In the case In re Orion HealthCorp, Inc., No. 18-71748 (AST), Adv. Pro. 22-08008 (AST) (Bankr. E.D.N.Y. Dec. 6, 2022), New York Bankruptcy Judge Alan S. Trust ruled that privilege was waived for documents (for which the defendant law firm asserted privilege) when the former clients failed to assert privilege themselves.

Case Discussion

This specific dispute in a series of long-running disputes centered around the Plan Trustee’s requests for production of documents from the defendant, the law firm of Kriss & Feuerstein LLP (“K&F”). K&F timely asserted attorney-client privilege in response to portions of the production request and provided privilege logs on a rolling basis as its review continued. The Plan Trustee timely challenged the assertion of privilege on a variety of grounds.

Over several months, the dispute was narrowed by the parties to 703 documents (“Challenged Documents”). In June 2022, the Court established a protocol to resolve the privilege dispute where K&F was to file with the Court: (i) a list identifying the name and last known address of each client that K&F represented in connection with the transactions referenced in the Complaint, along with any retention agreement with respect to any and all Former K&F Clients; and (ii) revised privilege logs identifying the Former K&F Clients involved in each of the Challenged Documents.

The Court directed that the Plan Trustee serve copies of the Revised Privilege Logs and the Protocols Order on the identified Former K&F Clients on or before August 25, 2022, which they did. Any Former K&F Client that wished to assert a privilege with respect to the Challenged Documents had to file an objection to the relief sought in the Motion to Compel and serve the objection on counsel to the Plan Trustee on or before September 8, 2022. Any Former K&F Client that filed an Objection had to appear at the Adjourned Hearing and was provided instructions on how to appear at the Adjourned Hearing via Zoom.

No Former K&F Client filed a timely or untimely objection to K&F turning over the Challenged Documents. No Former K&F Client appeared at the Adjourned Hearing to oppose the turnover of the Challenged Documents.

Judge’s Ruling

Judge Trust recounted the four essential elements of the attorney-client privilege:

“(1) the asserted holder of the privilege is or sought to become a client;

(2) the person to whom the communication is made (a) is a member of the bar of a court or his subordinate, and (b) in connection with his communication is acting as a lawyer;

(3) the communication related to a fact of which the attorney was informed: (a) by his client; (b) without the presence of strangers; (c) for the purpose of securing permanently, either (i) an opinion of law,(ii) legal services, or (iii) assistance in some legal proceeding, (d) and not for the purpose of committing a crime or tort; and

(4) privilege has been (a) claimed, and (b) not waived by the client.”

Judge Trust stated in assessing K&F’s assertion of privilege: “Because K&F asserts the privilege, it bears the burden of establishing the elements of the privilege. The Court does not need to determine if K&F established the first three elements of the privilege because it failed to establish the fourth—the element that requires that the privilege be both claimed and not waived.”

“The parties holding the privilege here—the Former K&F Clients—never asserted the privilege in their own capacity; rather, the privilege was purported to have been asserted on their behalves by K&F, which claimed that it has an ethical obligation to do so. K&F’s assertion of privilege appears to have been based merely on K&F’s assumption that its former clients would want the privilege asserted, rather than K&F having undertaken efforts to ascertain whether this is actually what their former clients wanted. But, nevertheless, even if privilege was properly asserted-by-proxy by K&F, the Former K&F Clients later waived the privilege by declining to respond to the Protocols Order.”

He also noted that “the Former K&F Clients waived the privilege by their inaction in the face of being given the explicit opportunity to assert the privilege. K&F’s earlier assertion-by-proxy of the privilege on behalf of their former clients—who K&F do not represent in this matter or any other known matter—was superseded by the Former K&F Clients’ decision not to assert the privilege on their own behalves, when given the opportunity to do so.”

As a result, Judge Trust concluded that “the Former K&F Clients have waived attorney-client privilege in response to the Plan Trustee’s discovery request for the Challenged Documents. K&F may not continue to stand on attorney-client privilege as a basis for declining to comply with the Plan Trustee’s discovery request for the Challenged Documents.” So, finding that privilege was waived for the documents, he ordered K&F to produce them.

So, what do you think? Have you ever seen a case where privilege was waived for documents because the clients failed to assert the privilege? Please share any comments you might have or if you’d like to know more about a particular topic.

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