Case No. 01-60386-DOT; (Chapter 11); Adv. Proc. 01-6010United States Bankruptcy Court, E.D. Virginia, Richmond Division
November 5, 2001
MEMORANDUM OPINION
ROBERT G. MAYER, Bankruptcy Judge
This matter is before the court on Fas Mart’s motion to compel discovery. MEMO has refused to produce three documents, in each case asserting the attorney-client privilege or the attorney work product doctrine. The documents sought to be protected are the minutes of the Special Credit Meeting held on March 21, 2001;[1] the March 8, 2001 draft of a letter sent on March 12, 2001; and the March 9, 2001 draft of the same March 12, 2001 letter. Copies of each were provided to the court for an in camera review.
Federal Rule of Evidence 501 provides that privileges are “governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience.” However, where state law supplies the rule of decision, the privilege’s of that state apply. The leading federal case on the attorney-client privilege is Upjohn Company vs. United States, 449 U.S. 383, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). In Upjohn, the Court was concerned with information that the corporation’s counsel obtained from a large number of employees. The employees had been instructed to provide the information to counsel by the Chairman of the company. The Internal Revenue Service sought the information obtained. The Supreme Court rejected both of the then-leading articulations of the attorney-client privilege as it applied to corporations. Instead, it looked to the purpose of the privilege. It found that in order for an attorney to provide effective and meaningful legal advice, he must be in a position to obtain information. The control-group theory did not allow for this important function unless the information came from senior management. In fact, it is frequently the case that important information is only known by much lower level employees, individuals who do not direct or control the company’s actions in connection with a legal matter. “The control group test . . . frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees of the client to attorneys seeking to render legal advice to the client corporation.” Upjohn, 449 U.S. at 392, 191 S.Ct. at 684. While Upjohn was directed to information flowing to the attorney from the corporate client, the Court opined that similar considerations apply to communications from the attorney to the corporate client. Upjohn, 449 U.S. at 392, 191 S.Ct. at 684 (“[T]he control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation’s policy.”) The legal advice “must be given to the corporate personnel who will apply it.” Upjohn, 449 U.S. at 392, 191 S.Ct. at 684
(quoting Duplan Corp. v. Deering Milliken, Inc., 397 F. Supp. 1146, 1164
(D.S.C. 1974)).
Upjohn is also significant in that it upheld the assertion of the attorney work product doctrine. The attorney work product doctrine was first enunciated in Taylor v. Hickman, 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451 (1947) and since been substantially incorporated into Fed.R.Civ.Proc. 26(b)(3). The purpose is to provide some measure of privacy to an attorney with respect to his work for a client. This preserves the attorney’s thoughts and planning. Without the rule, there would be pressure to not write things down which could itself have a detrimental effect on the legal advice given and the quality of legal services rendered in court proceedings. “Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and the preparation of cases for trial.” Upjohn, 449 U.S. at 398, 191 S.Ct. at 687.
Finally, the burden of establishing the existence of a privilege is on the party asserting the privilege and seeking to shield the document or communication. United States v. Jones, 696 f.2d 1069, 1072 (4th Cir. 1982) (“The proponent must establish not only that an attorney-client relationship existed, but also that the particular communications at issue are privileged communications and that the privilege was not waived.”)
Minutes of Special Credit Meeting
The first element of the attorney-client privilege is the existence of an attorney and a client. A corporation is not itself a natural person. It can only act through natural persons. Determining which corporate employees are covered by the corporate attorney-client privilege has been a vexing problem. Upjohn addressed the question of which corporate employees qualify for the purpose of making or receiving a communication that may be subject to the attorney-client privilege. The resolution depends on the employee’s role in the corporation, the transaction in question and the particular communication. Here, the record does not reveal who the seven attendees of the March 21, 2001 meeting were, except by first name. None is identified as or appears to be counsel for MEMO. There is no indication that the attendees were senior members of management, members of a committee with responsibility for administration of the Fas Mart relationship or were otherwise individually responsible in some manner for the administration of the Fas Mart relationship. The individual roles or responsibilities of the attendees are not developed in the record.
Unless they can be shown to be corporate employees who qualify to make or receive privileged communications, the claim of privilege must fail. The parties appear to assume that all of the attendees fall within that group of employees of MEMO to whom privileged communications may be made without waiving the attorney-client privilege. While it is possible that some of the attendees were not committee members and were not involved with the Fas Mart transaction — that is, they were guests of the committee whose presence would waive any otherwise applicable attorney-client privilege — the parties have not raised this issue and the court will assume that all attendees were necessary and qualified corporate employees with respect to the communications.
