Attorney/Client Privilege Protects Intake Questionnaire

Posted by NCBRC - December 4, 2012

The Bankruptcy Court for the Southern District of Texas issued a memorandum “in order to clarify the scope of the attorney/client privilege and the work product doctrine” in the bankruptcy context. In re McDowell, No. 12-31231 (Bankr. S.D. Tex. Nov. 16, 2012). There, the UST sought to compel production of three documents: 1) the attorney’s intake questionnaire, 2) a copy of the original draft Schedule F with debtors’ handwritten notes on it, 3) debtors’ counsel’s draft copy of the Schedule F with his handwritten notes on it. The debtors asserted attorney/client privilege and work product with respect to the questionnaire, attorney/client privilege with respect to the debtors’ draft of the Schedule F form, and work product with respect to the attorney’s draft of the Schedule F form.

In bankruptcy, because of the conflict between the need to uphold attorney/client confidentiality and the heightened need for full disclosure of assets, privileges are narrowly drawn. Applying Fifth Circuit law the court found that the debtor must establish three criteria. The communication: 1) must be made to an attorney, 2) must be for the purpose of obtaining or using legal services, and 3) must have been made with an expectation of confidentiality. It is the third requirement that has led to controversy in the bankruptcy context.

Noting that in bankruptcy the expectation of confidentiality is “diminished,” the court addressed two lines of cases. The first, represented by United States v. White 950 F.2d 426, 430 (7th Cir. 1991), included dicta suggesting that there can never be a reasonable expectation of confidentiality in the bankruptcy context. The second line, represented by In re Stoutamire, 201 B.R. 592 (Bankr. S.D. Ga. 1996), does not follow a hard and fast rule but applies a case by case analysis recognizing that there may be communications between debtor and attorney that go beyond the contents of publicly filed documents. Id. at 596.

The McDowell court rejected White’s bright-line rule, finding that it represented a “fundamental lack of understanding about the bankruptcy process,” and adopted the reasoning in Stoutamire under which a debtor may have a reasonable, subjective expectation of confidentiality in certain communications. In light of evidence that the parties intended the intake document to be confidential, the court found that it was privileged. No such evidence supported the privilege for the debtors’ draft Schedule F form.

As to the work product claim, under which the documents sought to be protected must be 1) tangible items, 2) prepared in anticipation of litigation, and 3) prepared by a party’s attorney, the court held that the work product doctrine protected both the questionnaire and the attorney’s handwritten notes on the draft Schedule F form because evidence supported a finding that they were prepared for use in litigation.

The court did not discuss the impact of section 542(e) on the issue. That section provides in part: Subject to any applicable privilege, after notice and a hearing, the court may order an attorney, accountant, or other person that holds recorded information . . . relating to the debtor’s property or financial affairs, to turn over or disclose such recorded information to the trustee.” While on its face, section 542(e) is limited to information over which the debtor does not assert any privilege, several courts have held that once the bankruptcy estate is established, the power to waive attorney/client privilege passes to the trustee. See Commodity Futures Trading Comm’n v. Weintraub, 471, U.S. 343 (1985) (trustee has power to waive attorney/client privilege for corporate debtor); In re Foster, 217 B.R. 631 (Bankr. D. Colo. 1997) (applying power where debtor is individual). Others have looked to the context of the case for guidance. See In re Bazemore, 216 B.R. 1020, 1024 (Bankr. S.D. Ga. 1998) (“The inquiry requires balancing the interests of a full and frank discussion in the attorney-client relationship and the harm to the debtor upon a disclosure with the trustee’s duty to maximize the value of the debtor’s estate and represent the interests of the estate.”). See also In re Rice, 224 B.R. 464 (Bankr. D. Ore. 1998) (power does not pass to trustee where trustee and debtor in adversarial posture); In re Courtney, 372 B.R. 519 (Bankr. M.D. Fla. 2007) (privilege passes to trustee where benefit to debtor’s estate outweighs harm caused by waiver, but privilege does not pass as matter of law); In re Fairbanks, 135 B.R. 717 (Bankr. D. N.H. 1991) (power to waive attorney/client privilege passes to trustee upon death of debtor when there is no executor of estate); In re Tarkington, No. 10-12 (Bankr. E.D. N.C. Apr. 2, 2010) (allowing trustee to waive attorney/client privilege where questions go to administration of the estate).

McDowell Opinion


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One Comment

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