J-A06019-18
2018 PA Super 227
IN RE: THE ESTATE OF WILLIAM K. : IN THE SUPERIOR COURT OF
MCALEER, DECEASED : PENNSYLVANIA
:
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APPEAL OF: WILLIAM MCALEER :
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:
:
: No. 932 WDA 2017
Appeal from the Order Entered May 30, 2017
In the Court of Common Pleas of Allegheny County Orphans' Court at
No(s): No. 0334 of 2014
BEFORE: BENDER, P.J.E., SHOGAN, J., and STRASSBURGER*, J.
OPINION BY SHOGAN, J.: FILED AUGUST 9, 2018
Appellant, William McAleer, appeals from the order directing him to
comply with the discovery request presented by Appellees, Stephen Lange
and Michael Lange, in this estate matter involving a trust created by
Decedent, William K. McAleer. After careful review, we quash.
We summarize the history of this case as follows. Appellant is the
trustee of the William K. McAleer Revocable Living Trust (“the Trust”), which
was created by Decedent on November 30, 2012, for the benefit of Appellant
and his two stepbrothers, Appellees. Trust Document, 11/30/12 (Record
Number 1). Since Decedent’s death on May 4, 2013, Appellees have raised
various issues pertaining to the administration of the Trust, which led to
Appellant retaining two law firms, i.e., Julian Gray & Associates and K&L
Gates.
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* Retired Senior Judge assigned to the Superior Court.
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On March 17, 2014, Appellant filed a first and partial account relating
to the administration of the Trust. First and Partial Accounting, 3/17/14
(Record Number 2). Appellees filed objections to the first and partial
account filed by Appellant. Appellees also sought disclosure of information
pertaining to two bank accounts, and Appellant retained K&L Gates to
respond. On March 30, 2016, the trial court dismissed Appellees’ objections
with prejudice. Order, 3/30/16.
On August 31, 2016, Appellant filed a Second and Final Accounting.
Second and Final Accounting, 8/31/16 (Record Number 24). On November
14, 2016, Appellees filed objections claiming that Appellant paid expenses in
the administration of the Trust that were unreasonable, including excessive
trustee and attorney fees. Objections, 11/14/16 (Record Number 26). On
March 2, 2017, Appellees served a request for production of documents
including billing statements for all trustee fees and attorney fees. On April
12, 2017, Appellant produced substantially redacted attorney invoices from
both law firms.1
Appellees filed a motion to compel service of unredacted copies of the
invoices on May 8, 2017. Motion to Compel Discovery, 5/8/17 (Record
Number 34). The trial court held a hearing on May 18, 2017. On May 30,
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1As the trial court indicated, billing documents from Julian Gray & Associates
were presented to Appellees with 223 entries redacted. Trial Court Opinion,
7/12/17, at 1. Also, Appellees received billing statements from K&L Gates
with 98% of the invoice redacted. Id.
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2017, the trial court entered an order directing Appellant to produce the
unredacted invoices within thirty days. Order, 5/30/17 (Record Number 39).
Appellant turned over unredacted trustee invoices, and only the attorney
invoices are at issue. This timely appeal followed. Both Appellant and the
trial court have complied with Pa.R.A.P. 1925.
Appellant presents the following issue for our review:
1) Did the Court of Common Pleas err in ordering Appellant to
produce unredacted attorney bills where doing so will disclose
material protected by the attorney-client privilege and the
attorney work product doctrine?
Appellant’s Brief at 3.
Our scope of review in an appeal from an Orphans’ Court decree is
limited. When reviewing a decree entered by the Orphans’ Court, we must
determine whether the record is free from legal error and the Orphans’
Court’s factual findings are supported by the evidence. In re Estate of
Angle, 777 A.2d 114, 122 (Pa. Super. 2001).
Before we address the underlying merits of Appellant’s issue, we must
determine whether the trial court’s order is appealable. In re Miscin, 885
A.2d 558, 560-561 (Pa. Super. 2005). “The question of the appealability of
an order goes directly to the jurisdiction of the [c]ourt asked to review the
order.” Moyer v. Gresh, 904 A.2d 958, 963 (Pa. Super. 2006). See also
In re Estate of Borkowski, 794 A.2d 388, 389 (Pa. Super. 2002)
(observing that the threshold question of the appealability of an order affects
the jurisdiction of this Court over the case). As a general rule, an appeal
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can be taken only from a final order. Estate of Borkowski, 794 A.2d at
389. No appeal will be permitted from an interlocutory order unless
specifically provided for by statute. Id.
