Supreme Court: Fiduciary Exception to Attorney-Client Privilege Does Not Apply to U.S. as Trustee of Funds Belonging to Indian Tribes

From United States v. Jicarilla Apache Nation, 2011 U.S. LEXIS 4381 (U.S. June 13, 2011) (reversing the decision excerpted in our post of January 3, 2010):

The attorney-client privilege ranks among the oldest and most established evidentiary privileges known to our law. The common law, however, has recognized an exception to the privilege when a trustee obtains legal advice related to the exercise of fiduciary duties. In such cases, courts have held, the trustee cannot withhold attorney-client communications from the beneficiary of the trust.

In this case, we consider whether the fiduciary exception applies to the general trust relationship between the United States and the Indian tribes. We hold that it does not. Although the Government's responsibilities with respect to the management of funds belonging to Indian tribes bear some resemblance to those of a private trustee, this analogy cannot be taken too far. The trust obligations of the United States to the Indian tribes are established and governed by statute rather than the common law, and in fulfilling its statutory duties, the Government acts not as a private trustee but pursuant to its sovereign interest in the execution of federal law. The reasons for the fiduciary exception — that the trustee has no independent interest in trust administration, and that the trustee is subject to a general common-law duty of disclosure — do not apply in this context.

Footnote 3. Today, "[c]ourts differ on whether the [attorney-client] privilege is available for communications between the trustee and counsel regarding the administration of the trust." A. Newman, G. Bogert & G. Bogert, Law of Trusts and Trustees § 962, p. 68 (3d ed. 2010) (hereinafter Bogert). Some state courts have altogether rejected the notion that the attorney-client privilege is subject to a fiduciary exception. See, e.g., Huie v. DeShazo, 922 S.W.2d 920, 924 (Tex. 1996) ("The attorney-client privilege serves the same important purpose in the trustee-attorney relationship as it does in other attorney-client relationships"); Wells Fargo Bank v. Superior Ct., 22 Cal. 4th 201, 208-209, 91 Cal. Rptr. 2d 716, 990 P.2d 591, 595 (2000) ("[T]he attorney for the trustee of a trust is not, by virtue of this relationship, also the attorney for the beneficiaries of the trust" (internal quotation marks omitted)). Neither party before this Court disputes the existence of a common-law fiduciary exception, however, so in deciding this case we assume such an exception exists.

***The difference between a private common-law trust and the statutory Indian trust follows from the unique position of the Government as sovereign. The distinction between "public rights" against the Government and "private rights" between private parties is well established. The Government consents to be liable to private parties "and may yield this consent upon such terms and under such restrictions as it may think just." Murray's Lessee v. Hoboken Land & Improvement Co., 59 U.S. 272, 18 How. 272, 283, 15 L. Ed. 372 (1856). This creates an important distinction "between cases of private right and those which arise between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments." Crowell v. Benson, 285 U.S. 22, 50, 52 S. Ct. 285, 76 L. Ed. 598 (1932).

Throughout the history of the Indian trust relationship, we have recognized that the organization and management of the trust is a sovereign function subject to the plenary authority of Congress. See Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 169, n. 18, 102 S. Ct. 894, 71 L. Ed. 2d 21 (1982) ("The United States retains plenary authority to divest the tribes of any attributes of sovereignty")***.

Because the Indian trust relationship represents an exercise of that authority, we have explained that the Government "has a real and direct interest" in the guardianship it exercises over the Indian tribes; "the interest is one which is vested in it as a sovereign." United States v. Minnesota, 270 U.S. 181, 194, 46 S. Ct. 298, 70 L. Ed. 539 (1926). This is especially so because the Government has often structured the trust relationship to pursue its own policy goals. Thus, while trust administration "relat[es] to the welfare of the Indians, the maintenance of the limitations which Congress has prescribed as a part of its plan of distribution is distinctly an interest of the United States." Heckman v. United States, 224 U.S. 413, 437, 32 S. Ct. 424, 56 L. Ed. 820 (1912); see also Candelaria, supra, at 443-444, 46 S. Ct. 561, 70 L. Ed. 1023. ***

