In re McDowell
| Decision Date | 16 November 2012 |
| Docket Number | No. 12–31231–H4–7.,12–31231–H4–7. |
| Citation | 483 B.R. 471 |
| Parties | In re Frank McDOWELL and Lori McDowell, Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
OPINION TEXT STARTS HERE
Michael Glen Walker, Walker Patterson, PC, Houston, TX, for Debtors.
At common law, attorney-client communications are protected from disclosure, with the purpose of this privilege meant to “encourage full and frank communication ... and thereby promote [the] broader public interests in the observance of law and administration of justice.” Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (1981). Similarly, the “work-product doctrine” is meant to “shelter[ ] the mental processes of the attorney, providing a privileged area within which he can analyze and prepare his client's case.” United States v. Nobles, 422 U.S. 225, 238, 95 S.Ct. 2160, 45 L.Ed.2d 141 (1975).
These tenets, however, are at odds with another basic principle. As the Fifth Circuit has said, “[t]he duty of disclosure in a bankruptcy proceeding is a continuing one,” In re Coastal Plains, Inc., 179 F.3d 197, 208 (5th Cir.1999); see also In re Ramirez, No. 03–47872, 2006 WL 3838176, at *3 (Bankr.S.D.Tex. Dec. 29, 2006). Debtors must divulge all relevant facts in order to receive the full benefits and protections of the Bankruptcy Code, 1 with the broad policy and goals of the Code “favor[ing] transparency and disclosure whenever possible.” Coastal Plains, Inc., 179 F.3d at 208.
This Court has decided to issue this Memorandum Opinion in order to clarify the scope of the attorney-client privilege and the work-product doctrine regarding handwritten notes and comments made by debtors and their counsel on documents used to facilitate the filing of the petition, the Schedules and the statement of financial affairs (SOFA). The Court also issues this Opinion to emphasize the evidentiary requirements for establishing the attorney-clientt privilege and work-product doctrine. Debtor and counsel communications may be privileged, but the assertor of the privilege must prove each element in order to receive the privilege's protection.
At stake in the case at bar is the disclosure of the following documents: (1) a questionnaire (the Questionnaire), which is a document created by counsel for Frank McDowell and Lori McDowell (the Debtors) and which this counsel, in the regular course of representing consumer debtors, uses to assist in representation; (2) a copy of the original Schedule F with handwritten notes and comments by the Debtors (the Handwritten Debtors' Draft Schedule); and (3) a copy of the original Schedule F with comments by the Debtors' counsel (the Handwritten Counsel's Draft Schedule). The United States Trustee (the UST) has brought the Emergency Motion of United States Trustee to Compel Production (the Motion to Compel) to compel production of each of these documents.
Based upon the entire record, the Court now makes the following written Findings of Fact and Conclusions of Law.2 The Court concludes that the Questionnaire is protected as an attorney-client communication and as attorney work-product; the Handwritten Counsel's Draft Schedule is also protected as attorney work-product. However, the Handwritten Debtors' Draft Schedule is not protected, as the Debtors have failed to meet their burden and did not adduce testimony or introduce exhibits demonstrating each required element. The Motion to Compel should therefore be granted regarding the Handwritten Debtors' Draft Schedule and denied regarding the Questionnaire and the Handwritten Counsel's Draft Schedule.
1. On February 15, 2012, the Debtors filed a Chapter 7 petition. [Doc. No. 1].
2. On May 11, 2012, the UST filed a Motion to Dismiss Chapter 7 Case Pursuant to § 707(b)(3) of the Bankruptcy Code (the Motion to Dismiss). [Doc. No. 20].
3. After the Debtors failed to file a response to the Motion to Dismiss, this Court signed an order dismissing the case. The order was entered on the docket on June 6, 2012. [Doc. No. 24].
4. On June 12, 2012, the Debtors filed an amended petition along with amended Schedules (Schedules A through J) and an amended SOFA. [Doc. Nos. 26–28].
5. On June 18, 2012, the Debtors filed a Motion to Reconsider and Vacate the Order Dismissing Chapter 7 Case (the Motion to Reconsider), along with an amended Schedule I. [Doc. Nos. 30 & 32].
6. On July 23, 2012, this Court signed an order which granted the Motion to Reconsider, vacated the order dismissing the case, and scheduled a hearing on the Motion to Dismiss. [Doc. No. 43].
7. Additionally on July 23, 2012, in a letter to the Debtors' counsel, the UST—now knowing that there would be an evidentiary hearing on the Motion to Dismiss—requested that the Debtors produce the following documents:
[C]opies of any and all documents, statements or reports provided to you or to your office by or on behalf of [the Debtors] ... including but not limited to real and personal property records and credit reporting agencies, for the purpose of preparing Debtors' original and amended personal bankruptcy petition, schedules, statement of financial affairs, declarations, means test, and related declarations.
[Doc. No. 51, Exhibit A]. The UST also requested “for inspection the original client questionnaires and bankruptcy documents, including signature pages.” [ Id.].
8. On July 31, 2012, the Debtors filed their response opposing the Motion to Dismiss. [Doc. No. 45].
9. On August 30, 2012, counsel for the Debtors, in responding to the UST's letter of July 23, informed the UST that the Debtors would not produce the requested documents on the grounds of attorney-client and attorney work-product privileges. [Doc. No. 51, Exhibit B, at 2].
10. Counsel for the Debtors provided the UST with a privilege log (Debtors' Privilege Log) stating the following with respect to each document withheld:
[Debtors' Privilege Log].
11. On September 6, 2012, the UST filed the Motion to Compel. [Doc. No. 51].
12. On September 21, 2012, the Debtors, in opposing the Motion to Compel, filed their Brief Regarding Attorney–Client Privilege and Attorney Work Product. [Doc. No. 55].
13. On September 26, 2012, the UST filed its Reply of United States Trustee to the Debtors' Brief Regarding Attorney–Client Privilege and Attorney Work Product. [Doc. No. 56].
14. On September 27, 2012, this Court held a hearing on the Motion to Compel (the Hearing). Counsel for the UST, Ellen Hickman, and counsel for the Debtors, Johnie Patterson (Patterson) and Miriam Goott (Goott), appeared. The Debtors, however, did not personally appear or testify. See [Tape Recording, 09/27/12 Hearing at 2:34:113:09:04 p.m.].
15. At the Hearing, Patterson testified to the following:
a. The first page of the Questionnaire is not a handout that Patterson's firm's debtors/clients take home. [Debtors' Privilege Log, Bates No. 222]. Instead, it is completed at his firm's office where both the debtor and the attorney are present. Either the attorney fills in the first page of the Questionnaire himself when meeting with the client, or the first page of the Questionnaire is filled in by the client at the firm's office while the client goes through the document with the lawyer. [Tape Recording, 09/27/12 Hearing at 2:39:20–2:39:53 p.m.].
b. The remaining pages of the Questionnaire are not given to every client. [Debtors' Privilege Log, Bates Nos. 223–245]. As every client is different, each lawyer at Patterson's firm uses the handout differently. The pages of the Questionnaire are also frequently updated and changed by lawyers at Patterson's firm over time, such that different...
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