International Horizons, Inc., Matter of, No. 82-8024

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Writing for the CourtBefore HILL and HATCHETT; GOLDBERG
Citation689 F.2d 996
Parties7 Collier Bankr.Cas.2d 584, 9 Bankr.Ct.Dec. 1262, 11 Fed. R. Evid. Serv. 1772 In the Matter of INTERNATIONAL HORIZONS, INC., Debtor. INTERNATIONAL HORIZONS, INC., et al., and Touche Ross & Company, Appellants, v. The COMMITTEE OF UNSECURED CREDITORS, Appellee.
Decision Date21 October 1982
Docket NumberNo. 82-8024

Page 996

689 F.2d 996
7 Collier Bankr.Cas.2d 584, 9 Bankr.Ct.Dec. 1262,
11 Fed. R. Evid. Serv. 1772
In the Matter of INTERNATIONAL HORIZONS, INC., Debtor.
INTERNATIONAL HORIZONS, INC., et al., and Touche Ross &
Company, Appellants,
v.
The COMMITTEE OF UNSECURED CREDITORS, Appellee.
No. 82-8024.
United States Court of Appeals,
Eleventh Circuit.
Oct. 21, 1982.

Page 998

Troutman, Sanders, Lockerman & Ashmore, Dale M. Schwartz, Kevin C. Greene, Trotter, Bondurant, Miller & Hishon, Jeffrey M. Smith, Richard L. Shackelford, Atlanta, Ga., for appellants.

Kilpatrick & Cody, Alfred S. Lurey, Dennis S. Meir, Conde T. Cox, Atlanta, Ga., for appellee.

Appeals from the United States District Court for the Northern District of Georgia.

Before HILL and HATCHETT, Circuit Judges, and GOLDBERG, * Senior Circuit Judge.

Page 999

GOLDBERG, Circuit Judge:

In this appeal we are asked whether a federal bankruptcy court in Georgia must recognize and apply that state's "accountant-client" privilege. We conclude that no accountant-client privilege exists as a matter of federal common law and that the bankruptcy court need not apply Georgia's rules of evidentiary privilege. We therefore affirm a bankruptcy court order compelling the production of allegedly privileged materials.

I. FACTS AND PROCEDURAL HISTORY

This appeal concerns a discovery dispute that arose at the very outset of a consolidated bankruptcy proceeding now pending in the Northern District of Georgia. There are three parties to this dispute: International Horizons, Inc., a debtor who has filed for bankruptcy; Touche Ross & Co., the debtor's accounting firm; and a committee of the debtor's unsecured creditors. The Creditors Committee sought access to documents and workpapers in the possession of the debtors' accountant, Touche Ross & Co.; however, Touche Ross refused to disclose the workpapers, asserting the protections of Georgia's accountant-client privilege. The Bankruptcy Court rejected this claim to a privilege and ordered the accounting firm to produce the documents. 1 The debtor and its accountant then appealed.

The U.S. District Court, sitting as an appellate tribunal, affirmed the Bankruptcy Court order, holding that there was no federal common law accountant-client privilege and that neither the Federal Rules of Evidence nor considerations of comity required the federal court to apply Georgia's accountant-client privilege. 2 The debtor and its accountant then brought this appeal.

II. ISSUES ON APPEAL

We are called upon to review a bankruptcy court order compelling the production of documents and accountant's workpapers in the possession of appellant Touche Ross & Co. Touche Ross and its client, International Horizons, Inc. argue that these documents are cloaked by an accountant-client privilege. Specifically, Touche Ross and International Horizons contend that they should enjoy the protections of Georgia's accountant-client privilege in this federal proceeding. In the alternative, the appellants argue that a federal common law privilege should protect accountant's workpapers. Finally, the appellants argue that even if the federal courts do not recognize a general accountant-client privilege, considerations of comity and federalism require that the Bankruptcy Court apply Georgia's rules of evidentiary privilege.

In response, the appellees argue that the District Court was correct in holding that there is no federal common law accountant-client privilege and that a federal court need not defer to the vagaries of a forum state's rules of evidentiary privilege. In addition, the appellees have questioned the jurisdiction of this Court to hear this appeal. We will address each of these points in turn, focusing first upon the threshold question of appellate jurisdiction.