We do not question "the undisputed existence of a general trust relationship between the United States and the Indian people." Mitchell II, 463 U.S., at 225, 103 S. Ct. 2961, 77 L. Ed. 2d 580. The Government, following "a humane and self imposed policy . . . has charged itself with moral obligations of the highest responsibility and trust," Seminole Nation v. United States, 316 U.S. 286, 296-297, 62 S. Ct. 1049, 86 L. Ed. 1480, 96 Ct. Cl. 561 (1942), obligations "to the fulfillment of which the national honor has been committed," Heckman, supra, at 437, 32 S. Ct. 424, 56 L. Ed. 820. Congress has expressed this policy in a series of statutes that have defined and redefined the trust relationship between the United States and the Indian tribes. In some cases, Congress established only a limited trust relationship to serve a narrow purpose. ***

In this case, the Tribe's claim arises from 25 U.S.C. §§ 161-162a and the American Indian Trust Fund Management Reform Act of 1994, § 4001 et seq. These provisions define "the trust responsibilities of the United States" with respect to tribal funds. § 162a(d). The Court of Appeals concluded that the trust relationship between the United States and the Indian tribes, outlined in these and other statutes, is "sufficiently similar to a private trust to justify applying the fiduciary exception." 590 F.3d at 1313. We disagree.

As we have discussed, the Government exercises its carefully delimited trust responsibilities in a sovereign capacity to implement national policy respecting the Indian tribes. The two features justifying the fiduciary exception — the beneficiary's status as the "real client" and the trustee's common-law duty to disclose information about the trust — are notably absent in the trust relationship Congress has established between the United States and the Tribe.

A

The Court of Appeals applied the fiduciary exception based on its determination that the Tribe rather than the Government was the "real client" with respect to the Government attorneys' advice. Ibid. In cases applying the fiduciary exception, courts identify the "real client" based on whether the advice was bought by the trust corpus, whether the trustee had reason to seek advice in a personal rather than a fiduciary capacity, and whether the advice could have been intended for any purpose other than to benefit the trust. Riggs, 355 A. 2d, at 711-712. Applying these factors, we conclude that the United States does not obtain legal advice as a "mere representative" of the Tribe; nor is the Tribe the "real client" for whom that advice is intended. See ibid.

Here, the Government attorneys are paid out of congressional appropriations at no cost to the Tribe. Courts look to the source of funds as a "strong indicator of precisely who the real clients were" and a "significant factor" in determining who ought to have access to the legal advice. Id., at 712. We similarly find it significant that the attorneys were paid by the Government for advice regarding the Government's statutory obligations.

The payment structure confirms our view that the Government seeks legal advice in its sovereign capacity rather than as a conventional fiduciary of the Tribe. ***

The United States has a sovereign interest in the administration of Indian trusts distinct from the private interests of those who may benefit from its administration. Courts apply the fiduciary exception on the ground that "management does not manage for itself." Garner, 430 F.2d at 1101; Wachtel, 482 F.3d at 232 ("[O]f central importance in both Garner and Riggs was the fiduciary's lack of a legitimate personal interest in the legal advice obtained"). But the Government is never in that position. While one purpose of the Indian trust relationship is to benefit the tribes, the Government has its own independent interest in the implementation of federal Indian policy. For that reason, when the Government seeks legal advice related to the administration of tribal trusts, it establishes an attorney-client relationship related to its sovereign interest in the execution of federal law. In other words, the Government seeks legal advice in a "personal" rather than a fiduciary capacity. See Riggs, 355 A. 2d, at 711.

