Beware: Not All Communications Between Court-Appointed Bankruptcy Professionals Are Privileged

It is virtually a given in all but the smallest Chapter 11 bankruptcies that financial advisers and/or investment bankers will be retained to assist in the representation of the debtor or any official committee. Bankruptcy attorneys rely on the expertise and assistance of these other professionals in addressing virtually every issue that arises in a case, including debtor-in-possession financing, assumption and rejection of executory contracts and leases, formulation and confirmation of a plan of reorganization or liquidation, and selling some or substantially all of the debtor's assets under section 363 of the Bankruptcy Code. Indeed, bankruptcy attorneys will provide legal advice to their clients based, at least in part, on the information and opinions obtained from other court-appointed non-attorney professionals. Consequently, a successful Chapter 11 representation requires a close working relationship between the client's attorneys and non-attorney professionals, and the latter are generally kept fully abreast of the attorney's strategies on behalf of their common client.

Many bankruptcy attorneys assume that otherwise privileged communications that are shared with non-attorney professionals are privileged, or that the disclosure of such privileged information in the presence of non-attorney professionals will not result in the waiver of any applicable privilege. However, where a communication otherwise protected by the attorney-client privilege is disclosed to, or made in the presence of a third party, the communication may no longer be, or deemed never to have been considered privileged. See, e.g., Westinghouse Elec. Corp. v. Republic of Philippines, 951 F.2d 1414, 1424 (3d Cir. 1991) (“voluntary disclosure to a third party of purportedly privileged communications has long been considered inconsistent with an assertion of the privilege.”). This raises significant issues in the bankruptcy context, where bankruptcy attorneys regularly exchange information with other court-appointed professionals who are not their clients or employees of their law firms.

The disclosure of an attorney's work product to a third party “does not necessarily waive the protection of the work-product doctrine,” since it is “only in cases in which the material is disclosed in a manner inconsistent with keeping it from an adversary that the work-product doctrine is waived.” In re Chevron Corp., 633 F.3d 153, 165 (3d Cir. 2010). In other words, to the extent litigation is anticipated, the work product doctrine would apply to protect against the disclosure of documents revealing attorney strategy, even if the document had been provided to or created by an adviser acting at the committee's direction. Fed. R. Civ. P. 26(b)(3)(A) (protecting “documents ' prepared by another party or its representatives ' .”).

The disclosure of information protected by the attorney-client privilege, however, can be far more problematic. These discussions take place with and without the presence of the client, and are likely to involve the most significant strategic issues in a case. As discussed below, whether the disclosure of otherwise privileged communications to, or in the presence of non-attorney professionals will result in a waiver of the attorney-client privilege will likely depend on the approach used by the court.

The Functional Equivalent Approach

The attorney-client privilege applies to: “(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.” In re Teleglobe Communications, Corp., 493 F.3d 345, 359 (3d Cir. 2007). The burden of proof is on the party asserting a privilege, and privileges are strictly construed. U.S. v. Rockwell Intern., 897 F.2d 1255, 1264 (3d Cir. 1990). However, certain courts have held that the disclosure of confidential information to a third party does not result in the waiver of the attorney-client privilege where the third party is the “functional equivalent” of the client's employee. This approach derives from the Supreme Court's decision in Upjohn Co. v. United States, 449 U.S. 383 (1981).

For example, in In re Bieter Co., 16 F.3d 929 (8th Cir. 1984), the disclosure of confidential information to an independent consultant hired by a company did not result in the waiver of the attorney-client privilege because: 1) the consultant was the functional equivalent of the client's employee; 2) the communications at issue were within the scope of the consultant's duties; 3) the communications were made at the behest of the consultant's client; and 4) the communications were made for the purpose of seeking legal advice for the client. Under these circumstances, the court found that there was “no principled basis to distinguish [the consultant's] role from that of an employee” and that “his involvement in the subject of the litigation [made] him precisely the sort of person with whom a lawyer would wish to confer confidentially in order to understand [the client's] reasons for seeking representation.”

In Export-Import Bank of the United States v. Asia Pulp & Paper Co., Ltd., 232 F.R.D. 103 (S.D.N.Y. 2005), however, the court held that the attorney-client privilege did not extend to communications shared with a corporation's financial adviser, even though the adviser spent 80% of his time working on the client's business. The fact that the consultant had an active consulting practice involving other clients, and had an office in another city, was held to “contradict the picture of [the consultant] as so fully integrated into [the company's] hierarchy as to be a de facto employee.” 232 F.R.D. at 113-4.

