By Michael Hoenig - New York Law
Journal - February 10, 2015
A stimulating article in the Spring 2014 issue of Litigation
(the Journal of the American Bar Association's Section of
Litigation) posed an interesting question: "Does client
confidentiality live forever?"1 What if the client
dies? What if that death occurred 100 years ago? Rather
provocatively, the authors set up their discussion by referring
to Lizzie Borden, tried and acquitted of the 1892 murder in
Massachusetts of her father and stepmother. The case inspired a
Lizzy Borden took an axe
And gave her mother forty whacks.
When she saw what she had done
She gave her father forty one.
The authors inform us that Lizzie Borden's lead attorney's law
firm continues to maintain her client files in a confidential
manner. In contrast, the collection of notes kept by another
attorney on Borden's defense team were discovered by his
grandson who willed the client materials to the local
Massachusetts historical society to make them generally
accessible some 100 years after the murder trial. The authors
ask, "which is the right result?"2
It turns out that ethical obligations are one of the reasons
Lizzie Borden's lead lawyer's files continue to be kept locked
away. Attorneys at that firm considered sharing the files in the
1980s for use in a symposium on the Lizzie Borden trial.
However, they received a private letter from the Massachusetts
Board of Bar Overseers advising the firm that its ethical
obligations included the duty to protect the files'
confidentiality and even general information about the type of
materials within those files.3
In 1998, the U.S. Supreme Court, in
Swidler & Berlin v. United States,4 held
that the attorney-client privilege survives the death of the
client. The legal wrangle arose early during the so-called
"Whitewater" inquiry involving President Bill Clinton's firing
of White House Travel Office employees. Deputy White House
counsel Vince Foster sought legal advice from an attorney in
private practice, James Hamilton. Nine days later Foster
committed suicide. The independent counsel investigating Clinton
had the grand jury issue a subpoena for Hamilton's handwritten
notes. The Supreme Court held that Hamilton's notes did not have
to be produced since the attorney-client privilege survived
Foster's death. Indeed, the court noted that nearly every state
recognizes the survival of the privilege after the death of
client. Exceptions relate to disclosures needed to carry out the
client's intent regarding settlement of the estate.5
However, the Swidler case, which dealt with the death of a
natural person, did not answer questions regarding survival of
the attorney-client privilege when a corporation becomes
defunct. Corporations can cease to exist—in effect "die"—in a
variety of ways. Companies can cease to exist by operation of a
statute as, for example, because of failure to pay franchise
taxes, failure to deliver an annual report to the Secretary of
State, prolonged failure to maintain a registered agent, or an
expiration of the corporation's period of duration as stated in
its articles of incorporation. Although states give companies
some specified time to correct such administrative defects, the
company may elect to end its existence by accepting the
Corporate existence can also cease by fundamental changes to the
company's structure. Dissolution might occur through a court
order or state statute. Shareholders may act voluntarily to
dissolve the company. A merger can mean the end of a
corporation's existence since the merger combines two or more
business entities into one entity. A corporation also can "die"
through the sale of all of its assets which often is followed by
the company's dissolution.7 Bankruptcy, too, can lead
to the end of a company's existence but, here, the bankruptcy
trustee usually is held to assume the rights and powers formerly
held by corporate managers and, so, assumes all the bankrupt's
When a corporation "dies," what happens to the attorney-client
privilege? Does it die too? Is there a continuing right of
confidentiality inhering in the communications between the
company's officials and employees? Who can (or will) assert the
privilege against attempts to force disclosure? Do attorneys
whose files contain privileged communications of the defunct
corporation have to resist subpoenas, document requests and
other intrusions at all costs? If so, for how long?
Surprisingly, the case law is relatively scant and clear
boundaries have not been set.
A Pennsylvania Superior Court ruling issued just a month ago
seems to offer some clarification. The Jan. 13 intermediate
appellate decision grappled with the question whether a former
corporate attorney who was subpoenaed for documents related to
his legal work for three defunct companies had to comply and
produce the papers. The case is called
Red Vision Systems v. Nat'l Real Estate Information Services.9
The court observed that the question presented was an "issue of
first impression" in Pennsylvania, namely, "whether the
attorney-client privilege survives the dissolution of a business
entity."10 This factor caused the court to examine
case law and approaches in other jurisdictions. In turn, that
effort makes Red Vision a useful resource for all
practitioners interested in the issue.
