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Keywords

litigationattorneyappealfiduciarybankruptcychapter 11 bankruptcylegal counselattorney-client privilege
attorneyliabilitybankruptcychapter 11 bankruptcybinding agreementattorney-client privilege

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In re Teleglobe Communications Corp., 493 F.3d 345

Facts

The debtors, wholly owned subsidiaries of Teleglobe, Inc., filed for Chapter 11 bankruptcy after BCE ceased funding Teleglobe, which had incurred significant debt while developing a fiberoptic network. BCE had previously pledged financial support but later reassessed its funding strategy, leading to the abandonment of Teleglobe. The debtors alleged that BCE breached its fiduciary duties and committed misrepresentation by failing to honor its funding commitments, prompting them to seek the production of documents related to BCE's legal advice during this period.

This action began with a complaint brought in a Chapter 11 bankruptcy case. The debtors (“Debtors”) are the wholly owned United States subsidiaries of a Canadian telecommunications company formerly known as Teleglobe, Inc. (“Teleglobe”).

Issue

Whether the attorney-client privilege asserted by BCE applies against its former subsidiaries in the context of a dispute arising from BCE's cessation of funding.

The question, then, is whether Company A may assert the privilege against its former family members.

Rule

The attorney-client privilege protects communications between attorneys and clients from compelled disclosure, but it does not apply in adverse litigation between former clients who were jointly represented.

The attorney-client privilege protects communications between attorneys and clients from compelled disclosure.

Analysis

The Court of Appeals analyzed the District Court's findings regarding the joint representation of BCE and its subsidiaries. It concluded that the factual findings did not support the assertion of privilege by BCE, as the documents in question were produced during a time when BCE and the debtors were represented by the same legal counsel. The court emphasized that the privilege does not extend to communications made in the context of adverse litigation between former co-clients.

Because we conclude that the District Court's factual findings do not support setting aside the parent company's privilege in this case, we vacate its order compelling production and remand for further proceedings.

Conclusion

The Court of Appeals vacated the District Court's order compelling production of documents and remanded the case for further proceedings, indicating that BCE's claim of attorney-client privilege was not supported by the facts.

Having reviewed 44 documents in camera, the Special Master issued a supplemental decision in which he concluded that BCE's revised privilege claims and his review of documents in camera raised serious questions about the reliability of the privilege log.

Who won?

The debtors prevailed in the appeal as the Court of Appeals found that BCE's assertion of attorney-client privilege was not valid in the context of their dispute.

The Court rejected this argument on three grounds: (1) BCE made a binding agreement to disclose all communications generated as part of a BCE/Teleglobe joint representation, and so finding a joint representation between the two was all that was needed.

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