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the decisions. The DIP and its constituents are not required to be disinterested. Attorneys taking direction from interested insider management are not substitutes for the trustees Congress deliberately did not require, and ethically cannot be so. But they can and should develop "client control" through advising the client on the parameters of available alternatives and remedies, and not allowing a client to dictate activity in a case inconsistent with legal requirements. Lawyers can and must take care to assure that representations to the court are accurate. They must aggressively require clients to provide evidence supporting questionable positions on key issues.
2. Vigorous advocacy is ethical and appropriate in bankruptcy as in other cases, as long as it meets Rule 11 standards with a good faith basis for the facts and law asserted on positions taken for reasons other than harassment or delay. In Chapter 11 cases, good faith turns in part on whether reorganization is still possible. Thus, acquiescing in and carrying out a client's "scorched earth" strategy or otherwise assisting insiders in actions detrimental to the estate and creditors, if it is shown that counsel knows reorganization is hopeless, likely would not meet the good faith standards of ethics and Bankruptcy Rule 9011. Pursuing a plan that benefits insiders, at the considerable expense of the arms-length creditors, may also exceed the boundaries of good faith in some circumstances, and be considered DIP self-dealing. Acquiescing in DIP management selfdealing, without any attempt at counselling and without full disclosure to the court and creditors of insider involvement in (and benefit from) transactions, is a breach of DIP
This outline is adapted from Chapter 27, Ethical Responsibilities, Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