Moreover, the Government has too many competing legal concerns to allow a case-by-case inquiry into the purpose of each communication. When "multiple interests" are involved in a trust relationship, the equivalence between the interests of the beneficiary and the trustee breaks down. Id., at 714. That principle applies with particular force to the Government. Because of the multiple interests it must represent, "the Government cannot follow the fastidious standards of a private fiduciary, who would breach his duties to his single beneficiary solely by representing potentially conflicting interests without the beneficiary's consent." Nevada v. United States, 463 U.S. 110, 128, 103 S. Ct. 2906, 77 L. Ed. 2d 509 (1983).

As the Court of Appeals acknowledged, the Government may be obliged "to balance competing interests" when it administers a tribal trust. ***

We have said that for the attorney-client privilege to be effective, it must be predictable. See Jaffee v. Redmond, 518 U.S. 1, 18, 116 S. Ct. 1923, 135 L. Ed. 2d 337 (1996); Upjohn, 449 U.S., at 393, 101 S. Ct. 677, 66 L. Ed. 2d 584. If the Government were required to identify the specific interests it considered in each communication, its ability to receive confidential legal advice would be substantially compromised. ***

B

The Court of Appeals also decided the fiduciary exception properly applied to the Government because "the fiduciary has a duty to disclose all information related to trust management to the beneficiary." 590 F.3d at 1312. ***

Footnote 9. We assume for the sake of argument that an Indian trust is properly analogized to an irrevocable trust rather than to a revocable trust. A revocable trust imposes no duty of the trustee to disclose information to the beneficiary. "[W]hile a trust is revocable, only the person who may revoke it is entitled to receive information about it from the trustee." Bogert § 962, at 25, § 964; Restatement 3d, § 74, Comment e, at 31 ("[T]he trustee of a revocable trust is not to provide reports or accountings or other information concerning the terms or administration of the trust to other beneficiaries without authorization either by the settlor or in the terms of the trust or a statute"). In many respects, Indian trusts resemble revocable trusts at common law because Congress has acted as the settlor in establishing the trust and retains the right to alter the terms of the trust by statute, even in derogation of tribal property interests. See Winton v. Amos, 255 U.S. 373, 391, 41 S. Ct. 342, 65 L. Ed. 684, 56 Ct. Cl. 472 (1921) ("It is thoroughly established that Congress has plenary authority over the Indians . . . and full power to legislate concerning their tribal property"); Cohen § 5.02[4], at 401-403. The Government has not advanced the argument that the relationship here is similar to a revocable trust, and the point need not be addressed to resolve this case.

The United States, however, does not have the same common-law disclosure obligations as a private trustee. As we have previously said, common-law principles are relevant only when applied to a "specific, applicable, trust-creating statute or regulation." Navajo II, 556 U.S., at ___, 129 S. Ct. 1547, 173 L. Ed. 2d 429, 441. The relevant statute in this case is 25 U.S.C. § 162a(d), which delineates "trust responsibilities of the United States" that the Secretary of the Interior must discharge. The enumerated responsibilities include a provision identifying the Secretary's obligation to provide specific information to tribal account holders: The Secretary must "suppl[y] account holders with periodic statements of their account performance" and must make "available on a daily basis" the "balances of their account." § 162a(d)(5). The Secretary has complied with these requirements by adopting regulations that instruct the Office of Trust Fund Management to provide each tribe with a quarterly statement of performance, 25 CFR § 115.801 (2010), that identifies "the source, type, and status of the trust funds deposited and held in a trust account; the beginning balance; the gains and losses; receipts and disbursements; and the ending account balance of the quarterly statement period," § 115.803. Tribes may request more frequent statements or further "information about account transactions and balances." § 115.802.

The common law of trusts does not override the specific trust-creating statute and regulations that apply here. Those provisions define the Government's disclosure obligation to the Tribe. ***

Footnote 11. The dissent tells us that applying the fiduciary exception is even more important against the Government than against a private trustee because of a "history of governmental mismanagement." Post, at 21. While it is not necessary to our decision, we note that the Indian tribes are not required to keep their funds in federal trust. ***If the Tribe wishes to have its funds managed by a "conventional fiduciary" ... it may seek to do so.

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