400 Walnut Associates, L.P. v. 4th Walnut Associates, L.P. (In re 400 Walnut Associates, L.P.), 475 B.R. 217

Debtor 400 Walnut Associates, L.P. seeks sanctions against Sovereign Bank for failure to fully comply with subpoenas duces tecum in an adversary proceeding tied to a bankruptcy case.
First subpoena (Aug. 23, 2010) and second subpoena (July 12, 2011) sought documents about the Forbearance Agreement and the Loan; Sovereign produced but did not log privilege and later withheld a draft Forbearance Agreement.
Draft Forbearance Agreement evidence was discovered in Sovereign’s files but not produced; Sovereign asserted privilege and then claimed it was not required to log privileges.
Debtor filed motion to compel production and sanction; court held Sovereign’s conduct was flagrant discovery abuse justifying non-monetary and monetary sanctions.
Court conducted in camera review, ordered production of privileged documents and scheduled monetary sanctions hearing; cross-motions for protective order denied.
Court ultimately granted Debtor’s motion and imposed sanctions, including waiver of attorney-client privilege as to the relevant documents in question.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Sovereign violated Rule 45(d)(2)(A) and failed to log privilege.	Sovereign withheld responsive non-privileged docs and failed to provide a privilege log.	Sovereign complied with production; any delay was inadvertent.	Yes; violations found and sanctions warranted.
Whether sanctions for discovery abuse are appropriate.	Discovery abuse harmed Debtor and affected litigation trajectory.	Sanctions would be too harsh; focus should be on production.	Sanctions granted, including non-monetary and monetary aspects.
Whether the Forbearance Agreement drafts were privileged and can be withheld.	Drafts are critical to Debtor’s claims and should be produced.	Documents are privileged under attorney-client/work product.	Drafts treated as non-producible absent in-camera justification; privilege waived as sanction.
Whether the in camera review should inform monetary sanction level.	In-camera review confirms relevance and need for sanctions.	Review is costly and burdensome; not essential to merits.	In camera review of documents warranted; monetary sanctions to follow.
Whether the Comprehensive Privilege Log was adequate.	Log was incomplete and not cross-indexed, hindering review.	Log was sufficient and comprehensive.	Log inadequate; sanctions appropriate.

Teleglobe USA Inc. v. BCE Inc. (In re Teleglobe Communications Corporation), 493 F.3d 345 (3d Cir. 2007) (sanctions can include waiving privilege for abusive discovery)