COLLAUTT v. LI (E.D.Pa. 12-11-2014)

CATHERINE COLLAUTT and ALEXANDER COLLAUTT v. LIJIE LI and LUJUN ZHANG.

CIVIL ACTION NO. 14-632.

United States District Court, E.D. Pennsylvania

December 11, 2014.

  MEMORANDUM

  O'Neill, Judge

  Relevant here, plaintiffs Catherine and Alexander Collautt, the children
of Allan Collautt, seek to challenge non-party decedent Allan Collautt's
beneficiary designations on various life insurance policies. Dkt. No. 6 at
¶¶ 16, 27-29. Plaintiffs allege that following Allan Collautt's death the
proceeds from Allan Collautt's life insurance policies were paid to
defendant Lijie Li. Id. at ¶ 35. Allan Collautt revised his will and trust
to bequeath his estate to Li on November 21, 2011. Id. at ¶ 25. On December
6, 8 and 11, 2011, Allan Collautt changed the named beneficiaries on his
life insurance policies from Catherine Collautt and Alexander Collautt to
Li. Id. at ¶¶ 27-29. Plaintiffs claim that the beneficiary designations were
changed "subject to the undue influence of Li." Id. at ¶ 44; see also ¶ 54.

  Li now seeks an order directing non-party Joseph E. Lastowka, Jr., who
served as an attorney for Allan Collautt, but who is not the executor of his
estate, Dkt. No. 16 at ECF p. 1-2, to comply with a subpoena seeking
production of:

      1. Any and all estate planning documents which [he] maintain[s]
    for Allan Collautt, in either paper or computer form, including but
    not limited to, correspondence to or from Allen Collautt, and/or
    relevant to Allen Collautt which was exchanged with another person,
    and drafts and signed estate planning documents, including but not
    limited to wills, trusts, powers of
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    attorney, both financial and healthcare, and living wills.

      2. Any and all documents in [his] possession regarding, relating
    to or referring to Allen Collautt other than those referenced in
    item 1 above.

Dkt. No. 14-1 at ECF p. 5. Li contends that "the information requested is
vital to Defendant Li's defense of the beneficiary designation case because
discussions concerning beneficiary designations on non-probate assets are an
integral part of a client's estate plan and are routinely discussed with the
attorney during the estate planning process. Dkt. No. 14 at ECF p. 4. She
asserts that, relevant to plaintiffs' claim of undue influence, Lastowka is
"uniquely qualified to reveal [his discussions with Allan Collautt regarding
his beneficiary designations] and to tell [the parties] about Allan
Collautt's mental abilities at that time." Dkt. No. 18 at ECF p. 18.

  Li served the subpoena on Lastowka on April 25, 2014. Dkt. No. 14 at ECF
p. 3. The subpoena required production of documents by May 25, 2014. Id.
After several attempts to remind Lastowka of his obligation to comply with
the subpoena, "[o]n July 18, 2014, almost 3 months after being served with
the Subpoena, Attorney Lastowka forwarded an e-mail in which he asserted a
privilege as the reason for his non-compliance with the Subpoena." Id. at
ECF p. 3-4. Li contends that Lastowka's objection is waived because it was
"over 2 months late." Id.

  In his response to Li's motion to compel, Lastowka asserts that he "lacks
the power to waive the expectation of confidentiality held by Allan
Collautt, or Allan Collautt's executor, neither of whom are parties to this
lawsuit nor persons given notice of this proceeding." Dkt. No. 16 at ECF p.
2. He seeks dismissal of Li's motion "unless [Li] produces a Waiver or
Release from the executor of the Will of Allan Collautt, Deceased,
authorizing Respondent Lastowka to allow production of documents and
testimony at a deposition without concern for
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he confidentiality implied by the attorney-client privilege."[fn1]Id. at ECF
p. 3.

  Under Pennsylvania law, "[i]n a civil matter counsel shall not be
competent or permitted to testify to confidential communications made to him
by his client, nor shall the client be compelled to disclose the same,
unless in either case this privilege is waived upon the trial by the
client." 42 Pa. C.S. § 5928. "[T]he attorney-client privilege operates in a
two-way fashion to protect confidential client-to-attorney or
attorney-to-client communications made for the purpose of obtaining or
providing professional legal advice." Gillard v. AIG Ins. Co., 15 A.3d 44,
59 (Pa. 2011). "[T]he general rule is that the attorney-client privilege
continues after death." Swidler & Berlin v. United States, 524 U.S. 399, 406
(1998). As the Supreme Court has explained, "[k]nowing that communications
will remain confidential even after death encourages the client to
communicate fully and frankly with counsel" without concern about
"reputation, civil liability, or possible harm to friends and family." Id.
at 407. I find that Latowska has properly invoked the attorney-client
privilege, and therefore the "the burden shifts to [Li as] the party seeking
disclosure to show 'that disclosure will not violate the attorney-client
privilege, e.g., because ... some exception applies.'" In re Flonase
Antitrust Litig., 723 F.Supp.2d 761, 765 (E.D. Pa. 2010), quoting Nationwide
Mut. Ins. Co. v. Fleming, 924 A.2d 1259, 1266 (Pa. Super. Ct. 2007).

