MEMORANDUM OF OPINION RE MOTION TO QUASH SUBPOENA AND SUBPOENA DUCES TECUM

In a hearing related to allowance of fees in the above case, the attorneys for the Defense Committee in the above case and companion litigation caused to be issued and served a Subpoena on the attorney for the Creditors Committee and certain members of the Creditors Committee demanding that they appear and testify and to bring with them all the records of the official Creditors Committee and all records of communications with Clyde C. Greco, Howard J. Barnhorst, II, and Timothy H. Fine in the Christian Life Center Bankruptcy Case.

Counsel for the Defense Committee has made allegations in the above case that there was a possible breach of duties by the counsel for the Creditors Committee. Essentially, that he may be seeking fees for work done for parties other than the Creditors Committee, and that his fees possibly should be questioned because of possible breach of duty. These allegations are set forth in Paragraphs Five and Six of a “Motion to Consolidate and Continue Section 331 Applications” filed with this Court on November 2, 1981. A copy is attached as Exhibit “A” as if set forth in full.

Attorney for the Creditors Committee indicates that pursuant to the Subpoena he would produce copies of all correspondence between himself and Mr. Barnhorst and Mr. Fine and two documents between himself and Mr. Greco in which parties other than himself or members of the Creditors Committee were the addressees or received copies. The attorney for the Creditors Committee indicates that he has numerous documents relating to communications between himself and official members of the Creditors Committee that fall into one or more of the following categories:

Attorney for the Creditors Committee refuses to produce documents in those four categories on the bases of attorney-client privilege and attorney work-product privilege. This same position is taken by the members of the Official Creditors Committee who were subpoenaed.

As to the attorney work-product privilege the only matter that it can relate to is Counsel’s Item Number “c” “My attorney’s notes of meetings of the Official Creditors Committee.” As to that category it is felt Counsel’s position is well taken. The real question is, does an attorney-client privilege exist between the Creditors Committee set up pursuant to Chapter 11 of the Bankruptcy Code and the Committee’s attorney.

The attorney for the Creditors Committee relies primarily upon claimed similarities in the cases of In re Prudence-Bonds Corp., 76 F.Supp. 643 (E.D.N.Y., 1948) and In re Scranton Corp., 37 F.R.D. 465 (N.D.Pa., 1965) and In re LTV’s Securities Litigation, 523 F.Supp. 819 (E.D.Tex., 1981) and Upjohn Company v. United States, 449 U.S. 383 , 101 S.Ct. 677 , 66 L.Ed.2d 584 (1981).

In the LTV Case we have a case of alleged corporation mismanagement and the corporation was allowed the attorney-client privilege as against its own share holders, and this Court has no quarrel with that ruling but finds it does not apply to the situation where there are allegations of misconduct on the part of an attorney of the Creditors Committee.

In the Upjohn Case, the attorney-client privilege was allowed where a corporation was accused of wrongdoing which again is not the circumstance we have here.

In the Prudence-Bonds Case there is a totally unrelated circumstance in allowing an attorney-client privilege between a trustee and his counsel wherein the Trust Agreement provided that any action under the agreement by the trustee in accordance with the opinion of counsel shall be conclusive on the corporation and on all holders of Prudence-Bonds issued hereunder and the trustee would be fully protected in respect to any such action. The special master stated that it was his job to interpret the indenture and determine if the trustee’s actions were right or wrong, and he did not think the opinion of counsel was material except for the fact that they might be material in exculpation of the trustee if he saw fit to offer them. The District Court approved of that statement. The case undoubtedly has no relevence to the one now pending before this Court.

In the Scranton Case a reorganization trustee was allowed the attorney-client privilege between himself and his special counsel relating to advice as to how the trustee should carry out his duties. In the Scranton Case the Court quoted from In Re Ducker, 6 Cir. 1905, 134 F. 43 which in part states “The trustee is the hand of the Court. He stands as its agent to liquidate the assets, to protect them and bring them before the Court for final distribution.” This trustee is a mover and a shaker. He can cause things to be done as is differentiated between a Creditors Committee created pursuant to Section 1103 of the Bankruptcy Code. Section 1103(c) sets forth the powers and duties of Creditors Committees and essentially they can consult, investigate and recommend. Their participation is for the benefit of all creditors and their reports should be available to all creditors. In the legislative history, it pointed out that Section 1103(c) of the Code essentially follows Bankruptcy Act Rule ll-29(a) which also provided for the committee to report to the creditors concerning the progress of the case. It would thus seem where the committee does not have the power to act or the title of a trustee that it wouldn’t need or deserve the attorney-client privilege since they should make their activities known to the other creditors and to the Court. If, however, it appears that the members of the committee acted contrary to their duties and contrary to the best interests of the creditors wherein their acts might be determined illegal then they should not seek or be entitled to the protection of the attorney-client privilege but should rely on the protection of the Fifth Amendment by refusing to testify or produce documents on the grounds that it might tend to incriminate them.

There is, of course, no work-product privilege of the individual members of the Creditors Committee.

This Memorandum of Opinion wherein it sets forth facts and conclusions shall be determined to be the facts and conclusions of this case and order shall be entered accordingly.

EXHIBIT A

MALCOLM A. MISURACA

MISURACA, BEYERS & COSTIN

900 College Avenue

Post Office Box 878

Santa Rosa, California 95402

Phone: (707) 545-0142

MIKE H. WELTY

RATCHFORD, SHORT & WELTY

141 North Street

Post Office Box 1006

Healdsburg, California 95448

Phone: (707) 433-4842

Counsel for the Christian Life Center

Litigation Defense Committee

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

Motion to Consolidate and Continue Section 331 Applications

The Christian Life Center Litigation Defense Committee moves for an order to continue all applications under Bankruptcy Code § 331 for attorney’s fees and costs, now set for November 19, 1981, to a date convenient to the Court, when all applications of the same nature by the Defense Committee and its clients may be consolidated with the November 19 applications.

This motion is made on the following grounds:

I declare under penalty of perjury that the foregoing is true and correct.

/s/ Malcolm A. Misuraca

Malcolm A. Misuraca

Order

On the motion of the Christian Life Center Litigation Defense Committee, and good cause appearing, the Court makes the following order:

IT IS HEREBY ORDERED THAT the motions for payment of fees and expenses previously set in this matter for November 19, 1981, are removed from the Court’s calendar, to be reset by the Court when all motions for fees and expenses, including those of the Defense Committee, may be heard together.

PROOF OF SERVICE BY MAIL

I am a citizen of the United States and a resident of the County of Sonoma. I am over the age of eighteen years and not a party to this action. My business address is 900 College Avenue, Santa Rosa, California 95404.

On November 2 . 1981. I served

MOTION TO CONSOLIDATE AND CONTINUE SECTION 331 APPLICATIONS on the other parties in this action, by placing a true copy thereof, encloséd in a sealed envelope with postage fully prepaid, in the United States Post Office mailbox at Santa Rosa, California, addressed as follows:

Allen F. Corotto

Securities and Exchange Commission

450 Golden Gate Avenue

San Francisco, California 94102

Leslie Tchaikovsky

Dinkelspiel, Donovan & Reder

One Embarcadero Center, 27th Floor

San Francisco, California 94111

Vincent O’Gara

601 Montgomery Street

Suite 1410

San Francisco, California 94111

I declare under penalty of perjury that the foregoing is true and correct.