One of the most misunderstood areas of law for nonbankruptcy and bankruptcy attorneys alike is the attorney-client privilege, including the scope of the privilege, who holds it, and when and by whom it can be waived. As is often the case, in bankruptcy additional complexities arise.

Stakeholders are often surprised to learn that bankruptcy can result in the transfer of the business’ attorney client privilege to a trustee or other estate fiduciary. The implications of the transfer may not be apparent until years after the case is concluded and loyalties have shifted. Some Chapter 11 plans include express provisions governing privileged information and future control of the privilege itself. This issue was recently addressed by the U.S. Bankruptcy Court for the District of Delaware in In re KiOR, Case No. 14-12514 (CSS) (Oct. 19, 2020). The court reviewed provisions of the debtor’s Chapter 11 plan, controlling law, and post-confirmation litigation, and held that a liquidating trust created pursuant to a Chapter 11 plan and related trust agreement could not unilaterally waive the debtor corporation’s attorney client privilege without the reorganized debtor’s consent.

  • The Debtor’s Privilege in Its Bankruptcy Case and Post-Bankruptcy Litigations