In re Homes

• Decision Date: 11 March 2011
• Docket Number: No. 09–32467–H4–7.,09–32467–H4–7.
• Citation: 449 B.R. 709
• Parties: In re ROYCE HOMES, LP, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Texas

449 B.R. 709

In re ROYCE HOMES, LP, Debtor.

No. 09–32467–H4–7.

United States Bankruptcy Court, S.D. Texas, Houston Division.

March 11, 2011.

David Ronald Jones, Porter and Hedges LLP, Houston, TX, for Debtor.

MEMORANDUM OPINION REGARDING TRUSTEE'S MOTION TO COMPEL PRODUCTION OF DOCUMENTS CLAIMED AS PRIVILEGED BY JOHN SPEER [Docket No. 306]

JEFF BOHM, Bankruptcy Judge.

I. Introduction

This Memorandum Opinion concerns the attorney-client privilege—the first common law privilege to protect confidential communications between clients and their attorneys. At stake is the disclosure of thousands of e-mails exchanged between a key decision-maker of a once successful residential home building entity and his attorneys.

On January 28, 2011, this Court made Findings of Fact and Conclusions of Law orally on the record. This Memorandum Opinion memorializes these Findings and Conclusions. To the extent that any of the oral Findings and Conclusions conflict with any of the written Findings and Conclusions set forth herein, the latter should govern. To the extent that the written Findings and Conclusions do not encompass all of the oral Findings and Conclusions, then those oral Findings and Conclusions which are not covered are hereby incorporated as supplemental Findings and Conclusions.

II. Findings of Fact

1. On April 7, 2009 (the Petition Date), four creditors of Royce Homes, LP (the Debtor) ¹—Wisenbaker Builder Services, Inc., Suncoast Post Tension, Ltd., Builders Mechanical, Inc., and Luxury Baths by Arrow (the Petitioning Creditors)—filed an involuntary petition for relief against the Debtor under Chapter 7 of the United States Bankruptcy Code, commencing case number 09–32467. [Doc. No. 1.]

2. On April 30, 2009, this Court entered an Order for Relief pursuant to Chapter 7 of the Bankruptcy Code. [Doc. No. 10.] On this same day, Rodney Tow was appointed the trustee of the Debtor's estate (the Trustee).

3. Following his appointment, the Trustee began investigating the Debtor's financial affairs, including various prepetition transactions. [Tape Recording, 1/19/11 Hearing at 3:06:13 p.m.]

4. On September 16, 2010, as part of his investigation, the Trustee served John Speer (Speer) with a subpoena duces tecum. [Trustee's Ex. No. 1.] Speer's relationship to the Debtor was a significant one.² [Tape Recording, 1/19/11 Hearing at 3:24:43 p.m. & 3:24:56 p.m.]

5. The subpoena duces tecum requested Speer to produce documents and communications pertaining to business transactions, financial matters, and litigation involving Speer and the Debtor. [Trustee's Ex. No. 1.] Notably, the Trustee requested Speer to produce “Communications” between Speer and his attorneys, such as communications between “John Speer and Michael Manners, their agents, attorneys, representatives, or employees,” “Michael Manners or his attorney and John Speer or his attorney,” “Speer and any attorney or employee at Porter & Hedges,” “Speer or his attorney and Amegy Bank or its attorneys,” and “Speer or his attorneys, and George Kopecky or his attorneys.” [Trustee's Ex. No. 1.] Thus far, the Trustee has only filed a Notice of Intention to Take a Rule 2004 Examination of Speer. [Doc. No. 296.] No suit has been filed against Speer.

6. Speer produced some of the requested documents and withheld others on the basis of the attorney-client privilege. [Tape Recording, 1/19/11 Hearing at 3:06:40 p.m.]

7. Speer incorporated a privilege log with his response to the Trustee's subpoena. The privilege log contains approximately 1,000 entries, one entry for each document that was not produced to the Trustee. [Trustee's Ex. No. 3.]

8. Each entry in Speer's original privilege log was comprised of seven to nine fields. The fields were labeled as follows: Date, Description, Author, Addressee(s), Other Recipients, Privilege Claimed, Pages, and Att't Pages. [Trustee's Ex. No. 3.]

9. In his privilege log, Speer provided one or two words for each field entry. For example, the document occupying the first row of the privilege log is dated “12/30/08” and is described as an “email,” authored by “John Ransom,” addressed to “Michael Wilk,” with “John Speer” as an additional recipient, and the privileged claimed is the “Atty–Client” privilege. The majority of the communications Speer withheld were e-mails between Speer and his attorneys. Also, Speer cited the attorney-client privilege as the basis for denying disclosure for most of these e-mails. [Trustee's Ex. No. 3.]

