In the closing days of its September term, the Illinois Supreme Court allowed a petition for leave to appeal in Brunton v. Kruger. Brunton involves the scope of the accountant-client privilege – more specifically, what happens to that privilege after the client dies, and how the privilege can be waived.

In Brunton, an accounting firm assisted a couple with estate planning. As part of that planning process, both spouses executed a will and a trust. By 2011, both of the testators had died, leaving three adult sons and one daughter. The wife’s will was admitted to probate. It bequeathed her tangible person property to her husband, who was deceased by then, and the residue of her estate was to be distributed pursuant to the Trust. The Trust said that one of the three sons would get the entirety of the family farm, and everything else would be distributed to the three sons equally. Both trusts said that the couple was “mindful” of their daughter, but they were deliberately making no provision for her because they had provided for her in other ways.

Just after probate was opened, the daughter filed a will challenge, alleging undue influence by one of the sons. The sons, who were defending the will, issued a deposition subpoena to the accountants, seeking all the estate documents. Not long after, the daughter subpoenaed the estate planning documents as well. The accountants provided the documents to the sons’ representatives, but refused to provide them to the daughter, claiming accountant-client privilege. The trial court initially agreed and refused to compel production, but after a second subpoena from the daughter, the court held that the privilege had been waived by the sons when they requested the documents, and the accountants produced them. Counsel for the accountants declined to produce the documents and appealed the trial court’s order.

Section 27 of the Illinois Public Accounting Act says that a certified public accountant cannot be compelled to produce information obtained by him or her “in his confidential capacity” as a CPA. In 2002, the Eighth Circuit construed the privilege and held that it only covered information obtained during the course of auditing a financial statement. The Appellate Court in Brunton refused to follow that decision, pointing out that the whole purpose of auditing a financial statement is so that third parties can read your work product. The Court commented that accountants do many things beyond auditing financial statements, and one of those functions is participating in estate planning. The Court believe that the legislature wouldn’t have used such broad language in describing the privilege if it was only concerned about a small fraction of the accountant’s job.

The Court held that there were two reasons to compel production of this material. First, the Court noted that the attorney-client privilege, which is construed similarly in most cases to the accountant-client privilege, is automatically waived in a will contest. The Court held that it saw no reason to construe the accountant’s privilege differently, so the materials were producible solely because the case was a will contest.

Alternatively, the Court said any privilege has been waived. The accountants argued that they held the privilege, and they hadn’t waived anything, but the Court said that the privilege exists to encourage full communication by the clients, so the privilege is held by the client. Since the sons – the people defending the estate – had already subpoenaed the estate documents themselves, the Court said that waived any privilege, and the material had to be produced to the daughter.

We expect Brunton to be decided in six to eight months.

Image by Flickr courtesy of Ken Mayer (no changes).