Pennsylvania Rule of Appellate Procedure 342 addresses appeals as of
right from various orders of the Orphans’ Court and provides, in part, as
follows:
(a) General rule. An appeal may be taken as of right from the
following orders of the Orphans’ Court Division:
(1) An order confirming an account, or authorizing
or directing a distribution from an estate or trust;
(2) An order determining the validity of a will or
trust;
(3) An order interpreting a will or a document that
forms the basis of a claim against an estate or trust;
(4) An order interpreting, modifying, reforming or
terminating a trust;
(5) An order determining the status of fiduciaries,
beneficiaries, or creditors in an estate, trust, or
guardianship;
(6) An order determining an interest in real or
personal property;
(7) An order issued after an inheritance tax appeal
has been taken to the Orphans’ Court pursuant to
either 72 Pa.C.S. § 9186(a)(3) or 72 Pa.C.S. § 9188,
or after the Orphans’ Court has made a
determination of the issue protested after the record
has been removed from the Department of Revenue
pursuant to 72 Pa.C.S. § 9188(a); or
(8) An order otherwise appealable as provided by
Chapter 3 of these rules.
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Pa.R.A.P. 342(a). Thus, Rule 342 permits appeals as of right from the
enumerated orders or from orders that meet the requirements of the other
Chapter 3 Rules of Appellate Procedure pertaining to the appealability of
orders, as discussed infra.
Our review of the record on appeal indicates that the Orphans’ Court
order that directed Appellant to comply with discovery did not qualify as one
of the enumerated orders set forth under Rule 342 as being appealable as of
right. Pa.R.A.P. 342(a)(1-7). Accordingly, we must consider whether this
order is appealable under any of the rules in Chapter 3 of the Rules of
Appellate Procedure. Pa.R.A.P. 342(a)(8). It is well settled that an appeal
may be taken from: (1) a final order or an order certified as a final order
(Pa.R.A.P. 341); (2) an interlocutory order as of right (Pa.R.A.P. 311); (3)
an interlocutory order by permission (Pa.R.A.P. 312, 42 Pa.C.S. § 702(b));
or (4) a collateral order (Pa.R.A.P. 313). See Pace v. Thomas Jefferson
University Hospital, 717 A.2d 539, 540 (Pa. Super. 1998) (discussing the
appealability of orders).
We next consider whether the order on appeal is a final order.
Pennsylvania Rule of Appellate Procedure 341 defines final orders as follows:
(a) General rule. Except as prescribed in subdivisions (d),
and (e) of this rule, an appeal may be taken as of right from any
final order of an administrative agency or lower court.
(b) Definition of final order. A final order is any order that:
(1) disposes of all claims and of all parties; or
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(2) RESCINDED
(3) is entered as a final order pursuant to
paragraph (c) of this rule.
(c) Determination of finality. When more than one claim
for relief is presented in an action, whether as a claim,
counterclaim, cross-claim, or third-party claim or when multiple
parties are involved, the trial court or other governmental unit
may enter a final order as to one or more but fewer than all of
the claims and parties only upon an express determination that
an immediate appeal would facilitate resolution of the entire
case. Such an order becomes appealable when entered. In the
absence of such a determination and entry of a final
order, any order or other form of decision that adjudicates
fewer than all the claims and parties shall not constitute a
final order. . . .
Pa.R.A.P. 341 (emphasis added). Thus, pursuant to Rule 341, an order is
final if it disposes of all claims and all parties or if a statute expressly defines
it as final. An Orphans’ Court’s confirmation of the final accounting of an
estate, after exceptions have been filed and ruled upon, is the final order for
purposes of appeal. In re Estate of Habazin, 679 A.2d 1293 (Pa. Super.
1996). Moreover, we have stated that, in general, discovery orders are not
final and are therefore unappealable. In re Estate of Moskowitz, 115
A.3d 372, 389 (Pa. Super. 2015) (quoting T.M. v. Elwyn, Inc., 950 A.2d
1050, 1056 (Pa. Super. 2008)).
Our review of the record reflects that the order on appeal is not a
confirmation of the final account and that the estate and its assets remain
under administration. Rather, the appealed order compels Appellant to
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satisfy a discovery request. Therefore, the order in question is not a final
order under Pa.R.A.P 341.
We also consider whether the order on appeal is an interlocutory order
that is appealable as of right. Pennsylvania Rule of Appellate Procedure 311
addresses “interlocutory appeals as of right.” Generally, discovery decrees
do not give rise to an interlocutory appeal as of right under Rule 311.
Estate of Moskowitz, 115 A.3d at 390. Consequently, the order on appeal
directing discovery does not fall within the category of appealable
interlocutory orders under Rule 311.
