Matter of Mori, Bankruptcy No. B-79-00895.
| Decision Date | 26 October 1979 |
| Docket Number | Bankruptcy No. B-79-00895. |
| Parties | In the Matter of Eugene E. MORI, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida |
David M. Goldstein, McMahon & Goldstein, North Miami, Fla., for debtor.
Alan Rosenthal, Milledge & Hermelee, Miami, Fla., for Hartz Mountain Industries, Inc. and Hartz Mountain Development Corp.
ORDER COMPELLING PRODUCTION BY DEBTOR'S ACCOUNTANTS
This cause having come on to be heard on the Motion to Compel of Hartz Mountain Industries, Inc. and Hartz Mountain Development Corp. (Hartz) seeking answers to questions propounded upon oral examination to, and production of documents from, Rachlin & Cohen, the Debtor's accountants, and the Court having reviewed memoranda filed on behalf of Hartz and the Debtor and having heard argument of counsel, the Court hereby finds:
JURISDICTION
This Court has jurisdiction pursuant to 28 U.S.C.A. § 1471, Rule 737, Rules of Bankruptcy Procedure and Rule 37, Federal Rules of Civil Procedure.
On April 19, 1979, Eugene E. Mori filed a Petition under Chapter XII of the Bankruptcy Act in the United States District Court for the District of New Jersey In the Matter of Eugene E. Mori, Debtor, No. B-79-00895.
Hartz Mountain Industries, Inc. is a New York corporation with its principal place of business in Secaucus, New Jersey, and is a creditor of the Debtor, Mori. Hartz Mountain Development Corp. is a New Jersey corporation with its principal place of business in Secaucus, New Jersey, and entered into a contract to purchase approximately one hundred fifty (150) acres of vacant land in Secaucus, New Jersey, from Mori. Hartz Mountain Development Corp. is the assignee of Hartz Mountain Industries, Inc. under this contract to purchase land.
On May 17, 1979, Hartz moved to dismiss Mori's Petition claiming, inter alia, that Mori is not insolvent or unable to pay his debts as they mature.
In support of its Application to Dismiss, Hartz was attempted to conduct discovery regarding the assets, liabilities and income of Eugene E. Mori. On August 14, 1979, Leonard I. Safra, appeared for deposition in response to a Subpoena duces tecum served upon Rachlin & Cohen, a firm which has performed accounting services for Mori. Safra is a partner in Rachlin & Cohen. The Subpoena duces tecum sought, among other things, the production of documents relating to the assets, liabilities and income of Eugene E. Mori.
Following certain introductory questions, Safra was admonished by counsel for Mori to refuse to answer questions or produce documents relative to his client and Safra did so refuse, claiming a blanket privilege under Section 473.141, Florida Statutes.1
Pursuant to 11 U.S.C.A. §§ 323 and 521, a voluntary Debtor is required to disclose, in full, his assets, liabilities and income, in order to invoke the jurisdiction of the Federal Court.
Rule 501, Federal Rules of Evidence, governs the applicability of a privilege in a Federal proceeding:2
Except as otherwise required by the Constitution of the United States or provided by Act of Congress or in rules prescribed by the Supreme Court pursuant to statutory authority, the privilege of a witness, person, government, State, or political subdivision thereof shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in the light of reason and experience. However, in civil actions and proceedings, with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness, person, government, State, or political subdivision thereof shall be determined in accordance with State law.
The issue is, therefore, whether or not this Court is governed by "the principles of common law as they have been interpreted by the courts of the United States" or by the applicable Florida statute on privilege.3
The suggestion has been made that state law applies to a claim of privilege in a bankruptcy proceeding. See: Advisory Committee Note to Rule 501, Federal Rules of Evidence; 11 Moore's Federal Practice § 501 App. 6; 2 Moore's Collier on Bankruptcy ¶ 21.13, p. 297 (14th Ed. 1961).
However, in the absence of case law construing Rule 501, resort must be made to the opinion of the United States Supreme Court in McCarthy v. Arndstein, 266 U.S. 34, 45 S.Ct. 16, 69 L.Ed. 158 (1924):
266 U.S. at 39, 45 S.Ct. at 17.
The "common law as interpreted by the courts of the United States" is clear:
"No confidential accountant-client relationship exists under federal law, and no state-created privilege has been recognized in federal cases." Couch v. United States, 409 U.S. 322, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973); Falsone v. United States, 205 F.2d 734 (5th Cir. 1953), cert. denied, 346 U.S. 864, 74 S.Ct. 103, 98 L.Ed. 375.
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