Bankruptcy Attorneys Compelled to Disclose Name of Client as Court H...

A South Carolina bankruptcy court last week ordered a local law firm to disclose the names of bankruptcy clients amidst a discovery dispute with the U.S. Trustee.  The attorney-client privilege, the court held, does not apply to information disclosed for the purpose of filing a bankruptcy petition or assembling the schedules because the information, ultimately, is intended to be publicly disclosed.  The U.S. Trustee sought the information in connection with its motion to review the conduct of the firm and for disgorgement of fees.  The case is In re Hogan, No. 18-05693-HB (Bankr. D. S.C. May 19, 2020) (available here).

The bankruptcy court's decision hardly breaks new ground, as the attorney-client privilege long has been held inapplicable generally to a client's identity and the amount of the fee - with an exception where disclosure of identity has not been authorized by the client and compelled disclosure would reveal a client's confidences.  The decision is a very good reminder, however, of the many pitfalls that a bankruptcy filing creates for debtors who may, or expect to, be the subject of a parallel criminal investigation. 

Courts generally have held that attorney-client privilege does not shield a debtor from compelled disclosure (by the debtor or the debtor's attorney) in a criminal case of matters required to be disclosed in the bankruptcy petition or schedules.  Thus, material of this kind can be, and regularly is, accessed in bankruptcy criminal investigations, at trial or during plea negotiations, and even at sentencing.  The precise contours of the privilege in bankruptcy-related matters, of course, must be determined on the facts of individual cases and compelled disclosure should be resisted by counsel on behalf of the (former) client when appropriate so that a proper judicial determination may be made.