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both permitted by law and the client is independently represented in making the agreement.
5. The Third Circuit affirmed retention of the debtor's financial advisor
with an indemnity from the advisor's own negligence in United Artists Theatre Co. v. Walton. The court evaluated the indemnity from a market perspective and noted that indemnities have become common after the Merry-Go-Round settlement of negligent claims against the debtor's accountants. But being common does not make provisions reasonable as required under Code §328. The court evaluated reasonableness from the perspective of Delaware corporate law, focusing on the process of (1) having no personal interest; (2) having a reasonable awareness of all material information reasonably available after considering alternative options, and (3) providing advice in good faith. The court required that gross negligence be carved out of the indemnity, and rejected a contract term that would have required indemnity if gross negligence was not judicially determined to be the sole source of damages; contractual disputes were likewise carved out of the indemnity.
A. Source of Retainer.
1. Courts have required refunds of retainers deemed so large as to adversely affect the DIP's critical cash flow. The court may also require a retainer be refunded if it is paid from a source deemed inappropriate. To the extent a secured creditor is deemed to hold an interest in the debtor's cash prepetition or postpetition, that cash may
not be available to pay attorneys' fees or a retainer, absent creditor consent or a showing of
This outline is adapted from Chapter 27, Ethical Responsibilities, Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
