Every court acknowledges that a corporation’s Chapter 7 bankruptcy trustee “owns” the corporation’s attorney-client privilege. Who owns the privilege if the bankrupt company has no assets, liabilities, directors, shareholders or employees?
In Lewis v. United States, No. 02-2958 B/An, 2004 U.S. Dist. LEXIS 26680 (W.D. Tenn. Dec. 6, 2004), the IRS subpoenaed the well-known firm of Baker Donelson, seeking documents it generated in connection with an investigation the firm conducted into financial problems at the firm’s client VisionAmerica. Baker Donelson asserted the privilege, but the court ordered the documents produced. In addition to finding that the firm’s lead lawyer’s activities for VisionAmerica “resembled those of a business advisor and not of a legal counselor” (thus making the privilege unavailable), the court noted that the bankrupt VisionAmerica “has no assets, liabilities, directors, shareholders, or employees.” Id. at *9, 12. Explaining that “courts are split over whether a corporation is entitled to protection from the attorney-client privilege after the corporation’s ‘death,'” [t]he court concluded that “the attorney-client privilege cannot be applied to a defunct corporation.” Id. at *10, 14.
As participants in capitalism’s “creative destruction” process, lawyers should remember that their dead clients may lose the privilege.