III. APPELLATE JURISDICTION

The Bankruptcy Reform Act of 1978, 3 Pub.L.No.95-598, 92 Stat. 2549, sets forth specific guidelines governing appeals from bankruptcy court proceedings. 4 Certain bankruptcy court orders, decrees, and judgments may be appealed to the district courts, to the courts of appeals, and ultimately to the Supreme Court. In this case, we must determine whether the District

Page 1000

Court was empowered to review the Bankruptcy Court's order and then decide whether this Court has jurisdiction to review the decision of the District Court.

A. The District Court's Jurisdiction to Review the Bankruptcy Court's Order

The jurisdiction of a federal district court to review "judgments, orders, and decrees" of a bankruptcy court is set forth in 28 U.S.C. § 1334. Section 1334(a) provides that a district court has appellate jurisdiction over "final judgments, orders, and decrees" of bankruptcy courts. 28 U.S.C. § 1334(a) (emphasis added). Section 1334(b) provides that a district court may also entertain appeals from interlocutory, nonfinal, orders and decrees of bankruptcy courts. 5

The appellees contend that the bankruptcy court order compelling the production of allegedly privileged materials was an interlocutory decree and therefore not appealable. However, because 28 U.S.C. § 1334(b) specifically empowers a district court to review a bankruptcy court's interlocutory orders, we conclude that the District Court did not act beyond the proper scope of its statutory jurisdiction in entertaining an appeal in this case.

B. Jurisdiction in the Court of Appeals

Having found that the District Court was empowered to review the Bankruptcy Court order, we must now determine whether this panel can entertain the appeal from the District Court. This Court's jurisdiction to review the decision of a district court that has affirmed a bankruptcy court order is set forth in 28 U.S.C. § 1293. Universal Minerals, Inc. v. C. A. Hughes & Co., 669 F.2d 98, 101 (3d Cir. 1982). 6 Section 1293 provides that in bankruptcy cases a court of appeals shall have jurisdiction of an appeal from a final judgment, order, or decree of ... a district court" (emphasis added). In contrast to the appellate jurisdiction conferred upon the district courts by 28 U.S.C. § 1334, the courts of appeals are not empowered to review interlocutory or nonfinal orders arising from bankruptcy proceedings. 7 Thus, we can hear this appeal only if the Bankruptcy Court's order compelling production of allegedly privileged documents is deemed final and not merely interlocutory. 8

1. Was the Order Compelling Production of Allegedly Privileged Material "Final"?

"As a general proposition most orders granting or denying discovery are not final

Page 1001

orders ... and therefore are not immediately appealable." Rouse Construction International, Inc. v. Rouse Construction Corporation, 680 F.2d 743, 745 (11th Cir. 1982). 9 "Ordinarily, a litigant seeking to overturn a discovery order has (only) two choices. Either he can comply with the order and challenge it at the conclusion of the case or he can refuse to comply with the order and contest its validity if subsequently cited for contempt for his refusal to obey." Id. 10

However, a major exception to this rule has been recognized where an order "is directed to a person who has custody of materials as to which another person may claim a privilege of non-disclosure." Branch v. Phillips Petroleum Co., 638 F.2d 873, 878 n.3 (5th Cir. 1981). In such a case, "the person who holds the privilege may seek immediate review of the disclosure order." Id. 11 The justification for permitting immediate appeal under these circumstances "is that the privilege-holder has no power to compel the custodian of the material to risk a contempt citation for his refusal to comply with the Court's order." Id. 12

Applying the general rule regarding the nonappealability of discovery orders to the facts of the instant case, we find that the appeal of appellant Touche Ross is not properly before this Court. Touche Ross is in possession of allegedly privileged documents which it refuses to disclose. The District Court has ordered Touche Ross to produce these documents, but has not yet backed up this order with a finding of civil contempt. Until such a finding has been made, the trial court's discovery order is not final and is not appealable by Touche Ross. As the party holding the allegedly privileged material, Touche Ross can only appeal if and when it is adjudged to be in civil contempt.

