In re Fairbanks, Bankruptcy No. 89-10904.

CourtUnited States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of New Hampshire
Writing for the CourtJAMES E. YACOS
Citation135 BR 717
PartiesIn re John C. FAIRBANKS, Debtor.
Decision Date20 December 1991
Docket NumberBankruptcy No. 89-10904.

135 B.R. 717 (1991)

In re John C. FAIRBANKS, Debtor.

Bankruptcy No. 89-10904.

United States Bankruptcy Court, D. New Hampshire.

December 20, 1991.

135 BR 718

Victor Dahar, Manchester, N.H., for trustee.

Paul Barbadoro, Concord, N.H., formerly representing debtor in criminal cases.

J. Christopher Marshall, McLane, Graf, Manchester, N.H., formerly representing debtor in civil cases.

U.S. Trustee, Boston, Mass.


JAMES E. YACOS, Bankruptcy Judge.

Judge Fairbanks, the involuntary bankruptcy debtor herein, has followed Judge Crater into the mists of the unknown.1 Before leaving, he delivered to his attorneys his books and records from his part-time law practice, including his office records, cash receipts/disbursements journal, and records of various bank accounts and other assets arguably unknown to the trustee in bankruptcy in this case. Since he was also indicted, on the eve of his departure, on various grounds of fraud and embezzlement in dealing with the funds of his clients in his law practice, his attorneys have opposed the efforts of the trustee to obtain those records. The attorneys refuse to produce the records on grounds of privilege even though the trustee contends he needs them so that he can liquidate any additional assets, pursue any recoveries of voidable transfers suggested by the records heretofore unavailable to the trustee, and then distribute the proceeds to Judge Fairbanks' creditors.

The attorneys assert the attorney-client privilege on behalf of their erstwhile client.2 The Trustee counters that the

135 BR 719
books and records have become property of the estate by operation of law and that even if the debtor were still here and had possession of them he could not prevent the trustee from taking possession of the same as necessary to administer the estate under the bankruptcy laws. This is true says the trustee even though the books and records may include incriminating matters implicating the Fifth Amendment.3

The trustee cites a series of Supreme Court decisions to that effect in the bankruptcy context. See Matter of Harris, 221 U.S. 274, 31 S.Ct. 557, 55 L.Ed. 732 (1911); Johnson v. United States, 228 U.S. 457, 33 S.Ct. 572, 57 L.Ed. 919 (1913); Ex parte Fuller, 262 U.S. 91, 43 S.Ct. 496, 67 L.Ed. 881 (1923). The attorneys counter that those early cases were based on "property right" concepts that no longer obtain in Fifth Amendment jurisprudence, as reflected in later decisions (at least by the lower courts) in developing that jurisprudence.

This Court believes that the continuing vitality of the Harris-Johnson-Fuller line of decisions must be considered in the context of the Supreme Court's 1990 decision in Baltimore City Dept. of Social Services v. Bouknight, 493 U.S. 549, 110 S.Ct. 900, 107 L.Ed.2d 992 (1990), holding that a mother could be compelled to produce her child (whose whereabouts were unknown) notwithstanding conceded self-incriminatory aspects of that compelled action, due to suspected child abuse and other factors, where the "production is required as part of a noncriminal regulatory regime." 110 S.Ct. at 905. The Supreme Court in Bouknight cited with approval and quoted from its earlier Harris decision in support of this proposition. 110 S.Ct. at 906.

The Bouknight decision clearly indicates that Harris and its progeny are not as dead as some have argued. The issue remains however as to the proper application of these decisions to the facts of the present case. Moreover, the complex interrelationships between the attorney-client privilege and the Fifth Amendment presented by this case deserve careful examination by virtue of the important public policies supporting both privileges.


1. On September 27, 1989, an involuntary case was filed against the debtor.

2. On October 31, 1989, an ex parte motion to join as co-petitioners in creditors' petition in the involuntary case was filed.

3. On October 31, 1989, an order for relief was entered.

4. On November 30, 1989, the trustee was appointed.

5. On December 5, 1989, a hearing on an order to show cause why the case should not be dismissed for failure to file schedules was held. The Court decided not to dismiss the case. Debtor's counsel at that time indicated the debtor would assert a Fifth Amendment privilege against discovery but the debtor was not present personally to assert the privilege. The Court refused to accept the assertion of the privilege by counsel.

6. On December 28, 1989, an indictment of the debtor was handed down on counts of embezzling clients' funds and appropriating those funds to his personal use by the Sullivan County Grand Jury. An arrest warrant was issued that day for the debtor but he could not be located.

7. On December 29, 1989, the Court ordered a Rule 2004 exam of the debtor be held on January 29, 1990, to develop information as to the claims against the estate and as to any assets that might be liquidated to pay creditors.

