudice, bias or ill-will, as shown by the evidence of record, discretion is abused. A conclusion or judgment constitutes an abuse of discretion if it is so lacking in support as to be clearly erroneous. . . . If the lack of evidentiary support is apparent, reviewing tribunals have the power to draw their own inferences and make their own deductions from facts and conclusions of law. Nevertheless, we will not lightly find reversible error and will reverse an orphans’ court decree only if the orphans’ court applied an incorrect rule of law or reached its decision on the basis of factual conclusions unsupported by the record.
assert privileges on behalf of their clients. Furthermore, with regard to some of the withheld estate planning communications between Attorney Finegold and the Law Firm, the Law Firm maintains that it was the client entitled to assert the privilege.
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In re Estate of Warden, 2 A.3d 565, 571 (Pa.Super. 2010) (internal citation
omitted).
At issue herein is whether there has been a breach of fiduciary duty by
the Trustees to the Trust. “A trust is a fiduciary relationship with respect to
property, subjecting the person by whom the title to the property is held to
equitable duties to deal with the property for the benefit of another person[.]”
Id. at 573. Generally, “[t]he trustee is under a duty to the beneficiary to
administer the trust solely in the interest of the beneficiary.” Id. The trustee
is prohibited from dealing with trust property for the benefit of himself or third
parties, or placing himself in a position inconsistent with the interests of the
trust. In re Paxson Trust, 893 A.2d 99, 119 (Pa.Super. 2006); see also
Duties of the Trustee, Restatement (Second) of Trusts (1959), §§ 169-185.
With the foregoing principles in mind, we turn to Gutnick and the Law
Firm’s first issue: that the orphans’ court erred in holding that they waived
their attorney-client and work product objections to producing Richard Scaife’s
estate planning file by failing to assert the privileges in response to Petitioners’
motion to compel. Petitioners candidly concede, and the record confirms, that
Gutnick and the Law Firm did in fact invoke the attorney-client and work
product privileges in their response to the motion to compel. Thus, this basis
relied upon by the orphans’ court for compelling production of the documents
subject to assertion of privilege is infirm, and Gutnick and the Law Firm’s first
issue is meritorious.
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Similarly, Gutnick and the Law Firm’s second issue provides a basis for
relief. The parties do not disagree that the orphans’ court erroneously relied
upon Follansbee in ordering disclosure of estate planning documents,
although that decision involved trust documents only, and does not speak to
the discovery of or duty to disclose estate planning documents. We agree that
Follansbee, while germane with regard to the Trust management documents,
is not controlling with regard to estate planning documents, and was
incorrectly relied upon by the orphans’ court in compelling production herein.
Nonetheless, Petitioners assert a plethora of alternative bases on which
to affirm the order of the orphans’ court, and urge this Court to avail itself of
the right-for-any-reason doctrine. See Commonwealth v. Shaffer, 209
A.3d 957, 980-81 (Pa. 2019) (concurring and dissenting opinion, Wecht, J.)
(quoting In re A.J.R.-H., 188 A.3d 1157, 1175-76 (Pa. 2018) (“The ‘right-
for-any-reason’ doctrine permits an appellate court to affirm the trial court’s
decision on any basis that is supported by the record.”). Gutnick and the Law
Firm caution that the doctrine can only be employed “where the correct basis
for the ruling, order, decision, judgment or decree is clear upon the record.”
Reply Brief for Appellants at 8 (quoting Bearoff v. Bearoff Bros., Inc., 327
A.2d 72, 76 (Pa. 1974)). It cannot, they argue, “be used to affirm a decision
when the appellate court must weigh evidence and engage in fact finding or
make credibility determinations to reach a legal conclusion.” Id. (quoting In
re A.J.R.-H, supra at 1176). Gutnick and the Law Firm maintain that
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Petitioners are asking this Court to engage in impermissible fact finding with
regard to documents that are not in the record. Id.
In his concurring and dissenting opinion in Shaffer, supra, Justice
Wecht explained that the rationale for the right-for-any-reason doctrine is that
we review the judgment or order of the trial court, rather than any the
particular rationale offered by that court. Id. at 980 (citing Ario v. Ingram
Micro, Inc., 965 A.2d 1194, 1200 (Pa. 2009)). Accordingly, our courts have
acknowledged that it would be a waste of judicial resources to remand a case
to the trial court merely to reinstate a decision it had already made, but on a
different basis within the power of an appellate court to effectuate. However,
the doctrine cannot be used to affirm “a decision when the appellate court
must weigh evidence and engage in fact finding or make credibility
determinations to reach a legal conclusion.” Id. at 981 (quoting In re A.J.R.-
H., supra at 1176). Moreover, appellate courts are not bound to utilize the
doctrine as it is “discretionary and prudential.” Id.
We observe the following. Although this action involves the
administration of the Trust, the subpoenaed documents pertain not to the
Trust, but to Mr. Scaife’s estate planning, and involve allegedly privileged
communications related thereto. Nonetheless, Petitioners advance numerous
arguments as to why this Court should affirm the court’s order compelling
disclosure of allegedly privileged estate planning documents, none of which
was fully explored below. They argue that Gutnick and the Law Firm waived
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any claims of privilege as to any documents, even estate planning documents,
by relying on the advice of counsel defense with regard to their administration
of the Trust. Alternatively, they allege that Gutnick and the Law Firm waived
any claim of privilege by asserting it selectively. Furthermore, Petitioners
assert that since Gutnick represented both the Trust and Scaife, individually,
and worked with the Law Firm and Attorney Finegold on estate planning,
Gutnick cannot assert attorney-client privilege with respect to estate planning
documents. Finally, Petitioners allege that Gutnick and the Law Firm never
asked for in camera review, and that the failure to do so constitutes waiver of
such relief.
