Who Controls Privilege Protection When Individuals Go Bankrupt?

February 14, 2018

Courts agree that bankruptcy trustees control bankrupt corporations’ privilege – just as corporations’ successor management controls privilege protection.  But does the same approach apply in an individual’s bankruptcy setting?

In Whatley v. Meyer Wilson Co. (In re Chandar), Case No. 11-37360-B-7, Adv. No. 17-2057, 2017 Bankr. LEXIS 3903, at *3 (Bankr. E.D. Cal. Nov. 13, 2017), the court noted that  (1) “[s]ome courts hold that an individual chapter 7 debtor’s privileges transfer to the trustee and the trustee controls the privilege as a matter of law”; (2) “other courts hold that an individual chapter 7 debtor’s privileges do not transfer to the trustee and therefore remain under the debtor’s control”; and (3) “still other courts take a balancing approach,” looking both at “potential harm to the individual chapter 7 debtor” and the “trustee’s need for privileged information in the administration of the estate.”  The court ultimately found that neither the privilege nor the work product doctrine applied to the documents at issue, so “[f]ortunately, this court need not join the fray.”  Id.

Such varied judicial approaches highlight the need for clients and lawyers to assess choice of laws in some privilege and work product settings.