Next, we address whether the matter before us is an appeal from an
interlocutory order by permission. Pennsylvania Rule of Appellate Procedure
312 addresses “interlocutory appeals by permission.” Such permission must
be sought from and granted by the appellate court under the rules set forth
in Chapter 13 of the Rules of Appellate Procedure. Our review of the record
reflects that Appellant never sought permission from this Court to appeal
from the order in question. Consequently, no permission was granted
allowing the appeal. Therefore, Rule 312 is not applicable to this matter.
We last turn to Pa.R.A.P. 313, which permits appeals as of right from
collateral orders. Pa.R.A.P. 313(a); J.S. v. Whetzel, 860 A.2d 1112, 1116
(Pa. Super. 2004). For an order to be appealable under Rule 313(b), it must
satisfy the three factors identified in the rule: “(1) the order is separable
from the main cause of action; (2) the right involved is too important to be
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denied review; and (3) the claim would be irreparably lost if review is
postponed.” Id. (citing Ben v. Schwartz, 729 A.2d 547 (Pa. 1999);
Pa.R.A.P. 313(b)).
An order is “separable” from the main cause of action if it is capable of
review without considering the underlying merits of the case. Crum v.
Bridgestone/Firestone N. Am. Tire, LLC, 907 A.2d 578, 583 (Pa. Super.
2006). Second, the “importance prong” is satisfied if the interests that
potentially go unprotected without immediate appellate review are
significant relative to the efficiency interests sought to be advanced by
adherence to the final judgment rule. Id. Moreover, “it is not sufficient that
the issue be important to the particular parties. Rather it must involve rights
deeply rooted in public policy going beyond the particular litigation at hand.”
Id. (quoting Melvin v. Doe, 836 A.2d 42, 47 (Pa. 2003)). To satisfy the
third factor, an issue must actually be lost if review is postponed. Keefer v.
Keefer, 741 A.2d 808, 813 (Pa. Super. 1999). “All three elements must be
satisfied to permit review of an interlocutory appeal under the collateral
order rule.” Estate of Moskowitz, 115 A.3d at 389 (quoting Jacksonian
v. Temple University Health System Foundation, 862 A.2d 1275, 1279
(Pa. Super. 2004)).
We are mindful that orders are not deemed to be collateral orders
liberally. The Pennsylvania Supreme Court noted that:
[t]he United States Supreme Court has stated that the “collateral
order doctrine” must be narrowly applied lest it be allowed to
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swallow the general rule, Digital Equipment Corporation [v.
Desktop Direct, Inc., 511 U.S. 863, 868 (1994)], and has
characterized the requirements for an appealable collateral order
as “stringent.” See Midland Asphalt Corp. v. United States,
489 U.S. 794, 799, 109 S.Ct. 1494, 1498, 103 L.Ed.2d 879
(1989). Although in Pennsylvania the doctrine has been reduced
from case law and set forth in our Rules of Appellate Procedure
as establishing a class of orders that may be appealed as of
right, it nevertheless remains a specialized, practical application
of the general rule that only final orders are appealable as of
right. Accordingly, we find it appropriate to interpret Rule 313
narrowly. Claims must be analyzed not with respect to the
specific facts of the case, but in the context of the broad public
policy interests that they implicate. Only those claims that
involve interests “deeply rooted in public policy,” Digital
Equipment Corp., 511 U.S. at 884 [], can be considered “too
important to [be] denied review.”
Geniviva v. Frisk, 725 A.2d 1209, 1214 (Pa. 1999).
We now address whether the order directing Appellant to comply with
Appellees’ discovery request and to produce complete and unredacted billing
statements for trustee billing, as well as all attorney billing, meets all of the
three prongs necessary to establish a collateral order. First, our review of
the record reflects that the order on appeal is interrelated with the
underlying merits of the pending challenges brought by Appellees, that being
the proper billing of the Trust and subsequent payments from the Trust
proceeds. Consequently, the first factor is not met in this case. Accordingly,
because all three factors must be present, and the order before us fails to
satisfy the first factor, we conclude that the instant appeal is not taken from
a collateral order.
We observe Appellant has asserted that the order on appeal qualifies
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as an immediately appealable collateral order because it compels the
production of privileged information. Appellant’s Brief at 1. Appellant
contends that the attorney invoices sought in discovery are protected by the
attorney-client privilege and the work product doctrine. Appellant’s Brief at
16-29.
As we previously noted, in general, discovery orders are not final and
are therefore unappealable. Estate of Moskowitz, 115 A.3d 372, 389 (Pa.
Super. 2015). “However, discovery orders involving privileged material are
nevertheless appealable as collateral to the principal action pursuant to
Pa.R.A.P. 313.” Id.
