Gold & Appel Transfer S.A.

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
GOLD & APPEL TRANSFER S.A.,
Debtor.
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Case No. 05-00775
(In a case brought under
11 U.S.C. § 304.)
OPINION REGARDING MOTION FOR ORDER ON ATTORNEY-CLIENT PRIVILEGE
Before the court is the Motion of Meade Malone, Official
Liquidator for Gold & Appel Transfer S.A., for Order on Attorney-
Client Privilege (D.E. No. 40, filed January 5, 2006), in which
Meade Malone, the Official Liquidator for Gold & Appel Transfer
S.A. (“Gold & Appel”), seeks an order declaring that he controls
the attorney-client privilege of Gold & Appel, the debtor in a
foreign proceeding who has filed an ancillary case in this case
pursuant to 11 U.S.C. § 304. The control sought by Malone would
allow him to waive Gold & Appel’s attorney-client privilege at
his discretion.
Gold & Appel has filed an objection to Malone’s motion (D.E.
No. 46, filed January 17, 2006). Hwan Kim has also filed a
limited objection to the motion (D.E. No. 42, filed January 17,
The opinion below is hereby signed. Dated: February
6, 2006.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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1 Accord In re ANR Advance Transp. Co., Inc., 288 B.R. 208,
210-11 (Bankr. E.D. Wis. 2002); In re Fidelity Guarantee
Mortgage., 150 B.R. 864, 867-68 (Bankr. E.D. Mass. 1993).
2
2006). Having reviewed Malone’s motion as well as the objection
and the limited objection filed by Gold & Appel and Mr. Kim, the
court will overrule the objections to the motion and approve the
motion.
I
“Because the attorney-client privilege is controlled,
outside of bankruptcy, by a corporation’s management, the actor
whose duties most closely resemble those of management should
control the privilege in an insolvency proceeding, unless such a
result interferes with the policies underlying the bankruptcy
laws.” CFTC v. Weintraub, 471 U.S. 343, 351-52 (1985).
Ordinarily, that “actor” is the bankruptcy trustee. See id. at
352-56; see also United States v. Campbell, 73 F.3d 44, 47 (5th
Cir. 1996) (granting chapter 7 trustee control over attorney-
client privilege of debtor limited partnership).1 The trustee’s
“wide-ranging management authority over the debtor,” id. at 353,
coupled with the fact that a bankruptcy corporation’s pre-
petition management “retain[s] virtually no management powers,”
id., makes the trustee the entity “most closely analogous to that
of a solvent corporation’s management.” Id.
Malone is not a bankruptcy trustee per se; rather, he is the
“Official Liquidator” of Gold & Appel in the company’s
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involuntary insolvency proceeding in the British Virgin Islands.
But like a trustee, Malone “is ‘accountable for all property
received,’” id. at 352 (quoting 11 U.S.C. §§ 704(2) &
1106(a)(1)), “is directed to investigate the debtor’s financial
affairs,” id., “is empowered to sue officers, directors, and
other insiders,” id., and “has the power to ‘operate the debtor’s
business’ . . . for a limited period of time,” id. (quoting 11
U.S.C. § 1108), in the course of which he “‘may enter into
transactions, including the sale or lease of property of the
estate’ without court approval.” Id. (quoting 11 U.S.C. §
363(c)(1)). Indeed, Malone’s powers exceed those of an ordinary
trustee, as he is authorized to obtain credit for Gold & Appel
without prior court authorization.
There is (understandably) scant case law addressing the
status of official liquidators appointed in foreign bankruptcy
proceedings with respect to a corporation’s attorney-client
privilege in the United States. Nevertheless, the same
principles that have led courts to vest bankruptcy trustees with
control over a debtor corporation’s attorney-client privilege
apply to a trustee’s foreign counterpart, especially where that
counterpart wields the same amount of “management authority” (if
not more) over the insolvent company as a trustee. The court
concludes that Malone should have control over Gold & Appel’s
attorney-client privilege, including the ability to waive the
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privilege.
II
Neither Gold & Appel nor Mr. Kim object to Malone’s
assertion of control over Gold & Appel’s attorney-client
privilege. Instead, both parties object to the scope of the
proposed order submitted by Malone, which would order
that Meade Malone, Official Liquidator for
Gold & Appel Transfer S.A., controls the
attorney-client privilege of Gold & Appel
Transfer S.A., has the authority to assert or
waive such privilege[,] and controls access
to Gold and Appel Transfer S.A.’s records,
documents, correspondence, communications
with any counsel or in the possession,
custody or control of such counsel.
