KATHRYN MENNEN, SARAH MENNEN, NANCY MENNEN, as natural guardian for [A.M.], SHAWN MENNEN, and JOHN MENNEN, Plaintiffs,
WILMINGTON TRUST COMPANY, a Delaware Corporation, GEORGE JEFFREY MENNEN, and The TRUST ESTABLISHED BY GEORGE S. MENNEN FOR THE BENEFIT OF GEORGE JEFFREY MENNEN, a Delaware trust.
Date Submitted: July 2, 2013
Kevin G. Abrams, J. Peter Shindel, Jr., and Matthew L. Miller of Abrams & Bayliss LLP, Wilmington, Delaware; Attorneys for Plaintiffs.
Thomas W. Briggs, Jr., Jay N. Moffitt, Matthew R. Clark and Brendan W. Sullivan of Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware; Attorneys for Defendant Wilmington Trust Company.
Jeffrey S. Cianciulli of Weir & Partners LLP, Wilmington, Delaware; Attorneys for Defendant George Jeffrey Mennen.
Brian J. Ralston and Jessica A. Montellese of Potter Anderson & Corroon LLP, Wilmington, Delaware; Attorneys for Owen J. Roberts.
MASTER'S REPORT (Motion to Compel and Motion to Intervene)
Before me are two motions filed in this case in which the beneficiaries of a trust allege that the trustees have violated their fiduciary duties and engaged in a host of breaches of trust. The first motion seeks to compel the production of documents (the "Motion to Compel"), and was brought by the plaintiffs, Kathryn Mennen, Sarah Mennen, John Mennen, Shawn Mennen, and Nancy Mennen as natural guardian for A.M., who is a minor. The plaintiffs are beneficiaries (the "Beneficiaries) of a trust created in 1970 by George S. Mennen for the benefit of John H. Mennen dated November 25, 1970 (the "Trust"). The defendants, Wilmington Trust Company ("Wilmington Trust") and George Jeff Mennen ("Jeff Mennen" or "Jeff"), who were the co-trustees of the Trust, contend that I should deny the Motion to Compel in its entirety because the requested documents are protected by attorney-client privilege and/or the work product doctrine. For the reasons set forth below, I conclude that some, though not all, of the documents at issue are protected by privilege, and I therefore recommend that the Court grant in part and deny in part the Motion to Compel. The second motion seeks leave to intervene in this action and is brought by the individual co-trustee of the trust established by George S. Mennen for the benefit of George Jeffrey Mennen and his issue dated November 25, 1970 ("Jeff's Trust"). I recommend that the Court grant the motion to intervene.
On March 22, 2013, the Beneficiaries filed their 27 count Verified Complaint in this Court alleging several breaches of trust by Wilmington Trust and Jeff Mennen as the two trustees (the "Co-Trustees") of the Trust. The Complaint seeks, inter alia, removal of the Co-Trustees and damages in excess of $100 million as a result of alleged breaches of the Co-Trustees' fiduciary duties. The Complaint also names Jeff's Trust as a defendant, and alleges one count against it.
This action was preceded by a petition for instructions that Wilmington Trust filed on May 25, 2012 to remove Jeff as the individual co-trustee of the Trust (the "Petition Action"). In the Petition Action, Wilmington Trust alleged that the Trust was a directed trust that required Wilmington Trust to follow the direction of the individual trustee with respect to certain trustee powers and responsibilities, and that investment decisions directed by Jeff had caused the Trust to lose a substantial portion of its value. In the Petition Action, Wilmington Trust sought (1) removal of Jeff as individual trustee, (2) an order authorizing the adult beneficiaries of the Trust to appoint a successor individual co-trustee, and (3) access to certain investment information Jeff allegedly was withholding. Curiously, although the Beneficiaries were identified as interested parties and received notice of the Petition Action, they did not immediately appear in that action. Instead, after Wilmington Trust indicated that its attempts to contact the Beneficiaries had gone unanswered for a number of years, I appointed a guardian ad litem to represent the interests of A.M., the minor beneficiary. It was not until this action was filed in March 2013 that the Beneficiaries appeared in this Court. At that point, the Petition Action was stayed by agreement of the parties, and the guardian ad litem was dismissed from service.