Although we find that the appeal of Touche Ross is not properly before this Court, we reach a different conclusion regarding the viability of the appeal brought by Touche Ross's client, International Horizons, Inc. Like Touche Ross, International Horizons claims that the documents here in question are privileged. However, International Horizons does not have custody of the allegedly privileged material. This brings International Horizons within a recognized exception to the general rule regarding the non-appealability of discovery orders. Its appeal is properly before this Court because it claims a privilege of non-disclosure relating to materials that another party has been directed to produce. See In re Grand Jury Proceedings, 641 F.2d 199, 202 (5th

Page 1002

Cir. 1981) (party claiming attorney-client privilege may appeal from order compelling his attorney to disclose allegedly confidential information). 13 Accord, W. T. Thompson v. General Nutrition Corp., 671 F.2d 100, 103 (3d Cir. 1982) (party claiming accountant-client privilege may appeal from order compelling its accountant to disclose allegedly confidential information); Branch v. Phillips Petroleum, 638 F.2d 873, 878 n.3 (5th Cir. 1981) (dicta ); Overby v. U.S.F. & G., 224 F.2d 158 (5th Cir. 1955). Thus, we conclude that while we cannot hear the appeal of Touche Ross, we do have jurisdiction to entertain the appeal brought by appellant International Horizons, Inc.

IV. THE ACCOUNTANT-CLIENT PRIVILEGE IN THE FEDERAL COURT

Georgia state courts recognize a broad accountant-client privilege. 14 In this case, we are asked whether a federal bankruptcy court...

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85 practice notes
  • Jove Engineering, Inc. v. I.R.S., No. 94-6372
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • August 29, 1996
    ...902 F.2d 883, 890 n. 5 (11th Cir.1990); In re TCL Investors, 775 F.2d 1516, 1518 (11th Cir.1985); In re International Horizons, Inc., 689 F.2d 996, 1000 n. 6 (11th Cir.1982). A final decision "is one which ends the litigation on the merits and leaves nothing for the court to do but execute ......
  • U.S. v. Tomeny, Nos. 97-3089
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • June 24, 1998
    ...Circuit is binding on the Eleventh Circuit, even if the decision was issued after September 30, 1981. See Matter of Int'l Horizons, Inc., 689 F.2d 996, 1004 n. 17 (11th 4 Because the Magnuson Act has no general repeal provision, we need not decide whether such a provision would have indicat......
  • Presley v. United States, No. 17-10182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • July 18, 2018
    ...1913, 146 L.Ed.2d 914 (2000) ; see also United States v. Fleet , 498 F.3d 1225, 1227 (11th Cir. 2007) ; Matter of Int'l Horizons, Inc. , 689 F.2d 996, 1003 (11th Cir. 1982) ("It is clear ... that this is a federal law proceeding and that the Bankruptcy Court is not required to apply the Geo......
  • Robinson v. Tanner, No. 85-7456
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 9, 1986
    ...who has custody of materials as to which another person may claim a privilege of non-disclosure." In re International Horizons, Inc., 689 F.2d 996, 1001 (11th Cir.1982). Additionally, a district court order rendered under the authority of 26 U.S.C. Secs. 7402(b) or 7604(a) compelling a taxp......
  • Request a trial to view additional results
85 cases
  • Jove Engineering, Inc. v. I.R.S., No. 94-6372
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • August 29, 1996
    ...902 F.2d 883, 890 n. 5 (11th Cir.1990); In re TCL Investors, 775 F.2d 1516, 1518 (11th Cir.1985); In re International Horizons, Inc., 689 F.2d 996, 1000 n. 6 (11th Cir.1982). A final decision "is one which ends the litigation on the merits and leaves nothing for the court to do but execute ......
  • U.S. v. Tomeny, Nos. 97-3089
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • June 24, 1998
    ...Circuit is binding on the Eleventh Circuit, even if the decision was issued after September 30, 1981. See Matter of Int'l Horizons, Inc., 689 F.2d 996, 1004 n. 17 (11th 4 Because the Magnuson Act has no general repeal provision, we need not decide whether such a provision would have indicat......
  • Presley v. United States, No. 17-10182
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • July 18, 2018
    ...1913, 146 L.Ed.2d 914 (2000) ; see also United States v. Fleet , 498 F.3d 1225, 1227 (11th Cir. 2007) ; Matter of Int'l Horizons, Inc. , 689 F.2d 996, 1003 (11th Cir. 1982) ("It is clear ... that this is a federal law proceeding and that the Bankruptcy Court is not required to apply the Geo......
  • Robinson v. Tanner, No. 85-7456
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • September 9, 1986
    ...who has custody of materials as to which another person may claim a privilege of non-disclosure." In re International Horizons, Inc., 689 F.2d 996, 1001 (11th Cir.1982). Additionally, a district court order rendered under the authority of 26 U.S.C. Secs. 7402(b) or 7604(a) compelling a taxp......
  • Request a trial to view additional results

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