In re Crescent Resources Shows Attorney-Client Privilege Not Always Absolute

In re Crescent Resources Shows Attorney-Client Privilege Not Always Absolute

 

Attorneys are entrusted with a lot of sensitive information. The attorney-client privilege exists to allow clients to speak candidly with their attorneys. However, when the same attorney represents multiple parties, the privilege may not be so absolute. In the case of In re Crescent Resources, LLC, No. 09-11507 (Bankr. W.D. Tex. 7/22/11), Bankruptcy Judge Craig Gargotta was asked to decide who could access the attorney files in a billion dollar dispute. You can find the opinion here.

What Happened

Crescent Resources was a real estate development and management organization. It was formed by Duke Energy Corporation to manage and develop approximately 300,000 acres of real estate owned by Duke. Crescent grew over the years, eventually operating about 100 projects through over 120 entities. In 2006, Duke, Crescent and several real estate investment entities entered into a series of transactions where the Crescent entities pledged their assets to secure a loan from Bank of America in the amount of $1.225 billion, much of which was upstreamed to Duke.

By June 2009, the Crescent entities had filed for chapter 11 in Austin, Texas. The Court confirmed a plan which created a litigation trust. The litigation trust sued Duke Energy Corporation, et al alleging that the 2006 transaction rendered the debtors insolvent. Shortly after filing suit, Dan Bensimon, the litigation trustee, filed a motion to compel a firm named Robinson, Bradshaw & Hinton, P.A. (RBH) to turn over its files with regard to work done for the debtors. RBH responded that it had concerns about Duke's rights to keep the files confidential. After five months of procedural wrangling, the Court conducted a hearing and took the matter under advisement.

The files at issue fell into three categories: 1) pre-2006 files from the period when Crescent was a subsidiary of Duke; 2) files related to the 2006 transaction (known as Project Galaxy); and 3) files subsequent to 2006 when Crescent was no longer a Duke subsidiary.

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