An expedited scheduled was entered in this case, and the parties proceeded to conduct discovery. Unfortunately, that process has not been without hurdles. In their responses to the Beneficiaries' first request for the production of documents, both Wilmington Trust and Jeff asserted that the attorney-client privilege and/or the work product doctrine protected several categories of responsive documents and that they intended to withhold those documents. Specifically, Wilmington Trust refused to produce any of its internal or external communications with counsel related to the Petition Action. Additionally, Wilmington Trust has refused to create a privilege log for the documents it has withheld relating to the Petition Action. Finally, Wilmington Trust has raised an advice of counsel defense but has refused to produce the documents related to that defense. For his part, Jeff Mennen continues to withhold a small number of documents on attorney-client privilege and work product grounds.
Through this motion, the Beneficiaries seek to compel Wilmington Trust to produce "all privileged documents related to the Trust through March 22, 2013, " the date they filed their Verified Complaint, as well as "all privileged documents related to the Trust" and created thereafter if "not created in connection with [the] defense" of this action. In addition to the communications with counsel related to the Petition Action, the Beneficiaries seek the production of legal "advice and documents related to [Wilmington Trust's] duties and powers" under the Trust agreement. The Beneficiaries also seek an order compelling Jeff to produce three specific documents that relate to events that occurred before the Petition Action was commenced.
The Beneficiaries assert that under Riggs National Bank of Washington D.C. v. Zimmer,  Wilmington Trust must turn over all documents related to the Petition Action because that action presumably was brought on behalf of the Beneficiaries, who were, in effect, the ultimate clients of the attorneys ostensibly representing Wilmington Trust. The Beneficiaries also contend that communications between Wilmington Trust and its attorneys regarding Wilmington Trust's powers and duties under the Trust agreement are not privileged as to the Beneficiaries because, as with communications relating to the Petition Action, these communications were created on behalf of the Beneficiaries. Further, the Beneficiaries argue that Wilmington Trust impermissibly attempts to use the privilege as both a sword and a shield by asserting an advice of counsel defense while claiming that the documents related to that defense are protected.
Wilmington Trust responds that Riggs i) does not apply to the documents that Wilmington Trust is withholding, and ii) is no longer good law. Although it has backed away from the second argument,  Wilmington Trust maintains that it was the ultimate client in the Petition Action because the legal advice Wilmington Trust procured was intended for its benefit, not for the benefit of the Beneficiaries. Wilmington Trust further asserts that because litigation reasonably was anticipated between itself and the Beneficiaries when it retained counsel regarding the events giving rise to the Petition Action, and because Wilmington Trust paid for the legal advice it sought rather than dipping into the Trust assets to pay the fees, the factors identified in Riggs as appropriate in resolving the privilege question do not support the application of a fiduciary exception to attorney-client privilege. Finally, Wilmington Trust contends that the Beneficiaries' assertion that Wilmington Trust is improperly withholding documents related to an advice of counsel defense is premature as Wilmington Trust is still reviewing documents, making privilege determinations, and deciding whether to pursue an advice of counsel defense.
For his part, Jeff Mennen contends that the motion to compel primarily is directed at Wilmington Trust, and, to the extent that it is not, the documents he seeks to withhold clearly fall outside of Riggs. Jeff has withheld three documents; each was created before the Petition Action was filed. The Beneficiaries ask this Court to compel the production of those documents as well as any privileged documents created after the commencement of the Petition Action that are unrelated to Jeff's defense in that action. Jeff responds that he is not withholding any documents other than the three at issue. He claims that two of the withheld documents are protected by the attorney-client privilege, and that ...