Supreme Court Limits Scope of "Trust" Responsibility, Denies Tribe Access to Documents under Attorney-Client Privilege

On June 13, 2011, the United States Supreme Court issued a decision in United States v. Jicarilla Apache Nation, No. 10-382, 564 U.S. ___, reversing two lower courts and holding that the Jicarilla Apache Nation (“Nation” or “Tribe”) is not entitled to see documents related to the Government’s management of its money trust accounts, when those documents fall within the Government’s attorney-client privilege. The 7-1 decision (Justice Sotomayor dissenting and Justice Kagan not participating) spells out the several reasons why the majority believes the Government should not be held to the same rules as a private trustee in this case.

The case began in 2002, when the Nation brought a breach of trust action in the Court of Federal Claims against the United States alleging mismanagement of tribal trust funds. During six years of pretrial negotiations, the Government turned over many documents to the Tribe, but withheld some potentially relevant documents, claiming that they were protected by the traditional attorney-client privilege. The court disagreed, concluding that while the documents normally would be privileged, they fell within the “fiduciary exception,” a court-developed doctrine that allows trust beneficiaries access to documents that the trustee ordinarily would be allowed to keep private. The Government appealed; the federal appellate court agreed with the lower court, holding that:

“[T]he United States cannot deny an Indian tribe’s right to discover communications between the United States and its attorneys based on the attorney-client privilege when those communications concern management of an Indian trust and the United States has not claimed that the government or its attorneys considered a specific competing interest in those communications.”

The Supreme Court reversed both the trial court and the appellate court, saying that they had read too much into the private trust analogy. Although the word “trust” often is used to describe the relationship between the United States and Indian tribes, the Court emphasized that the United States is not a private trustee. It is a sovereign nation with its own interests, which sometimes conflict with the interests of tribes. To the extent that there is a trust relationship, the Court said, the Government’s responsibilities under that relationship are defined by statute, not by court-made trust principles governing traditional private trusts. The relevant statute, according to the Court (25 U.S.C. 162a, see discussion below), spells out what the Government must disclose, and does not require disclosure of documents protected by the attorney-client privilege.

Moreover, the Court concluded that even if the Government’s attorney-client privilege was subject to the fiduciary exception, the documents would not have qualified for the exception. The Court recited precedents that show there are two factors that determine when trust beneficiaries should have access to otherwise privileged documents. First, whether the beneficiaries are the “real client” for whom such legal advice is intended. The beneficiary may be the real client if the trustee consulted the attorney for no reason other than the beneficiary’s benefit, or if the advice was paid for by the beneficiary with trust funds, not with the trustee’s own funds. The Supreme Court found this latter factor to be very important, and noted that here the legal advice in question was paid for by the United States from congressional appropriations, not by the Nation’s trust fund. (We note that the Government almost always pays for the expenses of the Indian trusts.)

The second factor is whether the trustee’s duty to provide that information outweighs the value of the privilege itself. Such balancing in this case works in favor of the Government, the Court said, because it sought legal advice to protect its own sovereign interests, not necessarily to benefit the trust; because the right to the fiduciary exception is not specifically articulated in any statute; and because the Government paid for the legal advice.

Finally, the Court discussed the significance of the statute that spells out some of the Government’s duties in managing trust funds, 25 U.S.C. 162a. This requires giving account holders periodic statements showing performance results, and making available account balances on a daily basis. The Secretary’s regulations further spell out the disclosures the trustee must make, including the source, type, and status of the funds, the beginning balance, the receipts and disbursements, and ending balance. There is no specific mention that the Government must disclose information protected by the attorney-client privilege, although the regulations say that the account holder may request “further information about account transactions and balances,” and the statute states that trust responsibilities “shall include (but are not limited to)” the list of duties thereafter enumerated. The Court did not analyze whether the foregoing language showed an intent that the Government’s disclosure duties were to be construed broadly, not narrowly.

Justices Ginsburg and Breyer concurred in the overall result (i.e., that the Tribe could not see the privileged documents) but not in the majority’s lengthy rationales for that result. They apparently felt the fiduciary exception to the attorney-client privilege did not have to be discussed at all, because it comes into play only when the trustee has consulted the attorney for the benefit of the trust, whereas here, as the majority pointed out, “the Government seeks legal advice in a ‘personal’ rather than a fiduciary capacity;” therefore, there was no point in discussing the fiduciary exception.

Justice Sotomayor wrote a lengthy dissent. She rejected the idea that trust responsibilities must be spelled out in statute, noting that the Court previously has looked to general trust principles in order to flesh out the Government’s obligations where the relationship between the United States and a tribe “bears the hallmarks of a conventional fiduciary relationship.”

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