In Pennsylvania, the attorney-client privilege operates in a
two-way fashion to protect confidential client-to-attorney or
attorney-to-client communications made for the purpose of
obtaining or providing professional legal advice. Gillard v. AIG
Ins. Co., 15 A.3d 44, 59 (Pa. 2011); see 42 Pa.C.S. § 5928. In
describing the purpose of the privilege, we have said: “The
attorney-client privilege exists to foster a confidence between
attorney and client that will lead to a trusting and open
dialogue.” Gocial v. Independence Blue Cross, 827 A.2d
1216, 1222 (Pa. Super. 2003).
Custom Designs & Mfg. Co. v. Sherwin-Williams Co., 39 A.3d 372, 376
(Pa. Super. 2012).
Further, we have explained the following:
Pennsylvania law imposes a shifting burden of proof in
disputes over disclosure of communications allegedly protected
by attorney-client privilege. The party invoking a privilege must
initially “set forth facts showing that the privilege has been
properly invoked; then the burden shifts to the party seeking
disclosure to set forth facts showing that disclosure will not
violate the attorney-client privilege, e.g., because the privilege
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has been waived or because some exception applies.”
Nationwide Mut. Ins. Co. v. Fleming, 924 A.2d 1259, 1266
(Pa. Super. 2007) (citations omitted), aff’d, 605 Pa. 468, 992
A.2d 65 (Pa. 2010). Accordingly, “[i]f the party asserting the
privilege does not produce sufficient facts to show that the
privilege was properly invoked, then the burden never shifts to
the other party, and the communication is not protected under
attorney-client privilege.” Id. at 1267.
Id. Likewise, the same burden applies to a party seeking to invoke the
protections of the work-product doctrine. See generally T.M. v. Elwyn,
Inc., 950 A.2d at 1062.
In addition, we are mindful that the duty to furnish information to
beneficiaries of a trust is defined in Section 82 of The Restatement (Third) of
Trusts, which provides, in part, as follows:
§ 82 Duty to Furnish Information to Beneficiaries
(2) Except as provided in § 74 [(relating to the effect of power of
revocation)2] or as permissibly modified by the terms of the
trust, a trustee also ordinarily has a duty promptly to respond to
the request of any beneficiary for information concerning the
trust and its administration, and to permit beneficiaries on a
reasonable basis to inspect trust documents, records, and
property holdings.
Restatement (Third) of Trusts § 82(2).
Comment e addresses requests for information under subsection 2,
and provides as follows:
____________________________________________
2 The comment to Section 82 explains that the information requirements of
the section do not apply to revocable trusts while the settlor is alive and
competent. Restatement (Third) of Trusts § 82, cmt. a.
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e. Requested information and access. Under the general rule of
Subsection (2), a trustee ordinarily has a duty, with reasonable
promptness, to provide information that is requested regarding
the trust property or its administration by any beneficiary, a
right not limited to fairly representative beneficiaries. The
trustee is also to grant access to books and records of the trust,
and to permit inspection of the trust’s property holdings, on a
reasonable basis, at reasonable hours and intervals, to any
beneficiary, including with the participation of the beneficiary’s
accountant, attorney, or other advisor. On petition by the
trustee or a beneficiary, however, a court may limit the
frequency or extent of such inquiries by one or more of the
beneficiaries, weighing the remoteness or substantiality of their
interests in the trust against the burdens, intrusiveness, and
privacy considerations that may be involved.
Restatement (Third) of Trusts § 82, cmt. e.
Also, comment f explains the following limitations on disclosure to
beneficiaries:
f. What need not be disclosed? A trustee is privileged to refrain
from disclosing to beneficiaries or co-trustees opinions obtained
from, and other communications with, counsel retained for the
trustee’s personal protection in the course, or in anticipation, of
litigation (e.g., for surcharge or removal). This situation is to be
distinguished from legal consultations and advice obtained in the
trustee’s fiduciary capacity concerning decisions or actions to be
taken in the course of administering the trust. Communications
of this latter type are subject to the general principle entitling a
beneficiary to information that is reasonably necessary to the
prevention or redress of a breach of trust or otherwise to the
enforcement of the beneficiary’s rights under the trust.
Restatement (Third) of Trusts § 82, cmt. f.
