15175613578_5b2705e2a3_zLast week, the Illinois Supreme Court heard oral argument in Brunton v. Kruger.  Brunton involves the scope of the accountant-client privilege – specifically, what happens to that privilege after the client dies, and how the privilege can be waived.  Our detailed summary of the facts and lower court opinions in Bruton is here.

An accounting firm assisted a couple with estate planning.  As part of that process, both spouses of an elderly couple executed a will and trust.  The wife’s will was admitted to probate, and provided that most of her property would be distributed through a Trust.  The Trust provided that one son would get the entirety of the family farm, and everything else would be distributed to the three sons equally.  The testator’s daughter filed a will challenge, alleging undue influence by one of the sons.  The sons, who were defending the will, subpoenaed all the estate documents from the accountants.  The accountants provided the documents.  Not long after, the daughter subpoenaed the estate planning documents from the accountants too.  The accountants refused to produce the documents to the daughter, asserting the accountant-client privilege.  When the daughter moved to compel production, the trial court held that the sons had waived the accountant-client privilege.  Counsel for the accountants declined to produce the documents, inviting a finding of friendly contempt in order to render the production order appealable.  The Appellate Court affirmed the order of production, holding that (1) by analogy to the attorney-client privilege, any privilege was automatically waived in a will contest; and (2) the privilege was held by the estate, and had been waived by the sons’ subpoena.  The Court vacated the finding of contempt, finding that counsel had declined to produce the documents in good faith in order to facilitate an appeal.

Counsel for the appellant (the attorney in the lower court for the accountants) began by arguing that the Court should affirm the vacating of the contempt order regardless of whatever else the Court decided.  Counsel argued that the statute was clear and unambiguous.  Both the respondents and the Appellate Court had likened the accountant-client privilege to a common law privilege.  But the case involves a statutory privilege with no exceptions, counsel argued.  The issue couldn’t be determined by conjecture as to what the legislature meant, but rather by construction of the actual language used.  Because the accountant-client privilege is statutory, counsel argued that it could only be expanded or contracted by the legislature.  Justice Theis whether an accountant could waive the privilege without the consent of the client, and counsel said that the accountant was the holder of privilege, and could choose to waive it.  Justice Theis asked whether that meant that a client who came to the accountant with confidential information had no control over it.  Counsel answered that clients gave information to their accountants with the understanding that it would be held in confidence pursuant to the privilege.  Unless the accountant chose not to hold it in confidence, Justice Theis noted.  Counsel answered that whether to maintain the privilege was up to the accountant as the holder.  Justice Thomas asked whether the executors could waive the privilege.  Counsel responded no – production to the attorney for the estate was not a waiver, since the estate was not adverse to the accountants’ deceased clients.  Chief Justice Garman asked whether counsel would argue that there was no testamentary exception, despite the parallel between an attorney’s role in estate planning and the role of an accountant.   Counsel said that was correct.  Although the First District had commented that it was unclear what the accountant’s interest in secrecy might be, the Court also noted that it was not the Court’s purpose to rewrite the statute.  In fact, counsel argued, the statute was clear and unambiguous, and didn’t have an exception.  There was no basis for finding that the accountants had waived the privilege, either expressly or by implication.  Counsel concluded by asking the Court to affirm the vacation of the contempt finding, but to otherwise reverse, holding that the accountants held the privilege and had not waived.

Counsel for the executors followed, arguing that the Court should affirm the lower court and order production.  Counsel argued that the client of the accountant holds the privilege.  Full disclosure by individuals is promoted by finding that the privilege is held by the clients, not the accountant, counsel argued.  Justice Thomas asked whether there was any significance to the fact that it’s called the accountant privilege.  Counsel answered that it’s not called that in the statute.  After death, counsel argued, when there is a dispute about the validity of the will, the scales tip in favor of disclosure.  Alternatively, counsel argued, even if the accountants hold the privilege, it was waived when they chose to respond to the executors’ subpoena.  Justice Karmeier noted that there had been a comment in the argument suggesting that the executors could have directly disclosed certain documents.  Were there other documents at issue?  Counsel answered yes.  Justice Karmeier asked whether the executors could have disclosed those documents to the daughter.  Counsel answered that the daughter had subpoenaed documents from the executors, and that subpoena was still pending.  Justice Karmeier asked whether the executors had an obligation not to disclose those documents.  Counsel answered that if the Court holds that the privilege belongs to the accountants, the executors’ disclosure would be over their privilege.

Counsel for the daughter challenging the will was next, and argued that the subpoena had nothing to do with certified financial statements.  Justice Thomas asked whether the statute made any exception for testamentary disputes.  Counsel agreed that was so, but argued that the statute doesn’t apply to estate planning activities.  In addition to testamentary intent, the subpoena involved issues of who was in attendance during certain conversations.  The Chief Justice asked whether the privilege belonged to both the accountant and the client.  Counsel answered that it belonged only to the client.  Justice Thomas asked whether the evidence being sought was obtained by the accountant in a confidential capacity.  Justice Thomas asked whether the statute would have been the place to provide a testamentary intent exception if the legislature had intended that there by one – would the Court be revising the statute to exclude such evidence?  Counsel said no, that the specific purpose of the statute was to protect the ability to certify financial statements.  There was no such dispute here.  The privilege was waived both expressly and impliedly, counsel argued.  Because the accountants were not a beneficiary of the estate, they had no common interest with anyone, and production affected a waiver.

Counsel for the accountants concluded with rebuttal.  Counsel argued that the proposition that estate planning was not within the scope of the Act was a nonstarter.  The legislature simply didn’t add a testamentary exception, and that was the bottom line, regardless of whether one considered that result unwise, unjust or absurd.  Opposing counsel had argued for harmonizing Illinois law with other states, but counsel argued that that wasn’t possible – there were sixteen different state statutes, and some expressly gave the privilege to the client.  Counsel argued that the Court should uphold the statute as written, and not worry about sixteen other states with sixteen different laws.  Counsel argued that there has been no waiver, either express or implied.  Counsel closed by asking that the Court reverse in all respects, with the exception of the Appellate Court’s vacation of the contempt order itself.

We expect Brunton to be decided in three to four months.

Image courtesy of Flickr by Sean (no changes).