In re McDowell, No. 12-31231 (Bky.S.D.Tex. Nov. 16, 202), involved a married couple who filed a chapter 7 bankruptcy case. After the U.S. Trustee filed a motion seeking dismissal of the case under section 707(b), the debtors filed an amended Schedule I, listing different figures for some of their living expenses. The U.S. Trustee then filed a motion requesting that the debtors turn over copies of all documents and notes used in the preparation of their bankruptcy case filing.
The debtors opposed this motion, responding that attorney-client privilege, and the doctrine of attorney work product, protected the documents from being disclosed to the U.S. Trustee.
Three documents were at issue: first, the Client Information Worksheet used by the law firm representing the debtors; second, the Schedule F listing the debtors’ creditors and filled out mostly by hand by the debtors; and third, the Schedule F with the lawyer’s handwritten notes for each creditor.
The court noted that for the attorney-client privilege to apply, the communication must have (1) been made to a lawyer, (2) for the purpose of obtaining legal services or advice, and (3) with the intent that the communication be confidential.
The court next turned to the oft-cited case U.S. v. White, 950 F.2d 426 (7th Cir.1991), in which the Seventh Circuit U.S. Court of Appeals held that because the debtor in a bankruptcy case expects that the information provided to a lawyer will be disclosed in a public bankruptcy filing, there can be no expectation of confidentiality, and therefore such information or documents are not protected by the attorney-client privilege. The court in the present case found that the White case “exhibits a fundamental lack of understanding about the bankruptcy process,” and declined to follow it. Accordingly, the Client Information Worksheet was protected by attorney-client privilege and did not have to turned over to the U.S Trustee.
However, the debtors did not testify about their expectation of confidentiality regarding their handwritten Schedule F. The court therefore ruled that they had not met their burden of proving that this document was protected.
The court also held that the Client Information Worksheet, and the Schedule F containing the lawyer’s handwritten notes, were protected by the attorney work product privilege. These documents contained extensive notes made by the lawyer in anticipation of the bankruptcy filing.
The McDowell case shows that courts are increasingly willing to limit the White case to its unusual facts and uphold the attorney-client privilege in bankruptcy cases.
Image credit: vaXzine’s photostream, Flickr.
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Last modified: January 13, 2013