The Facilitator Approach

Other courts consider a third party to be within the scope of the attorney-client privilege where the third party “facilitates” the attorney's provision of legal advice. This approach derives from the Second Circuit's decision in U.S. v Kovel, 296 F.2d 918 (2d Cir. 1961).

Kovel involved communications made by the client to a non-attorney employee of a law firm that was representing the client in connection with an IRS investigation. The non-attorney (Kovel) acknowledged that he received a statement of assets and liabilities from the client, but refused to answer, on the basis of the attorney-client privilege, questions seeking to determine the reason why he obtained the statements, whether he discussed them with the client, or gave the client any information regarding the IRS investigation, or what the client said to him regarding relevant transactions. 296 F.2d at 919. The district court directed Kovel to answer the questions on the basis that the communications were not privileged because he was not an attorney, and the court held him in contempt when he refused to answer.

The Second Circuit noted the absence of any policy justification to extend the attorney-client privilege to communications between a client and a non-attorney, while acknowledging the “complexities of modern existence [that] prevent attorneys from effectively handling clients' affairs without the help of others.” Id. at 921. Although the IRS did not dispute that “the privilege covers communications to non-lawyer employees with 'a menial or ministerial responsibility that involves relating communications to an attorney,'” the Second Circuit refused to “regard the privilege as confined to 'menial or ministerial' employees,” and opined that the privilege should extend to situations such as where the attorney requires a foreign language translator in order to provide the client with proper legal advice.” Id. The court then noted that:

This analogy of the client speaking a foreign language is by no means irrelevant to the appeal at hand. Accounting concepts are a foreign language to some lawyers in almost all cases, and to almost all lawyers in some cases. Hence the presence of an accountant, whether hired by the lawyer or by the client, while the client is relating a complicated tax story to the lawyer, ought not destroy the privilege, any more than would that of the linguist ' ; the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit ' .

296 F.2d at 922.

Thus, maintaining the attorney-client privilege under Kovel and its progeny requires that the non-attorney act as an interpreter, or otherwise facilitate the provision of legal advice to the client.

For example, in In re Fibermark, Inc., 330 B.R. 480 (Bankr. D. Vt. 2005), the court resolved a request to unseal an examiner's report that contained confidential information, including accusations of breached fiduciary duties. Certain parties argued that portions of the examiner's report were protected by the attorney-client privilege and the work product doctrine. Id. at 488. The court held that the presence of a financial adviser during meetings of the creditors' committee did not automatically destroy the attorney-client privilege, but that only those communications made in confidence to the committee for the purpose of obtaining or providing legal advice were protected. If a communication was merely to aid the committee in making a business decision, the court found that it fell outside the scope of the attorney-client privilege. Thus, the court declined to redact references to discussions in which committee counsel conferred with co-counsel, committee advisers, or individual committee members about their divergent opinions regarding the debtor's post-confirmation corporate governance, because the court did not view these issues as raising ”legal issues on behalf of its client,” the committee. However, where committee counsel communicated with the committee chair or co-counsel regarding the committee's obligation to disclose suspected violations of a trading order, that activity was a duty of the committee and the court deemed the communications privileged.

Similarly, in Urban Box Office Network, Inc. v. Interfase Managers, L.P., 2006 WL 1004472 (S.D.N.Y., April 17, 2006), the court applied the Kovel doctrine to find several communications privileged, including: 1) an e-mail seeking information from plaintiff's advisers for counsel's use in litigation; 2) a communication between counsel and plaintiff's financial adviser, which the court found to “provide the benefit of legal insight and advice”; and 3) a draft disclosure schedule sent from counsel to plaintiff's financial adviser, the “completeness and accuracy [of which] clearly had legal implications with which the attorneys would be concerned.” 2006 WL 1004472 at * 6-7.

Courts applying the facilitator approach, however, have refused to apply the Kovel doctrine where the non-attorney was not acting as an interpreter or facilitator. For example, in United States v Ackert, 169 F.3d 136 (2d Cir. 1999), in-house tax counsel sought the advice of an investment banker (Ackert), and initiated discussions to “learn more about the details of [a] proposed transaction and its potential tax consequences so that he could advise his client, Paramount, about the legal and financial implications of the transaction.” Id. at 138. The Second Circuit held that the attorney-client privilege did not protect communications between the tax counsel and Ackert because “Ackert's role was not as a translator or interpreter of client communications.” Id. at 139'140.

