Whose Privilege Is It Anyway? In Illinois, Privilege Belongs to Accountant Rather Than Client
Many clients believe they absolutely control the disclosure or confidentiality of information they provide to their accountants. That may not be true in Illinois, where the state Supreme Court recently held that an accountant, not the client, has statutory power to decide whether to assert or waive privilege in response to a subpoena for information about the client. It remains to be seen how this decision may affect the flow of information between clients and their accountants.
In Brunton v. Kruger, 2015 IL 117663, - N.E.3d - (2015), Julie Brunton sued her brother, Robert Kruger, in his capacity as trustee of the trusts established by their late parents. Brunton, who was not named as a beneficiary of the trusts, alleged undue influence by certain family members and that her mother had diminished capacity at the time the trust documents were executed. Both parties issued subpoenas to an accountant who had assisted in their parents’ estate planning process, but the accounting firm provided the information only to Kruger as personal representative of the parents’ estate. Brunton then filed a motion to compel compliance with her subpoena. Affirming the trial court’s order to turn the documents over to Brunton, the Illinois Supreme Court held that (1) the privilege created by the Public Accounting Act is held by the accountant, not the client, and (2) the accountant waived the privilege by producing the requested documents to Kruger.
By regulation of the accounting profession, Illinois does impose on an accountant a duty not to disclose “any confidential client information without the specific consent of the client.” Ill. Admin. Code tit. 68, § 1430.3010(a). However, that duty expressly does not affect an accountant’s “obligation to comply with a validly issued and enforceable subpoena or summons,” nor does it “prohibit a registered public accountant’s compliance with applicable laws and government regulations.” Id. at § 1430.3010(b)(2). Thus, in many of the most sensitive contexts, a client appears to have little if any control over the accountant’s possible release of confidential information. Another implicit lesson of the Brunton case is that, in Illinois, the personal representative of a deceased client is not the client. That’s why the accountant’s disclosure to the personal representative waived the accountant’s privilege.
Illinois is one of the few states that hold this privilege belongs to the accountant rather than the client. Courts in Indiana and Tennessee, for example, have interpreted nearly identical statutes to create “a privilege personal to the client.” See Ernst & Ernst v. Underwriters Nat. Assur. Co., 178 Ind. App. 77, 381 N.E.2d 897 (1978); Fed. Ins. Co. v. Arthur Anderson & Co., 816 S.W.2d 328, 331 (Tenn. 1991). This article is not a 50-state survey, but the question of who holds the accountant-client privilege depends entirely on which state’s law applies.
For clients, the practical implications of the Brunton case may take some time to emerge. In many instances, the client has most if not all the same information that the accountant has. The court explained that the accountant’s privilege does not bar the client from producing the information, either voluntarily or in response to a discovery order. But if the client does not have the information, only the accountant can decide whether to produce it. Would the accountant nevertheless face professional disciplinary charges if confidential information is disclosed without the client’s consent? Will clients become less likely to provide full information to their accountants in the ordinary course of business? Can the accountant and client contract around the Illinois privilege statute and let the client have more control over confidential information? These are just some of the thorny questions that the Illinois Supreme Court did not answer.