In re Tri State Outdoor Media Group, Inc.

• Decision Date: 04 September 2002
• Docket Number: No. 02-70596.,02-70596.
• Citation: 283 B.R. 358
• Parties: In re TRI-STATE OUTDOOR MEDIA GROUP, INC., Debtor. Tri-State Outdoor Media Group, Inc., Movant, v. Official Committee of Unsecured Creditors to Tri-State Outdoor Media Group, Inc., Respondent.
• Court: U.S. Bankruptcy Court — Middle District of Georgia

283 B.R. 358

In re TRI-STATE OUTDOOR MEDIA GROUP, INC., Debtor Tri-State Outdoor Media Group, Inc., Movant, v. Official Committee of Unsecured Creditors to Tri-State Outdoor Media Group, Inc., Respondent.

No. 02-70596.

United States Bankruptcy Court, M.D. Georgia, Valdosta Division.

September 4, 2002.

COPYRIGHT MATERIAL OMITTED

David G. Aelvoet, San Antonio, TX, Raymond R. Aranza, Brown & Brown, P.C., L.L.O., Omaha, NE, Gary L. Barnhart, Missouri Department of Revenue, Jefferson City, MO, Darrel Begnaud, Athens, GA, Richard H. Bins, Rochester, MN, Russell S. Bogue, III, Hunton & Williams, Atlanta, GA, Michael S. Dietz, Rochester, MN, Erich N. Durlacher, Atlanta, GA, Ronald F. Fisk, Nevada, MO, T. Baron Gibson, II, Martin, Snow, Grant & Napier, Macon, GA, Stephen G. Gunby, Columbus, GA, Jeff Hermann, Brobeck, Phleger & Harrison, LLP, Los Angeles, CA, Jerome L. Kaplan, Macon, GA, Perry E. Kaufman, Commissioners of the Land Office, Oklahoma City, OK, Fred W. Krahmer, Fairmont, MN, Matthew R. Lawrence, Valdosta, GA, Paul Burke O'Hearn, Burr & Forman, LLP, Atlanta, GA, John P. Pringle, Los Angeles, CA, Milton A. Rosenblad, Rochester, MN, James R. Spradling, Carthage, MO, John R. Stoebner, Minneapolis, MN, Peter D. Wolfson, Sonnenschein, Nath & Rosenthal, New York City, for creditors.

Grant T. Stein, Jason H. Watson, Alston & Bird, Atlanta, GA, for debtor.

Wesley J. Boyer, Katz, Flatau, Popson & Boyer, LLC, Macon, GA, James E. Houpt, Sacramento, CA, Thomas L. Kent, Orrick, Herrington & Sutcliffe, LLP, New York City, Anthony Princi, Orrick, Herrington & Sutcliffe, LLP, New York City, for respondents.

MEMORANDUM OPINION

JOHN T. LANEY, III, Bankruptcy Judge.

On July 29, 2002, the court held an emergency telephone hearing regarding the attorney-client privilege and work product doctrine protections that were being asserted during the deposition of David Rosen, a testifying expert and an employee of Houlihan, Lokey, Howard & Zuken ("Houlihan"), the financial advisors for the Official Committee of Unsecured Creditors ("Official Committee") of Tri-State Outdoor Media Group, Inc. ("Tri-State"). At the conclusion of the hearing, the court took the matters under advisement and the deposition continued. However, many questions were left unanswered because of the asserted attorney-client privilege and work product doctrine protections. On July 31, 2002, Tri-State filed a Motion to Compel the Deposition Testimony of Mr. Rosen and later amended the motion with an additional request to compel the production of certain documents that had been withheld. The parties were given an opportunity to submit briefs in support of their positions. The court has considered the evidence, the parties' briefs, affidavits and oral arguments, and the applicable statutory and case law. The court will grant the Motion to Compel in part and deny the Motion to Compel in part.

FACTS

Tri-State is in the business of outdoor advertising in many states. In May 1998, Tri-State sold $100 million 11% Notes due in March 2008. After losses in the following years, Tri-State defaulted on the semi-annual payment due in November 2001. An ad hoc committee of bondholders ("Ad Hoc Committee") was formed to negotiate the financial restructuring of Tri-State. The Ad Hoc Committee hired Orrick, Herrington & Sutcliffe, LLP ("Orrick") as legal counsel.

In January 2002, Houlihan was retained by Orrick to provide financial advisory services to the Ad Hoc Committee "in connection with the [Ad Hoc Committee's] analysis, consideration and possible formulation of potential financial restructuring options" for Tri-State ("Retention Agreement"). (Declaration of David J. Rosen, Doc. 230, Ex. "1" at ¶ 1). Despite being retained by Orrick, Tri-State agreed to pay Houlihan because the possible restructuring would benefit the company. (See id. at ¶ 2). The Retention Agreement contemplated Bankruptcy and contained a confidentiality clause. (See id. at ¶¶ 5-6).