The court noted that “a communication between an attorney and a third party does not become shielded by the attorney-client privilege solely because the communication proves important to the attorney's ability to represent the client.” Id. Rather, the Kovel doctrine is limited to situations where “the purpose of the third party's participation is to improve the comprehension of the communications between attorney and client.” Id. Consequently, the court held that the Kovel doctrine was inapplicable where, as in Ackert, counsel “was not relying on [the investment banker] to translate or interpret information given” by the client, but instead [the investment banker] was simply providing information that the client did not have. Id. at 140. Indeed, the Second Circuit declined to apply the Kovel doctrine to the communications at issue in Ackert “notwithstanding [the court's] assumption that those conversations significantly assisted the attorney in giving his client legal advice about its tax situation.” 169 F.3d at 139.

Courts applying the facilitator approach have also refused to apply the Kovel doctrine where the subject communications were made to facilitate advice from the non-attorney. For example, in In re G-1 Holdings , 218 F.R.D. 428 (D.N.J. 2003), the debtor submitted a declaration in support of its claim of privilege over communications exchanged between the debtors' counsel and accountant, which stated that:

Mr. Baldasaro [the accountant] assisted us in understanding the tax and tax accounting ramifications of the proposed structure, which assistance was necessary in order for us to provide legal advice and counsel to the senior management of [the debtors].

218 F.R.D. at 435.

The court, however, held that the documents were not privileged because the accountant was retained for his tax expertise, rather than to act as an interpreter or translator. In this regard, the court noted that:

There is no evidence that GAF hired Baldasaro to sit with GAF employees and define tax concepts to attorneys unschooled in tax and accounting, or vice versa. If GAF hired Baldasaro for Baldasaro's expertise, then GAF sought Baldasaro's independent tax advice, not his help as a translator defining complicated accounting concepts. Communication between an attorney and a third party does not become shielded by the attorney-client privilege solely because the communication proves important to the ability to represent the client.

Similarly, in Louisiana Mun. Police Employees Retirements System v. Sealed Air Corp., 253 F.R.D. 300 (D.N.J. 2008), the court ruled that because the investment banker “was not retained to facilitate the attorney-client relationship, the information was not protected under the Kovel doctrine.” Id. at 314. Likewise, in Dahl v. Bain Capital Partners, LLC , 714 F.Supp.2d 225 (D. Mass. 2010), the court held that any applicable privileges were waived with respect to documents that were forwarded to a financial adviser in order to obtain the financial adviser's “feedback.”

The Delaware Chancery Court Approach

The Delaware Chancery Court in 3Com Corp. v. Diamond II Holdings, Inc., 2010 WL 2280734 (Del. Ch. May 31, 2010), adopted a third, more liberal approach, which relies on the expectations of the parties, and provides greater flexibility for protecting confidential communications with financial advisers and other consultants. Under this approach, the court does not require that the financial adviser be the functional equivalent of an employee, or that the adviser interpreted or facilitated the provision of legal advice to the client. Rather, the court determines whether the adviser was involved in communications regarding legal matters. If so, the communication generally remains privileged, regardless of its disclosure to the financial adviser. This approach is consistent with Delaware law, under which the court determines “whether in the circumstances the person making the disclosure in fact regarded that disclosure as confidential and, if there was an expectation of confidentiality, whether the law will sanction that expectation.”

Conclusion

Whether the disclosure of confidential information to a third party will result in the waiver of an otherwise applicable attorney-client privilege may depend on the role the third party has with the client, such that the third party can be considered a “functional equivalent” of an employee of the client, a “facilitator” in the provision of legal advice, or based on the expectations of the parties. The outcome of this sensitive determination will likely depend on the approach adopted by the court, which cannot always be predicted. Consequently, any assumption that communications and information shared with non-attorney professionals will remain privileged may be incorrect and each such communication should be carefully considered by bankruptcy attorneys before it is made.

Norman N. Kinel is a partner in the New York office of Lowenstein Sandler LLP's Bankruptcy, Financial Reorganization & Creditors' Rights Department Terence D. Watson is counsel in the firm's Roseland, NJ, office.

