Proofs of Claim: Attorney Signatures and the Risk of Loss of Privileges
Preparing a proof of claim is a relatively easy task. As one court has noted, the proof of claim form is not elaborately detailed and may take only five minutes to complete.1 This simple task can result in extremely adverse consequences for a creditor and its counsel, if counsel, as opposed to the creditor-client, signs the proof of claim form. This problem is of relatively recent vintage, and arises out of an amendment to Official Form 10, the proof of claim form. In 2011, section 8 of the proof of claim form was revised to include a signature requirement, which contains a declaration under penalty of perjury that the information provided “is true and correct to the best of my knowledge, information, and belief.” The 2011 Advisory Committee Note to Official Form 10 provides that this revision was done “to impress upon the filer the duty of care that must be exercised in filing a proof of claim.” However, the change in the signature block has more far reaching consequences, intended or otherwise.
Prior to the amendment, the form simply provided a signature block for the creditor or other person authorized to file the claim. It was not uncommon for the claim form to be signed by counsel, whether outside counsel or in-house counsel. Proofs of claim were analogized to complaints in civil actions,2 which complaints are signed by counsel, with no requirement that they be signed under penalty of perjury. Like a complaint, the proof of claim, whether signed by counsel or the client, was subject to (and remains subject to following the amendment) the strictures of Fed. R. Bankr. P. 9011(b). This rule requires, among other things, that the claim be warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law, and that the allegations in the claim have evidentiary support or be likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. Why this duty of care was not sufficient for proofs of claim is not explained in the Advisory Committee Note.
By engrafting the requirement that the proof of claim be signed under penalty of perjury, does an attorney who signs the proof of claim waive the attorney client and work product privileges and render himself or herself available as a witness with respect to the underlying facts alleged in or upon which the proof of claim is based? In a recent unpublished decision, In re Rodriguez(“Rodriguez”),3 the Honorable Marvin Isgur, concluded that such was the case.
In Rodriguez, an attorney for petitioning creditors signed proofs of claim on their behalf. Objections to the proofs of claim were filed and consolidated with an adversary proceeding. During the course of the adversary proceeding, the attorney who signed the proof of claim was deposed by a party-defendant in the adversary proceeding. The party conducting the deposition took the position that by signing the proof of claim, the attorney for the petitioning creditors made himself a fact witness with respect to the allegations in the proof of claim. The attorney refused to answer a number of questions on the grounds that they sought information protected by the attorney client and attorney work product privileges. A motion to compel discovery responses was filed in response to these objections. The Court granted the motion to compel, and found that the attorney had waived both the attorney client and work product privilege.4 The Court examined attorney-client privilege issues under Texas law, and work product privilege issues under federal law.5 This said, the Court’s reasoning makes the decision applicable to virtually any scenario where an attorney signs a proof of claim. In granting the motion, the Court noted the following in explaining the rationale for its ruling:
a proof of claim is distinguishable from a complaint because a complaint is not prima facie evidence of the facts asserted therein, whereas a properly filed proof of claim is prima facie evidence as to the claim’s validity;6
a proof of claim signed under penalty of perjury is analogous to an affidavit, and there is case authority holding that an attorney who serves as an affiant waives the privilege with respect to the representations in the affidavit;7
signing a proof of claim is an assertion by the signatory of personal knowledge of the facts alleged in the claim;
by signing the proof of claim, the attorney becomes a fact witness as to the allegations contained in the proof of claim.
The Court addressed a variety of categories that became fair game as a result of the attorney’s having signed the proof of claim. The Court allowed inquiry into the attorney’s activities investigating the merits of the claim before he signed it; the factual basis for the allegations in the claim; questions concerning documents used in support of the claim; and whether the attorney was aware of facts and events during time periods in which the claim arose. However, the Court held that questions about the lawyer’s legal opinions, legal research, and thoughts did not have to be answered and were still protected by the work product privilege.8
If a creditor’s counsel has signed a proof of claim, there are arguments that can be raised in response to an argument that the privilege has been waived. For example, the privilege is held by the client, not the attorney.9 Thus, absent a showing of express or at least implied consent to a waiver, the privilege can still be asserted. Where work product is sought, Fed. R. Civ. P. 26(b)(3), made applicable by Fed. R. Bankr. P. 7026, restricts production unless a party “is unable, without undue hardship, to obtain the substantial equivalent of the materials by other means.” A court may rely upon this rule to limit the scope of the discovery sought. Even if discovery is allowed, there will be issues concerning the scope of the waiver. Unlike a complaint, the proof of claim form requires very limited information about the underlying claim to be provided. There is a box to fill in for the claim amount, and while there is a box that requires information for the basis for the claim, the instructions to the claim form say: “State the type of debt or how it was incurred.” The typical response filled in by creditors is often very limited in scope. The claim form also requires documents that support the claim to be attached. Does attaching documents require the attorney signatory to attest to details he/she learned about the documents? No doubt an attorney/deponent will seek to limit the scope of the answer, such as by seeking to restrict the testimony by simply saying that these are documents that were provided by the client. What is fair game for questioning will be clarified by future decisions, but it is likely that courts will have to deal with discovery disputes arising out of these circumstances.
The Rodriguez case underscores the need for creditors to be vigilant in preparing proofs of claim before the bar date so as to avoid the need for counsel, rather than the client, having to sign the document. Other courts may very well choose to follow Rodriguez, and the consequences of a waiver can be devastating. It may allow for disclosure of facts that compromise the allowance or amount of the claim, create exposure for the creditor’s counsel, and may dramatically increase the cost of the litigation if disputes over the scope of the waiver ensue. Debtor’s counsel may use the threat of conducting a deposition for strategic advantage as a basis for driving a more favorable resolution of a disputed claim. Thus, it is extremely unwise for outside counsel or in-house counsel to sign a proof of claim form. This task should be delegated to a business person who the creditor’s counsel would intend to use as a witness in the event the claim is contested.
1 LTV Corp. v. Gulf States Steel, Inc. of Alabama, 969 F.2d 1050, 1058 (D.C. Cir. 1992) (citing In re Great W. Cities, Inc., 88 B.R. 109, 114 (Bankr. N.D. Tex. 1988)).
2 In re Simmons, 765 F.2d 547, 552 (5th Cir. 1985).
3 In re Rodriguez, 2013 WL 2450925 (Bankr. S.D. Tex. 2013).
4 2013 WL 2450925*3-6.
5 2013 WL 2450925*2.
6 Fed. R. Bankr. P. 3001(f).
7 Computer Network Corp. v. Spohler, 95 F.R.D. 500, 501-02 (D.D.C. Cir. 1982).
8 2013 WL 2450925*6.
9 In re Seagate Technology, LLC, 497 F. 3d 1360, 1372 (Fed. Cir. 2007).