Does a Bankrupt Individual’s Receiver Control the Attorney-Client Privilege?

May 10, 2006

Courts universally recognize that a company’s bankruptcy trustee controls the company’s privilege. However, the same may not be true of bankrupt individuals.

In Securities & Exchange Comm’n v. Marker, No. 1:02CV01109, 2006 U.S. Dist. LEXIS 7233, at *13 (M.D.N.C. Feb. 6, 2006), the court noted that “confronted with a trustee’s request to waive the attorney-client privilege of an individual debtor,” courts “have adopted a balancing approach: weighing the potential for harm to the individual debtor with the trustee’s duty to maximize the value of the debtor’s estate.” The court ultimately found that the bankrupt individual’s receiver did not control the privilege.

Lawyers should not assume that the same privilege rules apply to corporations as to individuals.