Plaintiffs were affiliated companies providing real estate
services such as title searches to customers throughout the
United States. They sued defendants for failure to pay invoices
for services totaling some $500,000. After unsuccessful attempts
at service of process, plaintiffs learned that each defendant
was defunct and/or dissolved. Believing that defendants
transferred substantial assets to avoid paying creditors,
plaintiffs sought to obtain information about fraudulent asset
transfers and to identify possible sources of recovery. The only
possessor of information they knew was Thomas K. Lammert Jr. who
had been in-house counsel to each of the defendants.
Plaintiffs directed a subpoena to Lammert to testify and to
produce documents related to defendants' management personnel,
insurance coverage and asset transfers. Lammert filed a motion
to quash the subpoena claiming that many of the requested
documents were protected by the attorney-client privilege or
would require disclosure of sensitive information of third
parties subject to non-disclosure agreements. Lammert also said
he would incur "considerable burden and expense" in reviewing
and categorizing the records which were electronically stored.
Plaintiffs contested the existence of any privilege and agreed
to a protective order to limit plaintiffs' use of confidential
information. They also contended that Lammert failed to
demonstrate that compliance with the subpoena would be unduly
The trial court denied Lammert's motion, holding that
defendants' documents were not protected by the privilege
because defendants "no longer existed or had interests in need
of protection." Further, Lammert would not violate any
confidentiality agreements. Finally, because Lammert need not
concern himself with applicability of the privilege or
confidentiality agreement, Lammert could "blindly turn over" the
documents and thus not undergo any burdensome document review.
The intermediate appellate court entertained only two of
Lammert's questions: (1) Does the attorney-client privilege
survive dissolution of a limited liability company, limited
partnership, corporation or other legal entity, particularly
when the entity continues to be subject to suit? (2) Whether
former counsel to a dissolved entity may invoke the
attorney-client privilege on behalf of the entity? The appellate
court observed that there was no Pennsylvania case law on point
so it would consider other state and federal precedents "for
their persuasive value."11
The appellate court noted that the attorney-client privilege has
"deep historical roots" and is available to corporate clients.
The privilege extends to communications between the company's
attorney and agents or employees authorized to act on the
entity's behalf. Quoting from a U.S. Supreme Court decision,
Commodity Futures Trading Com'n v. Weintraub,12
the appellate court observed that the administration of the
attorney-client privilege in the case of corporations must be
undertaken by individuals empowered to act on behalf of the
company. For solvent corporations, the power to waive the
privilege rests with the company's management and is normally
exercised by its officers and directors.
When control passes to new management, the authority to assert
or waive the privilege passes as well. Thus, new managers
installed in a takeover, merger, loss of confidence by
shareholders, or simply normal succession may waive the
privilege as to communications made by former officers and
directors.13 In Weintraub, the Supreme Court
held that, because the role of the bankruptcy trustee was
analogous to a solvent corporation's management, the trustee
could waive the privilege as to pre-bankruptcy communications.
The attorney-client privilege is not "absolute" so the discharge
in a given case of respective, shifting proof burdens by the
person invoking the privilege and by the party seeking
disclosure is important.14
Lammert cited a number of cases where, despite the existence of
defunct companies or entities, the courts seemed to allow the
attorney-client privilege to be asserted.15 One was a
1979 New York decision,
Randy International v. Automatic Compactor,16
where the Civil Court held that the fact that corporations which
were judgment debtors were "defunct and no longer functioning or
operating" did not preclude them from invoking the
attorney-client privilege. Randy also held that it was
appropriate for the entity's former attorneys to raise the
privilege because under New York law, "the privilege may be
raised by anyone." However, the court held that the attorneys
did not meet their burden of showing that the information sought
was from confidential communications, and that it had been
received in the course of professional employment.17
Then the Red Vision court examined case law cited by the
plaintiffs.18 The appellate panel concluded that the
seeming rift in the case law did not amount to an application of
different rules of law. Rather, the "disparate results" turned
upon "differences in facts." The "key fact," said the court, is
whether the corporation is "dead" as opposed to being in some
other state, such as a windup phase, bankruptcy or liquidation,
or having merged into or been acquired by a successor. In the
latter cases "there was a person or entity which succeeded to
the defunct company's interests and authority to assert the
privilege." In a case of corporate "death," no such person or
Review of other cases cited by the litigants supported the
appellate court's conclusion that "the same basic legal concepts
underlie them, with the different results based on the factually
dissimilar statuses of the companies."20 The notion
that the continued existence of the corporation's privilege
turns on whether there is anyone with continued authority to
raise it is in accord with the Restatement (Third) of the Law
Governing Lawyers §73, Comment k, which provides: "[w]hen a
corporation or other organization has ceased to have a legal
existence such that no person can act on its behalf, ordinarily
the attorney-client privilege terminates …."21
Therefore, the court held that the attorney-client privilege
survives after a company dissolves and/or ceases normal business
operations "so long as the company retains some form of
continued existence evidenced by having someone with authority
to speak for the 'client.'" However, if a business is dissolved
and has neither a legal successor nor some remaining management
with authority to handle the company's post-dissolution windup,
then there is no longer any "client" to raise or waive the
privilege. Without such a client, it is impossible to satisfy
the burden of one invoking the privilege to show it has been
claimed and not waived. In this case, Lammert did not discharge
his burden of proof. He did not point to any person who
presently had authority to claim or waive the privilege.