The second element of the attorney-client privilege is a communication between the attorney and the client. The Minutes do not reflect that any attorney was present at the meeting. The question then is whether the redacted portions of the Minutes contain communications from corporate counsel or communications to be sent to corporate counsel. The redacted portion of Item C does not appear to be a communication either from counsel or to counsel. Rather, it appears to be the committee’s objective and the gist of its theory of the case, a theory that appears extensively throughout MEMO’s pleadings. There is nothing to indicate the source of the committee’s basis for its position.
Items H, I and J are denoted as action items. The heading “Action Item” is all that was not redacted from each item. The redacted portion of Item H appears to be the conclusion reached by the committee after discussion. It is not a communication from corporate counsel and does not appear to be a communication to be made to corporate counsel. This is different from Item I.
Action Item I poses a legal question to be put to corporate counsel. As such, it is privileged. Item J, like Item H, does not appear to be a communication either from or to corporate counsel but rather a conclusion that the committee reached.
Item K is privileged, assuming that the first named individual is corporate counsel. This item concerns a communication to be made to the individuals concerning the Fas Mart matter and their representation of MEMO in this matter. If both named individuals are corporate counsel, the entire item is privileged; otherwise, only the second half of the item is privileged.
The attorney work product doctrine is not applicable to the redactions. As the name of the doctrine implies, the work product that is protected is the attorney’s, not the client’s. The work product privilege can be waived by disclosing the work product just as the attorney-client privilege may be waived by disclosing the communication. Here, however, just as there is no indication that the non-privileged items are communications from corporate counsel, there is no indication that they reveal any of counsel’s work product.
An additional point needs to be addressed. The copy of the redacted Minutes provided to Fas Mart is stamped “Confidential.” There is no similar marking on the unredacted copy provided to the court. If there are two copies of the document, one with the marking and one without, both must be provided, subject to the redactions set forth above.
Drafts of March 12, 2001 Letter
The last documents to be considered are the first draft (dated March 8, 2001) and the second draft (dated March 9, 2001) of the letter dated March 12, 2001 that was sent to counsel for Fas Mart. One element of the attorney-client privilege is that the client intends to maintain the confidentiality of the communication. Thus, if the client intended his attorney to reveal the information to the public, the communication is not privileged. For example, the information that a debtor gives to his attorney in order to accurately complete his schedules and statement of affairs is not privileged once the petition is filed. There is, at that point, no expectation that the information will be confidential.
However, prior to filing the petition, the information may be privileged because the attorney needs to review it in order to properly advice his client whether to file a petition in bankruptcy or to pursue other avenues. For the same reasons, drafts of letters prepared by counsel and communicated to the client are, if all other elements are present, privileged at least until the final letter is sent. Before the final letter is sent, the client may cause the letter to be changed or decide not to send the letter at all.
The final letter sent to a third party is not privileged. Nor are those portions of the drafts privileged that contain the same language as the final letter. The information in the draft, to the extent actually released, is not intended to remain confidential. Similar language may also lose its privilege if the change in the language reveals neither confidences nor attorney work product.
In this case, MEMO agrees that neither the language in the drafts that also appears in the final letter nor the paragraph of the draft read by MEMO’s counsel to Fas Mart’s counsel is privileged. Comparison of the final March 12, 2001 letter to the second draft dated March 9, 2001 reveals that the letters are virtually identical except for the last two paragraphs of each letter. In the draft letter, the third and fourth sentences in the penultimate paragraph are not contained in the final letter. The first half of the fifth sentence in the draft letter is the same as the last sentence in the same paragraph of the final letter. Only the final clause is added in the draft letter. The last paragraphs of both letters serve a similar function but differ due to the commencement of the bankruptcy case. Except for the additional sentences and clause in the draft letter, the draft letter is not privileged.
The March 8, 2001 draft was reviewed by counsel with the corporate client and is substantially different from the final letter. It represents a communication between client and counsel that, except for the portions read to Fas Mart, has not been divulged. It, therefore, remains privileged. Had the letter not been reviewed with the corporate client, it would represent counsel’s work product — a portion of his journey to his final action.
Conclusion
The documents will be produced, subject to the redactions indicated in this opinion.
ORDER
This matter is before the court on Fas Mart’s motion to compel discovery. For the reasons stated in the Memorandum Opinion, it is
ORDERED:
1. The Minutes of the Special Credit Meeting dated March 21, 2001, will be produced to Fas Mart forthwith subject to redaction of Item I (except for the words “Action Item”) and Item K.
2. The draft letter dated March 9, 2001 will be produced to Fas Mart forthwith subject to redaction of the third and forth sentences and the last clause of the last sentence of the penultimate paragraph.
3. The draft letter dated March 8, 2001 will be produced subject to redaction of all portions except the first paragraph.