539 B.R. 643
S.D.N.Y.2015Background
- China Medical Technologies, Inc. (CMED), a Cayman Islands corporation, entered a Cayman winding-up; Kenneth Krys was appointed Liquidator and recognized as foreign representative in a Chapter 15 proceeding.
- Krys sought Rule 2004 subpoenas to obtain documents from Paul Weiss and AlixPartners arising from a pre-liquidation internal investigation commissioned by CMED’s Audit Committee.
- Paul Weiss and AlixPartners produced many materials but withheld documents asserting attorney-client privilege and work-product protection (the Privileges), claiming the Audit Committee — not CMED — owned them.
- The Bankruptcy Court applied a federal “touch base” choice-of-law analysis, concluded U.S. privilege law governs, and held the Audit Committee owned the Privileges (so they did not devolve to the Liquidator).
- On appeal, the district court reviewed choice-of-law and privilege issues de novo and reversed: it held U.S. privilege law governs, the Liquidator may waive the attorney-client privilege under Weintraub, but work-product protection belongs to counsel and cannot be unilaterally waived by the client.
Issues
| Issue | Plaintiff's Argument (Krys) | Defendant's Argument (Paul Weiss / AlixPartners) | Held |
|---|---|---|---|
| Choice of law for privilege disputes | Cayman law should govern corporate-structure questions; internal-affairs doctrine applies | Federal "touch base" rule applies; U.S. law governs privilege here | Federal common law includes choice-of-law; "touch base" application to privilege was proper; U.S. privilege law governs |
| Whether corporate-law questions (Audit Committee status) require separate choice-of-law | Corporate law (internal affairs) decides who owned documents; Cayman law should control | Ownership and waiver questions are part of federal privilege analysis under Fed. R. Evid. 501 | Court rejected separatist approach; issues of ownership/waiver fall within U.S. privilege analysis |
| Ownership and waiver of attorney-client privilege | Liquidator now owns and can waive privilege even if Audit Committee previously asserted it | Audit Committee’s independent status means its privilege is separate and not waivable by Liquidator | Weintraub governs: Liquidator (as foreign representative/trustee analog) may waive the corporation’s prebankruptcy attorney-client privilege |
| Work-product protection | Liquidator may compel all investigation materials | Work product belongs to counsel and cannot be unilaterally waived by the client | Work-product protection survives; counsel holds the protection and Liquidator cannot unilaterally waive it |
Key Cases Cited
- Upjohn Co. v. United States, 449 U.S. 383 (Sup. Ct. 1981) (corporate attorney-client privilege covers communications by employees to counsel when for corporate legal advice)
- CFTC v. Weintraub, 471 U.S. 343 (Sup. Ct. 1985) (trustee controls and may waive a corporation's prebankruptcy attorney-client privilege)
- Swidler & Berlin v. United States, 524 U.S. 399 (Sup. Ct. 1998) (attorney-client privilege may survive a client’s death in individual contexts)
- Fisher v. United States, 425 U.S. 391 (Sup. Ct. 1976) (privilege is narrowly confined to its purpose)
- In re Gaston & Snow, 243 F.3d 599 (2d Cir. 2001) (federal choice-of-law considerations in bankruptcy contexts)
- Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786 (2d Cir. 1980) (discussion of dépeçage and issue-by-issue choice-of-law analysis)