10. Soon thereafter, the Trustee objected to Speer's privilege log. [Tape Recording, 1/19/11 Hearing at 3:07:33 p.m.] Speer, through his counsel, submitted an amended privilege log. [Trustee's Ex. No. 4.] Subsequently, he submitted a second amended privilege log. [Speer's Ex. No. 2.] Speer's second amended privilege log is almost identical to the original privilege log and the amended privilege log in that, like its predecessors, the withheld documents are described by merely one or two words, most of the withheld documents or communications are e-mails, and the basis for withholding most of these documents is the attorney-client privilege. [Speer's Ex. No. 2.] Below is the Court's reproduction of the first entry of Speer's second amended privilege log, and this entry is representative of all the entries:

+------------------------------------------------------------------------------------+
                ¦JHSP       ¦Date¦Description¦Author ¦Addressee¦Other     ¦Privilege¦Capacity  ¦Pages¦
                ¦           ¦    ¦           ¦       ¦(s)      ¦Recipients¦Claimed  ¦          ¦     ¦
                +-----------+----+-----------+-------+---------+----------+---------+----------+-----¦
                ¦           ¦12/ ¦           ¦John   ¦Michael  ¦          ¦Attorney ¦          ¦     ¦
                ¦1          ¦30/ ¦Email      ¦Ransom,¦Wilk,    ¦John Speer¦Client   ¦Individual¦1    ¦
                ¦           ¦2008¦           ¦Esq.   ¦Esq.     ¦          ¦         ¦          ¦     ¦
                +------------------------------------------------------------------------------------+
                

11. On December 31, 2010, the Trustee filed a Motion to Compel Production of Documents Claimed as Privileged by John Speer. [Doc. No. 306.] The Trustee argues that the communications listed in Speer's privilege log are either not privileged or the privilege has been waived. [Doc. No. 306, p. 6–8, ¶ 21.] The Trustee relies on the federal common law's interpretation of the attorney-client privilege to support his arguments. [Doc. No. 306, p. 8–12.] Generally, the Trustee contends that the attorney-client privilege does not attach to Speer's e-mails because Speer cannot carry his burden in proving the e-mails are privileged. [Tape Recording, 1/20/11 Hearing at 10:32:15 a.m.] Additionally, the Trustee asserts that the attorney-client privilege does not attach to any communications or documents relating to the legal representation of the Debtor or to any communications involving matters in which the Debtor and Speer were jointly represented by counsel. [Doc. No. 306, p. 8–10, ¶¶ 24–28.] Moreover, the Trustee contends that any privilege that may have attached to Speer's communications has otherwise been waived by virtue of Speer's disclosure of the e-mails to third parties and the Debtor's Electronic Communications Policy setting forth that employees could have no expectation of privacy in their personal e-mails. [Doc. No. 306, p. 6, 11–13.]

12. On January 18, 2011, Speer filed a Response in Opposition to the Trustee's Emergency Motion to Compel Production of Documents. [Doc. No. 334.] He maintains that the attorney-client privilege, as interpreted under Texas law, shields the communications requested by the Trustee from disclosure. [Doc. No. 334, p. 5–8, ¶¶ 23–32.] Speer argues that he has not waived the privilege, as the only third parties privy to his communications (Nancy Boothe and Ryan Gresham) were necessary parties for purposes of the attorney-client privilege.³ [Doc. No. 334, p. 7, ¶ 32.]

13. On January 19, 2011, this Court held a hearing on the Trustee's motion to compel (the Hearing). Speer did not personally appear at the Hearing.

14. At the Hearing, the Trustee adduced testimony from Nancy Boothe (Boothe), Speer's former executive assistant at the Debtor. [Tape Recording, 1/19/11 Hearing at 2:29:35 p.m.] Boothe was employed by the Debtor from March 2000 until October 2008. [Tape Recording, 1/19/11 Hearing at 2:30:34 p.m.] 15. Intermittently, Boothe functioned as a paralegal. [Tape Recording, 1/19/11 Hearing at 2:30:54 p.m.] As a paralegal for the Debtor, Boothe was generally involved in litigation matters. [Tape Recording, 1/19/11 Hearing at 2:31:00 p.m.] For example, she gathered documents and delivered them to the Debtor's hired counsel in response to requests for discovery. [Tape Recording, 1/19/11 Hearing at 2:32:45 p.m.] Not only did Boothe perform paralegal-related tasks for the Debtor, she also worked on legal projects for Speer in his individual capacity. [Tape Recording, 1/19/11 Hearing at 2:52:52 p.m.] Testimony was adduced at the Hearing that several of the Debtor's attorneys also represented Speer in personal matters. [Tape Recording, 1/19/11 Hearing at 4:04:09 p.m.] Boothe admitted that she has absolutely no legal education. [Tape Recording, 1/19/11 Hearing at 2:29:49 p.m.]

16. While working for the Debtor, Boothe was assigned a computer. [Tape Recording, 1/19/11 Hearing at 2:33:00 p.m.] Boothe used this computer to carry out her paralegal-related tasks, to draft e-mails for general business-related matters, and for her personal matters. [Tape Recording, 1/19/11 Hearing at 2:33:50 p.m.]

17. At the Hearing, Boothe testified that her computer, as well as all company computers, were subject to the Debtor's Electronic Communications Policy. [Tape Recording, 1/19/11 Hearing at 2:49:07 p.m.] The Debtor's Electronic Communications Policy was included in its Employee Handbook. [Trustee's Ex. No. 6; 1/19/11 Hearing at 2:49:22 p.m.] The Handbook states as follows:

POLICY:

All electronic communications are...