THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

waive it.⁴⁵⁴ A partnership is an entity, like a corporation, and its bankruptcy trustee may waive the partnership's privilege.⁴⁵⁵ Once in bankruptcy, only the trustee, not the shareholders, control the privilege.⁴⁵⁶

2. There is a split of authority on whether the attorney-client privilege always passes by operation of law to the bankruptcy trustee, so that the trustee may unilaterally waive the privilege of an individual debtor. The Supreme Court expressly declined to rule on the issue, but pointed out that since individuals do not act through agents like corporations, the rationale of taking over management's privilege rights would not apply, and other reasons would have to support any trustee waiver of an individual debtor's privilege.⁴⁵⁷ Some courts hold the trustee always may waive;⁴⁵⁸ some that the trustee may never waive.⁴⁵⁹ A growing trend holds that the trustee's power to waive the attorney-client privilege depends on the facts and circumstances of the case.⁴⁶⁰ As one court analyzed the cases, the individual debtor alone should hold privilege waiver power when potential harm to or control over his person may exist from a disclosure; the trustee should hold waiver power when he is only seeking to discover and recover assets for the estate.⁴⁶¹ And as the Tenth Circuit noted, that means the court must actually analyze the harm to the debtor and balance it against the trustee's need for information.⁴⁶² An additional theory to support a waiver argument may be found in the DIP's obligation to exercise the privilege in a manner consistent with his fiduciary duties, which may include duties to pursue causes of action against the DIP's personal interests.⁴⁶³ When postpetition communications are at issue, the court should evaluate whether they were made with the DIP in its DIP capacity (most communications

Ð waivable by the trustee), or in its debtor capacity (limited principally to plan proposals Ð not waivable).⁴⁶⁴

3. It is not uncommon for a single firm to represent both a corporation and its individual officers or directors. The corporate debtor's privilege may be waived by its bankruptcy trustee, while the individual may retain the right to assert the privilege on her own behalf.⁴⁶⁵ In order to assert such a privilege, the individual must establish there existed an attorney-client relationship with her as an individual.⁴⁶⁶

C. Creditors' Committee Exercise of Privilege.