We observe that our Supreme Court considered the issue of a
beneficiary’s right to access trust files in In re Estate of Rosenblum, 328
A.2d 158 (Pa. 1974). In addressing the issue, the Court relied upon the
precursor to Section 82, i.e., Section 173 of the Restatement (Second) of
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Trusts, to support its proposition that “[t]he right of access to trust records
is an essential part of a beneficiary’s right to complete information
concerning the administration of the trust.” Id. at 164-165. The Court in
Rosenblum noted that “[t]his section [from the Restatement] is declaratory
of the common law of Pennsylvania.” Id. at 165. The Court then stated
that
“[i]t places [the beneficiaries of a trust] on a different footing
from other litigants who seek discovery of documents under our
Rules of Civil Procedure. A beneficiary’s right of inspection has
an independent source in his property interest in the trust
estate, and the right may be exercised irrespective of the
pendency of an action or proceeding in court.”
Id.
The trial court offered the following discussion pertaining to Appellant’s
attempt to assert the attorney-client privilege:
On May 18th, [Appellant’s counsel] set forth only a general
argument of privilege on behalf of the Trustee as to the Gray
billings. As to the K&L bills, [Appellant’s counsel] stated: “I can’t
speak for the K&L Gates bills because they belong to K&L Gates.
I produced them to Attorney Caplan as an attorney to K&L
Gates, but have no knowledge of them. (5/18/17 Motions
argument at p. 7). The Trustee presented no facts to the Court
to show that he properly invoked a privilege in this case.
Furthermore, the Court finds persuasive Follansbee v.
Gerlach, 56 Pa. D. & C. 4th 483, 22 Fiduc. Rep. 2d 319, 6
All. Co. Disc. Op. 15 (Civ. Div. Allegh., June 13, 2002). In
Follansbee, the Honorable R. Stanton Wettick Jr. found that
where the trustee-client obtains legal advice from an attorney
relating to the trust, that legal advice must be shared with the
beneficiaries. Pursuant to Follansbee and the logic set forth in
that opinion, the billings that are the subject of this appeal
should be shared in full, since the Beneficiaries, in effect, paid
for the legal services rendered by Gray and K&L.
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Trial Court Opinion, 7/12/17, at 2. We are constrained to agree with the
trial court.
Our review of the record reflects that, prior to the trial court’s order
compelling Appellant to produce the discovery documents in question,
Appellant did not provide any facts to support his attempt to invoke the
attorney-client privilege and work-product doctrine protections. Appellant
never filed an objection to Appellees’ discovery request in which he could
have raised those protections. Instead, Appellant simply replied to the
discovery request by presenting Appellees with substantially redacted copies
of attorney invoices. Appellees then filed a motion to compel discovery, to
which Appellant failed to respond or object. Rather, Appellant’s first attempt
to invoke the protections was during oral argument at a hearing in response
to the motion to compel, which was held on May 18, 2017. N.T., 5/18/17,
at 5-6. At the hearing, Appellant’s counsel mentioned the attorney-client
privilege and the work-product doctrine as justification for redacting the
documents provided to Appellees. Id. However, Appellant failed to set forth
specific facts to show that either the attorney-client privilege or the work
product doctrine was applicable and properly invoked.
Further, 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 Sherwin-Williams Co., 39 A.3d at 375-376.
However, beyond a general discussion of relevant legal principles at the
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hearing, Appellant did not describe, explain, or substantiate the applicability
of the attorney-client privilege or the work product doctrine before the trial
court in this particular case. Accordingly, appellate review is precluded.
Moreover, we conclude that under the law as presented in the
Restatement (Third) of Trusts and our Supreme Court’s ruling in Estate of
Rosenblum, Appellant, as a trustee, has a duty to share with Appellees, as
beneficiaries, complete information concerning the administration of the
Trust. As set forth in comment f of Section 82, “[a] trustee is privileged to
refrain from disclosing to beneficiaries or co-trustees opinions obtained from,
and other communications with, counsel retained for the trustee’s personal
protection in the course, or in anticipation, of litigation (e.g., for surcharge
or removal).” However, Appellant neither argued nor presented evidence to
establish that the redacted information pertained to communications from
counsel retained for Appellant’s personal protection in the course of
litigation. Accordingly, there is no evidence that the information qualifies as
privileged under comment f to the Restatement (Third) of Trusts. Hence, we
are left to conclude that the information contained in the attorney invoices
qualifies as communications subject to the general principle entitling a
beneficiary to information reasonably necessary to the prevention or redress
of a breach of trust or otherwise to the enforcement of the beneficiary’s
rights under the trust. For this reason as well, Appellant cannot invoke the
protections of the attorney-client privilege.
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In conclusion, the order under review in the instant case is not a final
order, an order certified as final, an interlocutory order appealable as of
right, an interlocutory order appealable by permission, or an appealable
collateral order. Consequently, we conclude that this appeal is not properly
before this Court. Accordingly, the appeal is hereby quashed.
Appeal quashed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/9/2018
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