Is a Minority Shareholder a Client of Corporation's Attorney ?
In Hoiles v. Superior Court (1984) Cal. App. 3d 1192, court held that only closely held corporations, not minority shareholders, were the client of the corporation's attorney even though the corporate board members owed fiduciary duties to the complaining shareholders.
In Shannon v. Superior Court (1990) 217 Cal. App. 3d 986 [266 Cal. Rptr. 242], another court held a receiver could assert an absolute attorney-client privilege as to communications with his counsel even as to a disclosure request by the corporation which was placed into receivership and to which he owed fiduciary responsibilities.
In Wells Fargo Bank v. Superior Court (2000), 22 Cal. 4th 201, 209, the Supreme Court refused to create a so-called "fiduciary" exception to the attorney-client privilege because courts "do not enjoy the freedom to restrict California's statutory attorney-client privilege based on notions of policy or ad hoc justification."
In Wells Fargo the beneficiaries of a trust sought to discover confidential communications between the trustee (a bank) and outside trust counsel.
The beneficiaries contended the trustees owed independent duties to provide them with complete and accurate information regarding the trust administration and to allow them to inspect books and documents.
All to no avail, for the court declined to allow such responsibilities to trump the statutorily-created attorney-client privilege: "Certainly a trustee can keep beneficiaries 'reasonably informed' and provide 'a report of information' without necessarily having to disclose privileged communications. . . . If the Legislature had intended to restrict a privilege of this importance, it would likely have declared that intention unmistakably, rather than leaving it to courts to find the restriction by inference and guesswork . . . ." ( Id. at p. 207.) Wells Fargo held that the attorneys only represented the trustees, not the beneficiaries.
The Supreme Court was not persuaded to the contrary because the beneficiaries were indirectly paying attorney fees which came out of the trust.
That is because "payment of fees does not determine ownership of the attorney-client privilege. . . . In any event, the assumption that payment of legal fees by the trust is equivalent to direct payments by beneficiaries is of dubious validity. . . . This question of cost allocation does not affect ownership of the attorney-client privilege." ( Well Fargo Bank v. Superior Court, supra, 22 Cal. 4th at p. 213.)