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2007 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

THE ETHICS OF REPRESENTING DEBTORS &
CREDITORS IN BANKRUPTCY

By Susan M. Freeman


3. In several instances, courts have also allowed counsel to represent the

DIP despite status as a creditor, if the attorney waives the claim. Again, other courts refuse

to sanction such proposals, and a few courts have allowed counsel to represent the DIP without requiring any corrective action.

4. Some courts have also allowed counsel to represent the DIP despite failure initially to seek court approval for the appointment, nunc pro tunc. Others have flatly disallowed fees for services performed prior to or without a court appointment order. Most courts have held that fees cannot be awarded on a quantum meruit basis or substantial contribution basis unless court approval of employment is obtained, initially or nunc pro tunc where such retroactive relief is available.


H. Disclosure is Mandatory.

  1. Bankruptcy Rule 2014 requires disclosure of "any proposed arrangements for compensation, and to the best of the applicant's knowledge, all of the person's connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee." The rule is much more comprehensive than the applicable statutes, 11 U.S.C. §§ 327 and 1103.
  2. "Connection" has been broadly construed. It is not for the DIP or its counsel to determine unilaterally whether a connection is relevant; the court is to review all connections and decide whether there are any disqualifying conflicts.

This outline is adapted from Chapter 27, Ethical Responsibilities, Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)

 

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