It is virtually a given in all but the smallest Chapter 11 bankruptcies that financial advisers and/or investment bankers will be retained to assist in the representation of the debtor or any official committee. Bankruptcy attorneys rely on the expertise and assistance of these other professionals in addressing virtually every issue that arises in a case, including debtor-in-possession financing, assumption and rejection of executory contracts and leases, formulation and confirmation of a plan of reorganization or liquidation, and selling some or substantially all of the debtor's assets under section 363 of the Bankruptcy Code. Indeed, bankruptcy attorneys will provide legal advice to their clients based, at least in part, on the information and opinions obtained from other court-appointed non-attorney professionals. Consequently, a successful Chapter 11 representation requires a close working relationship between the client's attorneys and non-attorney professionals, and the latter are generally kept fully abreast of the attorney's strategies on behalf of their common client.

Many bankruptcy attorneys assume that otherwise privileged communications that are shared with non-attorney professionals are privileged, or that the disclosure of such privileged information in the presence of non-attorney professionals will not result in the waiver of any applicable privilege. However, where a communication otherwise protected by the attorney-client privilege is disclosed to, or made in the presence of a third party, the communication may no longer be, or deemed never to have been considered privileged. See, e.g., Westinghouse Elec. Corp. v. Republic of Philippines , 951 F.2d 1414, 1424 (3d Cir. 1991) (“voluntary disclosure to a third party of purportedly privileged communications has long been considered inconsistent with an assertion of the privilege.”). This raises significant issues in the bankruptcy context, where bankruptcy attorneys regularly exchange information with other court-appointed professionals who are not their clients or employees of their law firms.

The disclosure of an attorney's work product to a third party “does not necessarily waive the protection of the work-product doctrine,” since it is “only in cases in which the material is disclosed in a manner inconsistent with keeping it from an adversary that the work-product doctrine is waived.” In re Chevron Corp ., 633 F.3d 153, 165 (3d Cir. 2010). In other words, to the extent litigation is anticipated, the work product doctrine would apply to protect against the disclosure of documents revealing attorney strategy, even if the document had been provided to or created by an adviser acting at the committee's direction. Fed. R. Civ. P. 26(b)(3)(A) (protecting “documents ' prepared by another party or its representatives ' .”).

The disclosure of information protected by the attorney-client privilege, however, can be far more problematic. These discussions take place with and without the presence of the client, and are likely to involve the most significant strategic issues in a case. As discussed below, whether the disclosure of otherwise privileged communications to, or in the presence of non-attorney professionals will result in a waiver of the attorney-client privilege will likely depend on the approach used by the court.

The Functional Equivalent Approach

The attorney-client privilege applies to: “(1) a communication (2) made between privileged persons (3) in confidence (4) for the purpose of obtaining or providing legal assistance for the client.” In re Teleglobe Communications, Corp., 493 F.3d 345, 359 (3d Cir. 2007). The burden of proof is on the party asserting a privilege, and privileges are strictly construed. U.S. v. Rockwell Intern ., 897 F.2d 1255, 1264 (3d Cir. 1990). However, certain courts have held that the disclosure of confidential information to a third party does not result in the waiver of the attorney-client privilege where the third party is the “functional equivalent” of the client's employee. This approach derives from the Supreme Court's decision in Upjohn Co. v. United States , 449 U.S. 383 (1981).

For example, in In re Bieter Co., 16 F.3d 929 (8th Cir. 1984), the disclosure of confidential information to an independent consultant hired by a company did not result in the waiver of the attorney-client privilege because: 1) the consultant was the functional equivalent of the client's employee; 2) the communications at issue were within the scope of the consultant's duties; 3) the communications were made at the behest of the consultant's client; and 4) the communications were made for the purpose of seeking legal advice for the client. Under these circumstances, the court found that there was “no principled basis to distinguish [the consultant's] role from that of an employee” and that “his involvement in the subject of the litigation [made] him precisely the sort of person with whom a lawyer would wish to confer confidentially in order to understand [the client's] reasons for seeking representation.”

In Export-Import Bank of the United States v. Asia Pulp & Paper Co., Ltd. , 232 F.R.D. 103 (S.D.N.Y. 2005), however, the court held that the attorney-client privilege did not extend to communications shared with a corporation's financial adviser, even though the adviser spent 80% of his time working on the client's business. The fact that the consultant had an active consulting practice involving other clients, and had an office in another city, was held to “contradict the picture of [the consultant] as so fully integrated into [the company's] hierarchy as to be a de facto employee.” 232 F.R.D. at 113-4.