(Malone Proposed Order at 2).
Mr. Kim requests that the court amend the language of the
order to clarify that the order makes no determination as to
whether the attorneys listed as possible counsel in Malone’s
motion are or were in fact counsel to Gold & Appel (Kim Obj. at
2). Gold & Appel requests that the court “modify the order to
protect any matters and/or communications which are privileged
and which are jointly held by Mr. Anderson and
Gold & Appel . . .” (G & A Obj. at 2). The court sees no reason
to grant either request at this time.
With respect to Mr. Kim’s request, the court sees no virtue
in incorporating excess prophylaxis into an order that in no way
could be construed in the manner Mr. Kim evidently fears. An
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order granting Malone the right to waive Gold & Appel’s attorney-
client privilege will not predispose this court one way or the
other with respect to specific discovery disputes. The order to
be entered by the court does not address whether certain persons
are or were counsel to Gold & Appel because that issue is not
ripe for review.
Like Mr. Kim’s request, the objection raised by Gold & Appel
has little to do with the actual motion before the court. Malone
seeks control only over the attorney-client privilege of Gold &
Appel. To the extent that counsel for Gold & Appel engaged in
privileged communications with Gold & Appel’s principal Walter
Anderson specific to Mr. Anderson and unrelated to the general
matters of Gold & Appel, those communications do not fall within
the attorney-client privilege of Gold & Appel, but rather are
considered communications subject to a separate privilege between
counsel and Mr. Anderson. See In re Bevill, Bresler & Schulman
Asset Mgmt. Corp., 120 F.2d 120, 123-25 (3d Cir. 1986)
(recognizing separate privilege for corporate officer who
consults corporate counsel for advice unrelated to corporate
matters); accord In re Grand Jury Subpoena, 274 F.3d 563, 571-72
(1st Cir. 2001); In re Grand Jury Proceedings, 156 F.3d 1038,
1040-42 (10th Cir. 1998); United States v. Int’l B’hood of
Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-
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2 The test adopted by the Bevill court for determining
whether a communication between a corporate officer or agent is
subject to a privilege separate from that of the corporation’s
attorney-client privilege, which has been adopted in numerous
circuits, is as follows:
First, [individuals asserting an individual
privilege] must show they approached counsel
for the purpose of seeking legal advice.
Second, they must demonstrate that when they
approached counsel they made it clear that
they were seeking legal advice in their
individual rather than in their
representative capacities. Third, they must
demonstrate that the counsel saw fit to
communicate with them in their individual
capacities, knowing that a possible conflict
could arise. Fourth, they must prove that
their conversations with counsel were
confidential. And, fifth, they must show
that the substance of their conversations
with counsel did not concern matters within
the company or the general affairs of the
company.
In re Bevill, Bresler & Schulman Asset Mgmt. Corp., 805 F.2d at
123 (internal quotation omitted).
6
CIO, 119 F.3d 210, 214-16 (2d Cir. 1997).2
Finally, to the extent that Malone seeks to waive any
privilege jointly held by Gold & Appel and Mr. Anderson, he may
do so because “a corporation may unilaterally waive the attorney-
client privilege with respect to any communications made by a
corporate officer in his corporate capacity, notwithstanding the
existence of an individual attorney-client relationship between
him and the corporation’s counsel,” In re Grand Jury Subpoena,
274 F.3d at 573, and “communications may be individually
privileged only when they ‘do not concern matters within the
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company or the general affairs of the company,’ rather than when
they do concern an individual’s rights.” Id. (quoting In re
Bevill, Bresler & Schulman Asset Mgmt. Corp., 120 F.2d at 123)
(all emphasis supplied by the court in In re Grand Jury
Subpoena). “Holding otherwise would open the door to a claim of
jointly held privilege in virtually every corporate communication
with counsel.” Id.
III
For the reasons stated above, the court will enter a
separate order granting Malone’s request for control over Gold &
Appel’s attorney-client privilege and overruling the limited
objection of Mr. Kim and the objection of Gold & Appel.
[Signed and dated above.]
Copies to: All counsel of record
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