On April 25, 2002, after negotiations proved unsuccessful, the Ad Hoc Committee filed an involuntary petition for relief under Chapter 11 of the Bankruptcy Code ("Code"). On April 26, 2002, this case was converted to a voluntary Chapter 11 after Tri-State consented to the entry of an order for relief. Tri-State continues to operate the business as a debtor-in-possession.

As a result of the Bankruptcy filing, on May 14, 2002, the United States Trustee appointed the Official Committee of Unsecured Creditors, consisting mainly of former Ad Hoc Committee members. Houlihan was authorized to serve as financial advisors to the Official Committee but a new retention agreement was not signed.

On June 6, 2002, Tri-State filed a Motion for Entry of an Order Extending the Time to Assume or Reject Its Unexpired Leases of Nonresidential Real Property ("Lease Motion"). On June 21, 2002, the Official Committee filed an objection to the Lease Motion. On July 1, 2002, Tri-State filed a Motion for an Order Extending Debtor's Exclusive Periods Within Which to File a Plan and Solicit Votes Thereon ("Exclusivity Motion"). On July 26, 2002, the Official Committee filed an objection to the Exclusivity Motion.

On July 29, 2002, while preparing for the evidentiary hearing regarding the Lease Motion and the Exclusivity Motion scheduled for August 1, 2002, Tri-State deposed Mr. Rosen from Houlihan, who was expected to testify as an expert at the hearing. During the deposition, Mr. Rosen was questioned about the work he had done in conjunction with the Tri-State financial restructuring, including the involuntary Bankruptcy action. Specifically, the question was asked whether an analysis was done regarding the ramifications of a Bankruptcy filing on the leases held by Tri-State. (See Rosen Dep. at 44). Anthony Princi, the attorney from Orrick, as well as Mr. Rosen himself, objected to this question and other similar ones based on the attorney-client privilege and work product doctrine protections. (See id. at 34-35, 28, 44, 46, 59, 61, 63-66). Additionally, during the discovery process a privilege log was complied and certain documents were withheld from Tri-State.

Tri-State contends that the information and advice given to the former Ad Hoc Committee by Houlihan was business advice, not legal advice. Therefore, it should not be protected by the attorney-client privilege or the work product doctrine. Additionally, because the information and advice given was in the nature of business planning and not in anticipation of litigation, it should not be afforded work product doctrine protection. Even if it is considered protected, Tri-State asserts that the Official Committee has put the information and advice at issue by opposing the Lease Motion and the Exclusivity Motion. Further, Tri-State contends that the Official Committee has waived protection by offering Mr. Rosen as an expert.

The Official Committee contends that the attorney-client privilege applies to third-party agents retained by counsel to assist counsel in rendering legal advice. The Official Committee argues that Rosen's advice is not unprotected business advice but rather it is protected advice from an attorney's third-party agent to a client. Further, the Official Committee contends that the work product doctrine does apply in this case because Houlihan was hired in anticipation of Bankruptcy. Even if the Official Committee has waived protection by offering Mr. Rosen as an expert, it is waived only to the extent of his proposed testimony regarding valuation.

DISCUSSION

Attorney-Client Privilege

Courts apply the attorney-client privilege only when necessary because it withholds relevant information from the adverse party and the court. See Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). Thus, the privilege attaches only to confidential communications made to the attorney by the client with the intent to receive legal advice or assistance. See In re Grand Jury Investigation, 842 F.2d 1223, 1224 (11th Cir.1987). The party asserting the attorney-client privilege bears the burden of establishing its existence. See id. at 1225. Typically, advice from or passed through a third party destroys the existence of the privilege. See Shipes v. BIC Corp., 154 F.R.D. 301 (M.D.Ga.1994).

However, in today's complicated world, attorneys cannot work alone and must hire others to assist them; otherwise they would not be able to render adequate legal advice. See United States v. Kovel, 296 F.2d 918, 921 (2d Cir.1961); United States v. Pipkins, 528 F.2d 559, 562 (5th Cir.1976)(privilege can be extended to third parties who are agents of the attorney); HPD Laboratories, Inc. v. Clorox Co., 202 F.R.D. 410, 414 (D.N.J.2001) (privilege extended to third-party agents if confidential communications are made for the purpose of gaining legal advice from the attorney). The court in Kovel set out four factors that must be met for the attorney-client privilege to extend to third parties: 1) third party must be an agent of the attorney; 2) third party must facilitate the communication between the attorney and the client for legal advice; 3) communications with the third party must be kept confidential; 4) the privilege must not be waived. Kovel 296 F.2d at 921. Therefore, the presence of a third party, so long as it is assisting the attorney with a complicated matter, does not destroy the privilege. See id. In Kovel, the presence of an accountant was found necessary for effective communication between the client and the attorney. Id. at 922. Thus, the privilege permits consultation with others to render adequate legal advice. Id.

In United States v. Ackert, 169 F.3d 136 (2d Cir.1999), the court declined to follow Kovel by distinguishing the cases on the facts. Ackert, 169 F.3d at 140 (after bringing an investment opportunity to a company, an investment banker discussed the implications of the proposal with the company's in-house counsel). See also United States v. Davis, 636...