Company Pays a Price for Broad Privilege Assertion

February 7, 2007

In the midst of discovery, some companies reflexively assert the broadest possible privilege or work product claim. Normally a company taking this position at most loses the fight over the protections — but sometimes the stakes can be much higher.

In Money One Federal Credit Union v. Manegan (In re Manegan), Ch. 7 Case No. 06-10092-SSM, Adv. No. 06-1098, 2006 Bankr. LEXIS 3279 (Bankr. E.D. Va. Nov. 24, 2006), credit card issuer Money One claimed that a bankrupt debtor’s liability was non-dischargeable, which required Money One to establish justifiable reliance on the debtor’s implied representation to repay credit card advances. When the debtor filed interrogatories asking Money One what evidence it had of such justifiable reliance, Money One responded: “‘This interrogatory requests a legal explanation which is attorney-client privileged.'” Id. at *4. The debtor then filed a motion for summary judgment, claiming that Money One could not establish its necessary reliance. The court pointed to Money One’s privilege claim as “effectively stating that any such information [supporting its reliance] was secret and would not be presented at trial. Since Money One cannot prevail at trial without presenting some evidence of reliance, it follows that Money One has not carried its burden of showing that it has evidence sufficient to make a prima facie case at trial.” Id. at *14-15. The court granted summary judgment for the debtor.

Before automatically asserting as broad a privilege or work product claim as possible, companies must examine the downside risk of withholding evidence they might later need.