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make adequately informed decisions, and there is little risk of material prejudice if the contemplated resolution is unsuccessful; and (3) the lawyer reasonably believes the
common representation can be undertaken impartially and without improper effect on the responsibilities the lawyer has to the clients. The lawyer is to consult with each client throughout the representation to enable their adequately informed decisions, and is to withdraw if any of the clients requests or if any of the conditions warranting ethical joint representation is no longer satisfied. At that point the lawyer may not continue to represent any of the clients.
1. An "insider" and an "equity security holder" are not "disinterested." An "insider" includes a general partner of the debtor, and a director or officer of a debtor corporation. Some courts have allowed counsel or other professionals to represent the DIP despite a small number of shares of the publicly traded debtor being held by a firm member. But other courts have been much more strict, requiring disqualification despite firm attorneys' ownership of only a small percentage of the outstanding equity shares of the DIP, and despite firm members holding only the office of secretary to facilitate documentation of transactions. Most cases disqualifying counsel on these grounds involve larger equity roles in privately held debtors and service on the board directly and indirectly controlling the company. Counsel's actions during the case, including running for office
and placing people on the board of directors, may make him into an insider.
This outline is adapted from Chapter 27, Ethical Responsibilities, Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
