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2006 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

By Susan M. Freeman

*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)

 

  1. The creditors' committee has generally been held entitled to assert the attorney-client privilege.467 But while the privilege may be absolute with respect to disclosures sought by those not represented by the committee, a narrower construction of the privilege is utilized where a committee's constituent seeks information.468
  2. Attorney communications with the committee that are directed at advancing or reconciling the needs of individual committee members, rather than protecting the interests of the committee or its constituents, may be considered business advice and assistance to committee members instead of the committee client, and thus not protected by the committee's attorney-client privilege.469
  3. As in other cases, the presence of outsiders, including other committee advisors, may destroy the privilege.470 If the financial advisor's presence is necessary or useful to effective consultation between lawyer and client, it does not destroy the privilege in some circuits.471
  4. The 2005 amendments to the Bankruptcy Code include requirements that committees provide access to information for creditors who hold claims of the kind represented by the committee but are not committee members, solicit and receive comments from such constituents, and be subject to a court order that compels any additional report or disclosure to them.472 Caselaw with respect to disqualifying a committee member from discussion of issues on which that member has a conflict and withholding information from a committee member-competitor of the debtor should apply to committee constituents too.473
  5. Committee counsel should consider seeking a court order on notice to committee constituents regarding sharing of information where there is a need for confidentiality, referencing the new committee-constituent disclosure statute and caselaw on insulating sensitive information from competitors.474 Committee counsel should ask the court to order that disclosing information to a committee constituent does not result in a waiver of the privilege with respect to adverse parties, under the common interest doctrine, an analogy to shareholder deriva

 

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