  In Li's reply brief, she contends that disclosure of the requested
discovery is permitted
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pursuant to a "testamentary exception" to the attorney-client privilege. In
support of her argument, she cites the decision in In re Thevaos Estate, No.
14-09-0093, 2010 WL 1435160 (Pa. Ct. Comm. Pl. Centre Cnty. Feb. 8, 2010),
where the court found that "a testamentary exception is proper in this case
as well as in any case where a deceased holder of the attorney-client
privilege is suspected of having been unduly influenced to change the
planned disposition of his estate after his death." Id. at 487-88. The court
explained that "any documentation related to the change in [the decedent's]
estate near the end of his life and after suffering a series of medical
setbacks can only go to show what [the decedent's] intent was, and whether
he was able to clearly communicate what he desired for his estate." Id. at
488. The court thus ordered the subpoenaed law firm to produce the
subpoenaed documents. As the Supreme Court explained in Glover v. Patten,
165 U.S. 394, 406 (1897),

      in a dispute between putative heirs or devisees under a will or
    trust, the attorney-client privilege does not bar admission of
    testimony and evidence regarding communication between the decedent
    and any attorneys involved in the creation of the instrument,
    provided that evidence or testimony tends to help clarify the
    donative intent of the decedent.

(emphasis added). The Supreme Court continued, "such communications might be
privileged if offered by third persons to establish claims against an
estate" but they were not privileged in the context of a "contest between
the heirs or next of kin." Id.

  Even if a testamentary exception to the attorney-client privilege exists
under Pennsylvania law, I find that it would not here apply to exempt the
information Li seeks to discover. There is an important distinction between
the instant matter and Thevaos. In Thevaos, the information sought pertained
to whether the decedent had "been unduly influenced to change the planned
disposition of his estate." Id. Ultimately the information was relevant to a
caveat filed in the probate of the decedent's will and, for that purpose,
the attorney-client privilege did
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not bar production of the information sought. Id. at 485. Here, in contrast,
Li seeks information from Lastowka to defend against plaintiff's claims that
Li and defendant Lujun Zhang deprived plaintiffs of the death benefits from
Allan Collautt's life insurance policies. Dkt. No. 6 at ¶¶ 51, 61, 67. The
materials she seeks are not relevant to a contest of Allan Collautt's will.

  Pennsylvania law provides that "[t]he designation of beneficiaries of life
insurance ... shall not be considered testamentary and shall not be subject
to any law governing the transfers of property by will."
20 Pa. Cons. Stat. § 6108(a); see also Manhattan Life Ins. Co. of N.Y., N.Y.
v. Evanek, 762, F.2d 319, 322 (3d Cir. 1985) ("under current Pennsylvania
law, the designation of a revocable life insurance beneficiary is neither an
inter vivos nor a testamentary conveyance, vesting nothing in the
beneficiary...."); Equitable Life Assur. Soc. of U.S. v. Stitzel,
445 A.2d 523, 526 (Pa. Super. Ct. 1982) (finding that the designation of a
revocable beneficiary in a life insurance policy is not a testamentary
conveyance), superseded on other grounds by In re Estate of Hoffman,
54 A.3d 903 (Pa. Super. Ct. 2012). Writing in favor of affirmance in an
evenly divided per curiam decision affirming a Pennsylvania Superior Court
order which held that the beneficiaries of an insurance policy could not be
changed by a will, Justice Saylor explained, "[t]o allow modification of
non-testamentary contractual assets by testamentary documents blurs the
timeless and very practical distinction between the two, notably set forth
in 20 Pa. C.S. § 6108." Alkhafaji v. Tiaa-Cref Individual & Institutional
Servs., LLC, 69 A.3d 219, 223 (Pa. 2013). He reasoned that "[p]arties to a
contract must have the ability to rely on the terms of their contract, and
should not have to speculate about testamentary clauses in documents of
which they have no awareness." Id.

  On this authority, I am not persuaded that, under the circumstances now
before me, Li has met her burden to demonstrate that a testamentary
exception to the attorney-client privilege
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should apply to require Lastowka to provide the information she seeks to
compel — information regarding testamentary documents that may be used not
in a will contest, but as extrinsic evidence regarding Allan Collautt's
mental state when he modified his life insurance beneficiary designations.
Accordingly, I will deny her motion.

  An appropriate Order follows.

[fn1] In Li's memorandum in support of her motion to compel, it is asserted
that

[a]s of the writing of this Memorandum Law, undersigned counsel does not
know what the position is of the Executor of the Estate concerning waiver of
any privilege which might exist. However, a letter is being sent to the
Executor and hopefully at the time of argument his position can be stated to
the Court.

Dkt. No. 18 at ECF p. 5. To date, the Court has not received any update with
respect to the status of Li's request for a privilege waiver from the
executor of Allan Collautt's estate.