Accordingly, the trial court's ruling was affirmed.
The Pennsylvania court's Red Vision opinion is informative in
plowing through a thicket of complexities regarding survival of
the attorney-client privilege when a corporation ceases to
exist. It likely will not be the last word on the subject.
Nevertheless, since many practical questions are raised in such
corporate "death" scenarios, the reader has a convenient
starting point with the recent decision along with the helpful
legal articles cited in this column.
1. A. Klinefelter & M. Laredo, "Is Confidentiality Really
Forever: Even if the Client Dies or Ceases to Exist?" 40 ABA
Litigation Journal, No. 3, pp. 1-10 (Spring 2014).
2. Id. at 1.
3. Id. at 5; see also Id. at 6-7 for additional discussion on
the Borden confidentiality issues.
4. 524 U.S. 399 (1998).
5. See discussion of Swidler in the Klinefelter &
Laredo article, supra n. 1 at 2-3.
6. Michael J. Riordan, "The Attorney-Client Privilege & The
'Posthumous' Corporation—Should the Privilege Apply?" 34 Texas
Tech L. Rev. 237 (2003).
7. Id. at 240-243.
8. Id. at 242-243. Apparently, some courts distinguish between a
trustee appointed under Chapter 7 to liquidate a defunct
corporation and the trustee who is appointed to assume
management responsibilities in an ongoing entity. Some courts
have held the Chapter 7 trustee to be a "liquidator of assets"
and having no rights, including that of asserting the
attorney-client privilege, other than those emanating only from
the sale of the assets. Id. at 244 n. 55 (citing and quoting
Paul R. Rice, Attorney-Client Privilege in the United States,
§4:42 (2d ed. 1999)).
9. 2015 Pa. Super. LEXIS 7 (Pa. Super. Jan. 13, 2015).
10. Id., LEXIS at *10.
11. Id., LEXIS at *11n.4.
12. 471 U.S. 343, 348-49 (1985).
13. Red Vision Systems, LEXIS at *12-*13.
14. Id., LEXIS at *16-*18.
15. Id., LEXIS at *19-*22 (discussing County of Santa Clara
v. Myers Industries, 1996 U.S. Dist. LEXIS 1341 (E.D. Pa.
Feb. 9, 1996) (claimed successor entity allowed to claim
privilege on behalf of defunct partnership "for the time
being"); PCS Nitrogen v. Ross Development, 2011 U.S.
Dist. LEXIS 93021 (D.S.C., Aug. 19, 2011) (since South Carolina
law permits dissolved corporation to be sued, it follows that
dissolved company could assert the privilege where former
directors or others properly exercise authority to do so);
Official Committee of Administrative Claimants v. Bricker,
2011 U.S. Dist. LEXIS 49504 (N.D. Ohio May 9, 201) (Pennsylvania
court did not view this case as an "aid in our determination"
because an Ohio statute expressly extends the privilege for
dissolved corporations; no equivalent in Pennsylvania).
16. 97 Misc.2d 977, 412 N.Y.S. 2d 995 (N.Y. Civ. Ct. 1979).
17. Red Vision, LEXIS at *21-*22 (discussing Randy
18. Id., LEXIS at *22-*26.
19. Id., LEXIS at *25-*26.
20. Id., LEXIS at *29.
21. Id., LEXIS at *30. The court also cited a treatise, 1
Testimonial Privileges, §1:74 (3d ed. 2014) which states: "For
organizations, the general rule is that when the organization
ceases to have legal existence, such that no one can act on its
behalf, the privilege terminates."
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