THE ETHICS OF REPRESENTING DEBTORS &
CREDITORS IN BANKRUPTCY

1. Some courts have said that even the most trivial and attenuated and outdated connections must be disclosed. But despite the broad directives, the actual connections on which courts have focused in cases sanctioning professionals for nondisclosure of connections (even without damage to the estate) have been within the legitimate scope of inquiry under the applicable statutory standard. At least one court expressly recognized that connections which are meaningless under the statutory tests for employment approval need not be disclosed. In Rusty Jones, the court noted it was not necessary for the debtor's counsel to disclose he had owned a hot dog stand 20 years before with one of the debtor's indirect owners, because that connection was remote, de minimus and irrelevant to a § 327 analysis.
2. What is important are connections that presently exist or recently existed between the attorney and the parties in interest, and also past connections of business or personal nature that are either related to the bankruptcy proceedings or could reasonably have an effect on the attorney's judgment in the case. This principle was indirectly recognized by the Second Circuit in Arlan's Dep't. Stores. DIP counsel argued in Arlan's that the predecessor to Rule 2014 required "disclosure only of present 'connections' that are 'adverse to the debtor'" and that "every large New York firm has had prior relations with almost every other large New York firm, and to require the specifications of all of these past associations would engulf the court in trivia." The court responded that the undisclosed fee sharing agreement at issue in the case was a connection that was "hardly

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