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| vol 19, num 1 | April 2021 |
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| 2021 Letter from the Ethics & Professional Compensation Committee |
| As ABI President Hon. Barbara Houser has shared, ABI is committed to diversity and inclusion. In 2018, ABI formed a Diversity and Inclusion Working Group to address issues with diversity, including racial diversity, within ABI, its leadership and our industry. In connection with these efforts, ABI recently hosted a program on January 21, 2021, titled “Diversity in Insolvency: Putting Inclusive Ideas into Practice,” which
highlighted the many reasons why diversity and inclusion are important in our legal community. As the panelists explained, diversity and inclusion in the workplace lead to improved results and boost a business’s bottom line. The Ethics and Professional Compensation Committee wanted to take this moment to note that embracing diversity and promoting inclusion are also important components of fulfilling a lawyer’s ethical and professional responsibilities. |
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| Court Finds No Violation of Wells Fargo Conflict Waiver by Debtors’ Counsel |
| Hon. Christopher S. Sontchi approved the retention application of debtors’ counsel over the objection of the U.S. Trustee, finding that counsel (1) complied with the requirements for retention of professionals under § 327 of the Bankruptcy Code and (2) did not violate its conflict waiver with the debtors’ pre-petition ABL lender.
Background
On March 4, 2020, four days prior to the bankruptcy filings of Art Van Furniture, LLC and certain of its affiliates (the debtors), Benesch, Friedlander, Coplan & Aronoff LLP (Benesch) received a $250,000 retainer from the debtors for Benesch to represent the debtors in connection with their bankruptcy proceedings, as well as a specific consent (waiver) from Wells Fargo, N.A., the debtors’ pre-petition ABL lender, to solve for the fact that Benesch represented both the debtors and Wells Fargo in unrelated matters.
On the motion of the debtors, the court entered an order (interim cash-collateral order) authorizing the debtors to use cash collateral securing the debtors’ pre-petition ABL loan on March 11, 2020. The debtors submitted an application to retain Benesch as bankruptcy counsel on March 16, 2020, which disclosed that Wells Fargo was a current client of Benesch and that the wavier was in place as a result.
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| Show Me the Money: Subchapter V Trustee Compensation Is Based on Hourly Rates |
| How are subchapter V trustees compensated? The answer under the Code depends on whether the trustee is a standing or nonstanding subchapter V trustee. In reality, though, the answer should be the same in all cases, because, while 28 U.S.C. § 586(b) authorizes the appointment of “standing” trustees in subchapter V, so far all subchapter V cases have involved case-by-case, or nonstanding, trustees. No standing trustees have been appointed to date.
Assuming the subchapter V trustee is a nonstanding trustee, how should he or she be compensated? According to a recent case, In re Tri-State Roofing, subchapter V case-by-case trustees should be compensated on an hourly basis; such compensation is not tied to the amount of funds the trustee receives or disburses and is not capped.
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| Chapter 7 Trustees Take Caution: Court Details Reimbursement Limitations |
| The U.S. Bankruptcy Court for the Northern District of Georgia recently issued an opinion detailing the reimbursement limitations under the Bankruptcy Code for services provided by a trustee’s law firm in a chapter 7 case. In In re McConnell, the court denied the trustee’s request for attorneys’ fees and expenses because such services were either part of the trustee’s statutory duties under 11 U.S.C. § 704(a) or such services were not necessary or beneficial to the estate.
In McConnell, the debtor filed a voluntary chapter 7 petition on Oct. 28, 2019. A trustee was appointed and subsequently hired its own law firm as counsel. After a short period of time, the debtor moved to convert the case into a chapter 13 filing. Following the conversion, the trustee and the law firm filed an application for compensation and reimbursement of fees and expenses incurred as a result of the services they performed during the chapter 7 case.
The opinion focused on the services provided by the law firm and the court’s basis for denying the request for reimbursement. Among the services provided, the law firm reviewed files and documents relating to the financial state of the debtor, drafted a legal work memo regarding the debtor’s claimed exemptions, reviewed title examination reports of the debtor’s residence, reviewed and revised the trustee’s notice of interest in real estate, and served as lead counsel in opposition of the debtor’s motion to convert the case to chapter 13.
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| Register Today for ASM! |
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| ABI is pleased to announce the return of the Annual Spring Meeting April 12-22 — this year in a cutting-edge virtual format. Employing the same innovative platform that made last fall’s Insolvency 2020 event such an astounding success, this conference — always one of the most significant annual gatherings of bankruptcy and insolvency professionals in the country — will introduce a number of new and improved online networking features.
This year, the Ethics and Professional Compensation Committee will be partnering with the Mediation Committee to host a panel titled "When Mediation Gets Messy: Ethical Dilemmas."
Speakers for this panel include:
- B. Summer Chandler, Southern University Law Center; Baton Rouge, La.
- Russell M. Blain, Stichter, Riedel, Blain & Postler P.A.; Tampa, Fla.
- C. Edward Dobbs, Parker, Hudson, Rainer & Dobbs LLP; Atlanta, Ga.
- Hon. Joan N. Feeney (ret.), JAMS; Boston, Mass.
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