The Facilitator Approach

Other courts consider a third party to be within the scope of the attorney-client privilege where the third party “facilitates” the attorney's provision of legal advice. This approach derives from the Second Circuit's decision in U.S. v Kovel, 296 F.2d 918 (2d Cir. 1961).

Kovel involved communications made by the client to a non-attorney employee of a law firm that was representing the client in connection with an IRS investigation. The non-attorney (Kovel) acknowledged that he received a statement of assets and liabilities from the client, but refused to answer, on the basis of the attorney-client privilege, questions seeking to determine the reason why he obtained the statements, whether he discussed them with the client, or gave the client any information regarding the IRS investigation, or what the client said to him regarding relevant transactions. 296 F.2d at 919. The district court directed Kovel to answer the questions on the basis that the communications were not privileged because he was not an attorney, and the court held him in contempt when he refused to answer.

The Second Circuit noted the absence of any policy justification to extend the attorney-client privilege to communications between a client and a non-attorney, while acknowledging the “complexities of modern existence [that] prevent attorneys from effectively handling clients' affairs without the help of others.” Id. at 921. Although the IRS did not dispute that “the privilege covers communications to non-lawyer employees with 'a menial or ministerial responsibility that involves relating communications to an attorney,'” the Second Circuit refused to “regard the privilege as confined to 'menial or ministerial' employees,” and opined that the privilege should extend to situations such as where the attorney requires a foreign language translator in order to provide the client with proper legal advice.” Id. The court then noted that:

This analogy of the client speaking a foreign language is by no means irrelevant to the appeal at hand. Accounting concepts are a foreign language to some lawyers in almost all cases, and to almost all lawyers in some cases. Hence the presence of an accountant, whether hired by the lawyer or by the client, while the client is relating a complicated tax story to the lawyer, ought not destroy the privilege, any more than would that of the linguist ' ; the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit ' .

296 F.2d at 922.

Thus, maintaining the attorney-client privilege under Kovel and its progeny requires that the non-attorney act as an interpreter, or otherwise facilitate the provision of legal advice to the client.

For example, in In re Fibermark, Inc., 330 B.R. 480 (Bankr. D. Vt. 2005), the court resolved a request to unseal an examiner's report that contained confidential information, including accusations of breached fiduciary duties. Certain parties argued that portions of the examiner's report were protected by the attorney-client privilege and the work product doctrine. Id. at 488. The court held that the presence of a financial adviser during meetings of the creditors' committee did not automatically destroy the attorney-client privilege, but that only those communications made in confidence to the committee for the purpose of obtaining or providing legal advice were protected. If a communication was merely to aid the committee in making a business decision, the court found that it fell outside the scope of the attorney-client privilege. Thus, the court declined to redact references to discussions in which committee counsel conferred with co-counsel, committee advisers, or individual committee members about their divergent opinions regarding the debtor's post-confirmation corporate governance, because the court did not view these issues as raising ”legal issues on behalf of its client,” the committee. However, where committee counsel communicated with the committee chair or co-counsel regarding the committee's obligation to disclose suspected violations of a trading order, that activity was a duty of the committee and the court deemed the communications privileged.

Similarly, in Urban Box Office Network, Inc. v. Interfase Managers, L.P., 2006 WL 1004472 (S.D.N.Y., April 17, 2006), the court applied the Kovel doctrine to find several communications privileged, including: 1) an e-mail seeking information from plaintiff's advisers for counsel's use in litigation; 2) a communication between counsel and plaintiff's financial adviser, which the court found to “provide the benefit of legal insight and advice”; and 3) a draft disclosure schedule sent from counsel to plaintiff's financial adviser, the “completeness and accuracy [of which] clearly had legal implications with which the attorneys would be concerned.” 2006 WL 1004472 at * 6-7.

Courts applying the facilitator approach, however, have refused to apply the Kovel doctrine where the non-attorney was not acting as an interpreter or facilitator. For example, in United States v Ackert, 169 F.3d 136 (2d Cir. 1999), in-house tax counsel sought the advice of an investment banker (Ackert), and initiated discussions to “learn more about the details of [a] proposed transaction and its potential tax consequences so that he could advise his client, Paramount, about the legal and financial implications of the transaction.” Id. at 138. The Second Circuit held that the attorney-client privilege did not protect communications between the tax counsel and Ackert because “Ackert's role was not as a translator or interpreter of client communications.” Id. at 139'140.

