11 U.S.C. §542; Turnover of Documents
In re Nationwide Storage, LLC (Broadfoot v. Belford), 2005 Bankr. LEXIS 2674 (Adv. No. 03-6550)(Bankr. N.D. Ga. October 3, 2005) (Bonapfel)
The Chapter 7 trustee filed suit to recover $70 million from the debtor’s former owners as fraudulent transfers. The payments were received by the defendants, former owners of the debtor, in exchange for their shares in the debtor. The trustee sought the production of documents from the law firm that represented the defendants and/or the debtor with respect to the leveraged buyout transaction and other matters. The law firm objected to the discovery requests on the grounds that they were protected by attorney-client privilege.
The issue was whether the law firm represented only the defendants in the prior transactions or whether they also represented the debtor, in which case the privilege would belong to the trustee. The court reviewed the evidence and concluded that the law firm had represented both the individuals and the debtor corporation. Therefore, since the defendants could not invoke the attorney-client privilege against a co-client, the trustee was entitled to production of the documents.