549 B.R. 366
Bankr. W.D. La.2015Background
- PWK Timberland, Inc., a Louisiana LLC, filed Chapter 11 on March 22, 2013; six former members (Movants) exercised a put option to sell their membership interests and later filed proofs of claim for the put-option amounts.
- Prior to the bankruptcy, PWK retained counsel A.J. Gray in 2008 to advise on the Put Option; extensive state-court litigation followed and a judgment fixed the effective sale date as January 31, 2011.
- In bankruptcy, PWK objected to Movants’ claims; discovery disputes arose over PWK’s assertion of attorney-client privilege and work-product protection and the adequacy of PWK’s privilege log.
- Movants sought to traverse PWK’s privilege claims (arguing waiver, selective disclosure, applicability of the crime–fraud exception, and insufficiency of the privilege log) and requested in camera review of withheld documents.
- The court conducted in camera review of PWK’s privilege log and documents, found PWK’s privilege assertions valid except for two emails (Docs 277 and 315) exchanged with opposing counsel, and ordered those two produced.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether former members or a former director can pierce PWK’s corporate attorney-client privilege | Movants: as former members (and a former director, Aubrey White) they should access communications from their tenure and counsel retained to advise on the Put Option | PWK: privilege belongs to the corporation; former members/directors lack an independent right to privileged communications | Court: privilege belongs to PWK; Gamer exception not applicable here; Movants cannot pierce privilege based on former member/director status |
| Whether selective disclosure to one director waived privilege | Movants: a July 2008 memorandum was given to Director King White but not to Aubrey White, so privilege was waived | PWK: internal dissemination among management does not waive privilege; King White was management with decision-making authority | Court: no waiver; distribution within management did not defeat privilege |
| Whether the crime–fraud exception applies | Movants: allegations that non-withdrawing members sought to frustrate the Put Option amount to prima facie crime/fraud | PWK: no crime or fraud; privileged communications not subject to exception | Court: Movants failed to make a prima facie showing; in camera review does not support crime–fraud; exception denied |
| Adequacy of PWK’s privilege log and production scope | Movants: initial log was deficient and delayed, prejudicing discovery | PWK: revised log (tendered for in camera review) complies with the court’s order; delays can be remedied by schedule extension | Court: revised log satisfies court order; any prejudice manageable; discovery period may be extended if needed |
Key Cases Cited
- Weintraub v. Commodity Futures Trading Comm’n, 471 U.S. 343 (1985) (corporate privilege belongs to the corporation, not individual officers or shareholders)
- Upjohn Co. v. United States, 449 U.S. 383 (1981) (corporate attorney-client privilege principles and limits)
- Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970) (fiduciary/Garner exception allowing privileged disclosure to shareholders in certain derivative contexts)
- In re International Systems & Controls Corp. Sec. Litig., 698 F.2d 1235 (5th Cir. 1982) (limits on Gamer exception once litigation is foreseeable)
- In re Grand Jury Subpoena, 419 F.3d 329 (5th Cir. 2005) (prima facie requirement for applying the crime–fraud exception)
- In re John Doe, 675 F.2d 482 (2d Cir. 1982) (courts should not use in camera review to bootstrap a prima facie crime–fraud showing)