The court noted that “a communication between an attorney and a third party does not become shielded by the attorney-client privilege solely because the communication proves important to the attorney's ability to represent the client.” Id. Rather, the Kovel doctrine is limited to situations where “the purpose of the third party's participation is to improve the comprehension of the communications between attorney and client.” Id. Consequently, the court held that the Kovel doctrine was inapplicable where, as in Ackert, counsel “was not relying on [the investment banker] to translate or interpret information given” by the client, but instead [the investment banker] was simply providing information that the client did not have. Id. at 140. Indeed, the Second Circuit declined to apply the Kovel doctrine to the communications at issue in Ackert “notwithstanding [the court's] assumption that those conversations significantly assisted the attorney in giving his client legal advice about its tax situation.” 169 F.3d at 139.

Courts applying the facilitator approach have also refused to apply the Kovel doctrine where the subject communications were made to facilitate advice from the non-attorney. For example, in In re G-1 Holdings , 218 F.R.D. 428 (D.N.J. 2003), the debtor submitted a declaration in support of its claim of privilege over communications exchanged between the debtors' counsel and accountant, which stated that:

Mr. Baldasaro [the accountant] assisted us in understanding the tax and tax accounting ramifications of the proposed structure, which assistance was necessary in order for us to provide legal advice and counsel to the senior management of [the debtors].

218 F.R.D. at 435.

The court, however, held that the documents were not privileged because the accountant was retained for his tax expertise, rather than to act as an interpreter or translator. In this regard, the court noted that:

There is no evidence that GAF hired Baldasaro to sit with GAF employees and define tax concepts to attorneys unschooled in tax and accounting, or vice versa. If GAF hired Baldasaro for Baldasaro's expertise, then GAF sought Baldasaro's independent tax advice, not his help as a translator defining complicated accounting concepts. Communication between an attorney and a third party does not become shielded by the attorney-client privilege solely because the communication proves important to the ability to represent the client.

Similarly, in Louisiana Mun. Police Employees Retirements System v. Sealed Air Corp. , 253 F.R.D. 300 (D.N.J. 2008), the court ruled that because the investment banker “was not retained to facilitate the attorney-client relationship, the information was not protected under the Kovel doctrine.” Id . at 314. Likewise, in Dahl v. Bain Capital Partners, LLC , 714 F.Supp.2d 225 (D. Mass. 2010), the court held that any applicable privileges were waived with respect to documents that were forwarded to a financial adviser in order to obtain the financial adviser's “feedback.”

The Delaware Chancery Court Approach

The Delaware Chancery Court in 3Com Corp. v. Diamond II Holdings, Inc., 2010 WL 2280734 (Del. Ch. May 31, 2010), adopted a third, more liberal approach, which relies on the expectations of the parties, and provides greater flexibility for protecting confidential communications with financial advisers and other consultants. Under this approach, the court does not require that the financial adviser be the functional equivalent of an employee, or that the adviser interpreted or facilitated the provision of legal advice to the client. Rather, the court determines whether the adviser was involved in communications regarding legal matters. If so, the communication generally remains privileged, regardless of its disclosure to the financial adviser. This approach is consistent with Delaware law, under which the court determines “whether in the circumstances the person making the disclosure in fact regarded that disclosure as confidential and, if there was an expectation of confidentiality, whether the law will sanction that expectation.”

Conclusion

Whether the disclosure of confidential information to a third party will result in the waiver of an otherwise applicable attorney-client privilege may depend on the role the third party has with the client, such that the third party can be considered a “functional equivalent” of an employee of the client, a “facilitator” in the provision of legal advice, or based on the expectations of the parties. The outcome of this sensitive determination will likely depend on the approach adopted by the court, which cannot always be predicted. Consequently, any assumption that communications and information shared with non-attorney professionals will remain privileged may be incorrect and each such communication should be carefully considered by bankruptcy attorneys before it is made.

Norman N. Kinel is a partner in the New York office of Lowenstein Sandler LLP's Bankruptcy, Financial Reorganization & Creditors' Rights Department Terence D. Watson is counsel in the firm's Roseland, NJ, office.