In In re Old BPSUSH, Case No 16-12373-KJC (Bankr. D. Del. June 20, 2019), U.S. Bankruptcy Judge Kevin J. Carey of the District of Delaware resolved a dispute over control of attorney-client and work-product privileges applicable to information generated in an investigation conducted on behalf of the corporate debtor’s former audit committee. He held that, in accordance with the confirmation order, plan and liquidation trust agreement, the audit committee’s privileges vested in the liquidation trust and the reorganized debtors on the effective date of the plan, and the liquidation trustee, in his capacity as litigation representative for the liquidation trust and the reorganized debtors, had the exclusive power and authority to assert or waive the privileges.

In August 2016, the audit committee for Performance Sports Group Ltd. retained independent counsel to conduct an internal investigation relating to issues raised by the company’s external auditor concerning whether senior financial management could be relied upon with respect to financial reporting and certifications. Counsel then engaged a forensic accounting and consulting firm to assist in the investigation. Together they collected over 6.6 terabytes of data and over 4.5 million documents, interviewed multiple witnesses, performed various financial analyses, and communicated regularly with the audit committee.

In May 2016, the company’s stockholders commenced a class action securities lawsuit against the company alleging that it made false or misleading statements and engaged in accounting manipulations. In October 2016, the company and its affiliates filed voluntary petitions for relief under Chapter 11. The following March, the law firm and the consulting firm made a presentation to the audit committee and the SEC. The debtors paid approximately $6.3 million to the law firm and the consulting firm for work they performed in connection with the investigation.