Ethics: Debtor’s Counsel and Management Duties in Multiple-Company Cases
by Matthew A. Cantor
Kirkland & Ellis LLP; New York
Duties of Directors and Officers of Financially Solvent Corporation
When a corporation is solvent, its directors and officers owe the following fiduciary duties to the company and its shareholders.
- Duty of Loyalty
- The duty of loyalty (i) requires directors and officers to act in good faith and in the honest belief that the action taken is in the best interests of the corporation and (ii) prohibits self-dealing. The duty of loyalty mandates that the best interests of the corporation and its shareholders take precedence over any interest that is possessed by a director, officer or controlling shareholder, but not shared by shareholders generally.
- Duty of Care
- Directors and officers must act in a fully informed and considered manner. Consistent with their duty of care, directors must (i) inform themselves of all material information reasonably available to them prior to making a business decision and (ii) act with the care an ordinarily prudent person in a like position would use under similar circumstances.
Read the full outline. (Materials from the 2006 New York City Bankruptcy Conference)
Conflicts of Interest Issues Involving Committee Members
by Irving E. Walker, G. David Dean, Korey Q. Pirouz
Saul Ewing, LLP; Baltimore
Section 1102(a)(1) of the Bankruptcy Code provides for the U.S. Trustee to appoint an unsecured creditors’ committee and, in appropriate cases, additional creditors’ committees or equity committees. Once appointed, a committee member owes a fiduciary duty to the entire body of creditors or interest-holders represented by that committee. See, e.g., Westmoreland Human Opportunities, Inc. v. Walsh, 246 F.3d 233, 256 (3d Cir. 2001). It has been said that committee members must have undivided loyalty to those whom they represent without any conflicts of interest. See Woods v. City National Bank, 312 U.S. 262, 269 (U.S. 1941). In addition, a committee member’s fiduciary duty requires the member to maintain confidentiality and to avoid conflicts of interest that would affect the member’s ability to serve on the committee and to fulfill the member's duty to the group. 7 Collier on Bankruptcy 1103.05[2][a]-[b] (15th Ed. Rev. 2006).
Read the full outline. (Materials from Bankruptcy 2006: Views from the Bench)
Agenda for the 2006 Winter Leadership Conference
The Commercial Fraud Task Force and Ethics committees will hold the joint presentation, “‘Adequate Protection’ of the Attorney-Client Privilege and Other ‘Secrets’ in the Digital Age,” on Friday, Dec. 1 from 9:30 - 11:00 am. "Privileges" provided by the Federal Rules of Evidence are under attack. Who are the culprits? Who are the targets? Attorneys? Other professionals? Clients? Learn about the hazards, and the solutions, which can be found in the developing universe of electronically shared and stored information from a federal judge intimately involved in the formulation of new Federal Rules of Civil Procedure (effective on December 1, 2006), and from other essential participants in the process. Speakers will include Lorenzo Mendizabal (moderator Epiq Systems Inc.; New York), U.S. Magistrate Judge Ronald J. Hedges (D. N.J.), Ira L. Herman (Thompson & Knight LLP; New York) and Steve Katzman (U.S. Trustee, Region 15, and acting U.S. Trustee, Region 16; Los Angeles).