8. On January 18, 1990, the debtor's attorneys, McLane, Graf, Raulerson & Middleton filed a motion to withdraw and stated as grounds in part: "McLane is unable

135 BR 720
to locate Mr. Fairbanks and it has no way to contact him."

9. The debtor did not appear for his Rule 2004 exam.

10. On February 12, 1990, the Court held a hearing on debtor counsel's motion to withdraw. An objecting party claimed that documents of the debtor held by debtor's counsel should be turned over prior to permitted withdrawal. The Court continued the hearing but ordered debtor's counsel to file a disclosure of its fee arrangement and a list of documents claimed to be subject to the attorney-client privilege. Debtor's counsel complied. The latter list was filed under seal for inspection by the Court alone pending ruling on the asserted privilege.

11. The list filed by counsel describes various documents separated into "Financial Transaction Records" and "Documents of Title" categories. The actual documents themselves have not been produced. Disclosure of the list alone however would arguably violate the privilege since neither the attorneys nor this Court can know whether the trustee independently is aware of the various accounts or other transactions listed. It was for this reason that the Court directed that the listing be filed under seal until this Court could rule on the asserted privilege.

12. Without breaching the privilege at the outset, certain general facts about the documents in question can be set forth that are pertinent to the Court's decision upon the pending matter. The "Financial Transaction Records" include account statements, cancelled checks, and check registers with regard to various depository and other accounts that may or may not be known to the trustee; a cash receipts/disbursements journal for the law office from January 1980 to May 1989; general accounts ledger for the law office from January 1973 to May 1989; copies of miscellaneous checks including cashiers checks; and various other business records with regard to the debtor's activities which need not be further described at this time. The "Documents of Title" category includes various title certificates and related documents and correspondence involving personal property items which will not be further described; two cancelled passbooks from a depository institution that may or may not be known to the trustee; jewelry appraisals; instructions regarding the combination of a home safe; and miscellaneous insurance documents.

13. Without further disclosing the detail of the records in question it is clear that the records being withheld by the attorneys are business records of the debtor that a trustee in bankruptcy normally would be entitled to take possession of, and would obviously do so, in order to properly administer the bankruptcy estate.

14. It is also reasonably certain that at least some of the records could form a link in the chain of evidence necessary in the pending criminal proceeding and to that extent could incriminate the debtor. It is also probable that some of the records would have no incriminating effect. The debtor of course is not here to draw a line between the two.

15. On March 5, 1990, the court permitted debtor's counsel to unconditionally withdraw.

16. On January 3, 1991, the trustee filed a motion for turnover of the business record documents from the McLane firm. That firm, besides representing the debtor in the bankruptcy proceedings, represented the debtor in the closing of his law practice, his resignation as Newport District Judge, the defense of various civil lawsuits, and the defense of an investigation by the Professional Conduct Committee of the New Hampshire Bar Association. The Motion was heard on March 1, 1991 and the Court directed further briefing on the legal issues presented and subsequently took the matter under advisement. The Court's independent research has developed a number of additional relevant case decisions not briefed by the parties.

17. The debtor's whereabouts continue to this day to be a mystery.


A. Assertion of Fifth Amendment Privilege

Initially, it must be stated that respondent law firm has conceded that it is

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not entitled to assert the Fifth Amendment privilege of the debtor. This is not surprising since the First Circuit has made it clear that an attorney cannot assert that privilege on behalf of a client. See In re Grand Jury Proceedings, 760 F.2d 26 (1st Cir.1985).4

It is worth noting that the one reported bankruptcy decision involving a trustee's attempt to obtain documents from a debtor's attorney, where the Fifth Amendment privilege of the debtor was claimed, held squarely that no First Amendment privilege existed as to the documents. In re Carter, 62 B.R. 1007, 1010-11 (Bankr. C.D.Cal.1986) (but giving respondents "one last opportunity" to invoke attorney-client privilege). Other bankruptcy cases have come close to holding the same. See In re...

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1 practice notes
  • In re Hennessey, Bankruptcy No. 91-40179-JFQ.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
    • February 3, 1992
    ...1988); In re Knowles, 123 B.R. 428, 433 (Bankr. M.D.Fla.1991); In re Morrow, 122 B.R. 151, 155 (Bankr.M.D.Fla.1990); In re McIntosh, 135 BR 717 116 B.R. 277, 280 (Bankr.N.D.Okla. 1990); In re Alagna, 107 B.R. 301, 314 (Bankr.D.Colo.1989); In re Loe, 83 B.R. 641, 646 There is a fallacy to th......
1 cases
  • In re Hennessey, Bankruptcy No. 91-40179-JFQ.
    • United States
    • United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts
    • February 3, 1992
    ...1988); In re Knowles, 123 B.R. 428, 433 (Bankr. M.D.Fla.1991); In re Morrow, 122 B.R. 151, 155 (Bankr.M.D.Fla.1990); In re McIntosh, 135 BR 717 116 B.R. 277, 280 (Bankr.N.D.Okla. 1990); In re Alagna, 107 B.R. 301, 314 (Bankr.D.Colo.1989); In re Loe, 83 B.R. 641, 646 There is a fallacy to th......

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