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McDevitt v. Wellin

United States District Court, D. South Carolina, Charleston Division

September 24, 2019

LARRY S. MCDEVITT, as Trustee of the Wellin Family 2009 Irrevocable Trust, Plaintiff,
v.
PETER J. WELLIN, CYNTHIA W. PLUM, and MARJORIE W. KING, Individually and as Co-Trustees, Distribution Committee Members, Investment Committee Members, and Beneficiaries of the Wellin Family 2009 Irrevocable Trust; FRIENDSHIP MANAGEMENT LLC; and CYNTHIA W. PLUM, as Manager of Friendship Management LLC, Defendants. PETER J. WELLIN, CYNTHIA W. PLUM, and MARJORIE W. KING, as Co-Trustees of the Wellin Family 2009 Irrevocable Trust, Counterclaim Plaintiffs,
v.
LESTER S. SCHWARTZ, as Trust Protector of the Wellin Family 2009 Irrevocable Trust u/a/d/ November 2, 2009; and WENDY C.H. WELLIN, as Special Administrator of the Estate of Keith S. Wellin, Counterclaim Defendants.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE

         This matter is before the court on the Report and Recommendation ("R&R") of Special Master William L. Howard recommending that plaintiff Larry S. McDevitt's ("McDevitt") motion to compel be denied, ECF No. 348. For the reasons set forth below, the court adopts the R&R with modifications and denies the motion to compel.

         I. BACKGROUND

         Because the parties are well-acquainted with this case, the court will dispense with a recitation of facts and include only a procedural history of the matters at hand.

         On May 7, 2014, Lester S. Schwartz ("Schwartz") filed a motion compel seeking the production of certain information and documents from defendants Peter J. Wellin, Cynthia W. Plum, and Marjorie W. King (collectively, "the Wellin Children"). ECF No. 83. The motion was ratified by McDevitt upon his substitution as party-plaintiff in this action. The Special Master held a hearing on April 21, 2015 and heard arguments on several motions, including McDevitt's motion to compel. At that hearing, the Special Master instructed the parties to submit supplemental briefing on the privilege issue that is the subject of this order.

         In the meantime, on July 2, 2015, the Special Master issued his Report & Recommendation ("R&R") on the matters argued at the April 21, 2015 hearing, with the exception of the privilege issue on which the parties submitted supplemental briefing. ECF No. 316. The Special Master subsequently issued an amended R&R on July 31, 2015, ECF No. 329, but this amended R&R still did not address the privilege issue in the supplemental briefing. The parties filed objections to the amended R&R, and the court issued on order on the objections on September 30, 2015. ECF No. 360.

         The parties submitted their supplemental briefings in May and June of 2015, and the Special Master held a hearing on the briefings on August 5, 2015. On August 28, 2015, the Special Master issued an R&R on the supplemental briefing. ECF No. 345. The R&R considered whether communications between the Wellin Children and their current legal counsel, Nelson Mullins Riley and Scarborough ("Nelson Mullins"), should be produced pursuant to the fiduciary exception to the attorney-client privilege in the context of a co-trustee. The R&R aptly summarized the arguments before the Special Master, stating:

In this motion, Plaintiff McDevitt argues that he is entitled to the privileged communications between the Defendant Wellin Children, serving as trustees under the Wellin Family 2009 Irrevocable Trust, and their current legal counsel, Nelson Mullins, based upon his status as a co-trustee.
Defendants acknowledged in their answer to interrogatories that they received advice from their current counsel in making the decision to sell the BRK stock and distribute the proceeds, and in the handling of the transaction following the events of November 20, 2013. Plaintiff McDevitt asserts that these transactions involve matters of trust administration, and as a co-trustee, he is entitled to have access to the attorney-client communications between Nelson Mullins and his co-trustees, the Defendant Wellin children.

         ECF No. 345 at 3. The R&R began its consideration of this issue by first determining that South Dakota privilege law applied to the privilege analysis. The R&R then explained that South Dakota has not adopted or rejected a fiduciary exception to attorney-client privilege, but that even if South Dakota did recognize the exception, it would not apply here. The R&R determined that the exception only applied to attorney-client communication related to trust administration and not to advice sought by in a trustee in a personal capacity that is unrelated to trust administration. The R&R also determined that the exception does not apply once a trustee has become clearly adverse to a co-trustee. The R&R found that the Wellin Children obtained advice from Nelson Mullins "regarding their defense in the adversarial legal proceedings commenced by Keith Wellin, and specifically, in relation to their sale of trust assets and distribution of those assets from the trust, " and that advice was "procured for the benefit of the Defendants, and not for the benefit of their adversary." Id. at 13. The R&R then explained that the advice that the Wellin Children received from Nelson Mullins after Keith Wellin filed suit against them is "inextricably intertwined with the actions [the Wellin Children] took regarding the assets of the trust, " and as such any advice regarding the trust assets is not separable for disclosure. Id. In conclusion, the R&R concluded that a fiduciary exception did not apply and recommended that the court deny McDevitt's motion to compel.

         McDevitt and Schwartz filed objections to the R&R on September 17, 2015. ECF No. 348. The Wellin Children filed their response to the objections on October 15, 2015, ECF No. 375, and McDevitt and Schwartz filed a reply on October 30, 2015. ECF No. 389. The court has not yet issued an order on these objections and takes the opportunity to do so now.

         II. STANDARD

         In reviewing a special master's order, report, or recommendation, the court may "adopt or affirm, modify, wholly or partly reject or reverse, or resubmit to the master with instructions." Fed.R.Civ.P. 53(f)(1). The court is required to review all objections to any findings of fact or conclusions of law made or recommended by a special master de novo. Fed.R.Civ.P. 53(f)(3), (4). However, the special master's rulings on procedural matters will only be set aside for abuse of discretion. Fed.R.Civ.P. 53(f)(5).

         The Federal Rules of Civil Procedure provide that a party may "obtain discovery regarding any non-privileged matter that is relevant to any party's claim or defense, including the existence, description, nature, custody, condition and location of any books, documents or other tangible things and the identity and location of persons who know of any discoverable matters." Fed.R.Civ.P. 26(b)(1). "The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense" by forbidding or limiting the scope of discovery. Fed.R.Civ.P. 26(c)(1). "The scope and conduct of discovery are within the sound discretion of the district court." Columbus-Am. Discovery Grp. v. Atl. Mut. Ins. Co., 56 F.3d 556, 568 n.16 (4th Cir. 1995) (citing Erdmann v. Preferred Research, Inc. of Ga.,852 F.2d 788, 792 (4th Cir. ...


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