Gutnick and the Law Firm counter that they only relied upon the advice
of counsel defense with regard to their distributions of the Trust principal, and
did not rely upon the estate planning advice of Attorney Finegold in that
regard. Consistent with that position, they produced documents related to
legal advice they received in conjunction with the Trust. For example, Gutnick
and Law Firm produced notes of a meeting with Attorney Finegold and Gutnick
in April 2005, at which they discussed the consequences of terminating the
Trust, and for which PNC was billed for legal work related to the Trust. The
second document in controversy, an exit memorandum from Attorney Avalli
to Gutnick, dated February 27, 1997, when he resigned from the Law Firm,
also addressed the Trust. According to Gutnick and the Law Firm, production
of discoverable attorney-client communications involving the Trust was
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properly discoverable under the rationale espoused in Follansbee, supra,
and did not constitute a blanket waiver of attorney-client privilege.
Whether the disclosure of the aforementioned documents constituted
the selective assertion of attorney-client privilege is a fact-intensive inquiry.
As Gutnick and the Law Firm correctly note, such waiver is issue-specific, and
its scope can only be determined with reference to the documents claimed to
be privileged. See Gregury v. Greguras, 196 A.3d 619, 629 (Pa.Super.
2018) (en banc) (holding that claims of selective waiver, “if valid, may result
in waiver of the privilege with respect to other evidence regarding the same
subject matter”). The focus is on prejudice to the opposing party. Herein,
the relevant documents are not contained in the certified record, and the
record is not sufficiently developed for us to make such a determination.
Petitioners assert, without support, that no colorable claim of privilege
can be maintained because Gutnick and the Law Firm concurrently
represented Mr. Scaife in estate planning and with regard to the Trust, which
was a conflict of interest. Gutnick and the Law Firm contend that the roles
were different and not conflicting or inconsistent. Reply brief of Appellants at
16. Furthermore, they rely upon Gocial v. Independence Blue Cross, 827
A.2d 1216, 1222 (Pa.Super. 2003), for the proposition that even a
demonstrated conflict of interest does not result in a blanket waiver of
privilege. We find the record insufficient to make any such determination.
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Next, Petitioners claim that Gutnick and the Law Firm bore the burden
of proving the applicability of the privileges. They argue that the attorney-
client privilege does not extend to communications that were not intended to
be confidential, and will not protect communications between the attorney and
the client if the communication took place in the presence of a third party, if
the attorney represents both parties to the transaction or dispute, or if the
attorney is defending his former client’s attacks on his professional
competence. See Definitive Brief of Appellee David Zywiec, at 13 (citing
Upjohn Co. v. United States, 449 U.S. 383, 369-97 (1981) (recognizing
that scope of attorney-client privilege is fact-sensitive). Similarly, work
product protection can be waived either by agreement, prior disclosure, or
where such communications are relevant to a claim or defense, such as the
advice of counsel defense. Id.
Although Petitioners correctly point out some of the limitations on the
attorney-client and work product privileges, whether there are circumstances
that negate the claim of privilege in this case is a fact-intensive inquiry. That
is precisely why courts often require parties asserting privilege to prepare a
privilege log identifying the documents at issue and proffering why they are
privileged. At that point, the burden shifts to the party seeking disclosure to
demonstrate that the privilege has been waived or is subject to an exception.
See Yocabet v. UPMC Presbyterian, 119 A.3d 1012, 1019 (Pa.Super. 2015)
(finding that since board meeting may have been called to seek legal advice
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from the lawyers present, it was improper to reject outright the privilege
without examination of the factual basis for application of the privilege). In
camera review is a valuable tool for determining the validity of privilege
claims, and in many instances, it is difficult to make an informed decision
regarding privilege without such an inspection. See Berg v. Nationwide
Mutual Ins. Co., 44 A.3d 1164, 1179 (Pa.Super. 2012).
The legal bases urged by Petitioners for affirming the order of the
orphans’ court lack the factual underpinnings to permit this Court to make
decisions regarding the validity of the attorney-client and work product
privilege claims. Furthermore, the documents subject to the claims of
privilege are not contained in the certified record. Moreover, it is not the role
of this Court to conduct in camera examinations of hundreds or thousands of
documents in the first instance.
Finally, we reject Petitioners’ claim that Gutnick and the Law Firm
waived the right to seek in camera review. The record establishes that
Petitioners suggested in camera review, and Gutnick and the Law Firm agreed.
In fact, Gutnick and the Law Firm stated they were amenable to the
appointment of a special discovery master to conduct such review, an option
that remains available to the orphans’ court upon remand.
For all of the foregoing reasons, we conclude that the orphans’ court
erred in ordering Gutnick and the Law Firm to provide to Petitioners all of the
documents alleged to be privileged without first conducting in camera review
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to determine the validity of the privilege claims. Since in camera review of
the documents is warranted, we vacate the order of the orphans’ court
compelling Gutnick and the Law Firm to produce all documents claimed to be
privileged, and remand to the orphans’ court for such an examination.
Order vacated. Case remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 12/31/2019
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