In ABI Journal Article, Akin Gump Litigators Analyze Ownership of Debtor’s Corporate Privileges in Bankruptcy Litigation

American Bankruptcy Institute Journal has published the article “The Privilege Is Mine,” written by Akin Gump litigation partners David Zensky and Deborah Newman. Using the matter of In re Tribune Co. Fraudulent Conveyance Litigation, in which Akin Gump represented the Tribune Litigation Trust, the article examines the issue of who owns a debtor’s corporate privileges in connection with post-petition or post-emergence litigation. It also looks at the assignability of separate privileges previously held by board committees.

Zensky and Newman begin with some background on attorney/client privilege in bankruptcy matters. They write that upon the commencement of a bankruptcy case, “the debtor’s pre-petition privilege is controlled by the debtor in possession, who simply ‘retains’ the privilege, or by a bankruptcy trustee, who steps into the debtor’s shoes.”

The article then discusses attorney/client privilege as it pertains to pre-petition committees of boards of directors. Once a bankruptcy petition has been filed, courts are split, the authors write, “over whether a special committee’s pre-petition attorney/client privilege transfers to a trustee standing in a debtor’s shoes or to whom the debtor has assigned its attorney/client privilege.”

The Tribune matter, Zensky and Newman observe, determined that a litigation trustee, to whom a debtor’s attorney/client and work-product privilege is assigned under a confirmed reorganization plan, does inherit “the privilege of a former special committee of the debtor’s board of directors that was represented by its own counsel.” As a result, they advise that the pre-petition privileges of any special committees of the debtors’ boards of directors in a corporate bankruptcy “might vest automatically upon a bankruptcy filing in the debtors in possession or a bankruptcy trustee.” In addition, those privileges “might be assigned to a litigation trustee appointed to pursue estate claims post-confirmation.”

To read the full article, in which the authors received assistance with drafting and research from counsel William Mongan and associates Elise Bernlohr, Cristina Thrasher and Sean Nolan, please click here.