Lowenstein Sandler PC; Roseland, N.J.
Wojciech F. Jung
Lowenstein Sandler PC; Roseland, N.J.
In a recent decision in the chapter 11 case of Project Orange Associates LLC,[2] the court confronted an important issue that often arises in bankruptcy cases: whether the use of conflicts counsel is sufficient to permit court approval under § 327(a) of the Bankruptcy Code of a debtor’s choice for general bankruptcy counsel that also represents an important creditor of the debtor in unrelated matters. Here, the conflict involved the debtor's largest unsecured creditor and an essential supplier. The Office of the U.S. Trustee objected to Project Orange’sproposed retention of lead counsel based on the existence of the conflict and, further argued that proposed counsel’s conflict was inadequately disclosed in court documents. The court, in denying the retention, focused on the debtor’s proposed counsel’s conflict. The court noted that the proposed counsel acknowledged that resolving all past and future issues with the debtor’s largest unsecured creditor (and a key supplier) was critical to the debtor’s successful reorganization efforts. Because that creditor was essential to the viability of the debtor’s business and plan confirmation, the court reasoned that the debtor’s use of conflicts counsel to deal with issues relating to this creditor would not alleviate the lead counsel’s requirement to be “disinterested” within the purview of § 101(14) of the Code.
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Recent Second and Ninth Circuit opinions highlight the dispute over whether the Bankruptcy Code authorizes allowance of claims for post-petition legal fees incurred by unsecured creditors. Specifically, while not all circuits agree, in the wake of the 2007 U.S. Supreme Court decision, Travelers Casualty & Surety Co. of North America v. Pacific Gas & Electric Co., 549 U.S. 443 (2007), these recent cases support the theory that unsecured creditors can be paid post-petition legal fees when the contract creating the claim creates a right to payment of fees under applicable state law.
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You have been hired to represent a secured lender in a bankruptcy case. Thankfully, the lender took a lien on collateral with a value greatly exceeding the amount of the debt, and the loan documents provide coverage for legal fees and expenses. It looks as though this gives you plenty of room to participate in this case and have your fees and expenses reimbursed out of the proceeds of the collateral. There are some issues to consider that will not be addressed in this article such as whether your client will be able to recover default interest, late charges and pre-payment penalties as well as whether the specific language of the loan documents allows recovery of fees and expenses for the work performed in the bankruptcy proceeding. Be mindful that the client can only be reimbursed for the fees and expenses actually paid to you for services rendered. This article will discuss how the other parties who will be impacted by the amount of the lender’s secured claim (debtor, trustee and unsecured creditors) may use 11 U.S.C. § 506(b) to limit the amount of that secured claim.
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Judith Greenstone Miller (Jaffe, Raitt, Heuer & Weiss PC; Southfield, Mich.), Stuart Gold (Gold Lange & Majoros PC; Southfield, Mich.) and Clarkson McDow (Office of the U.S. Trustee, Region 4; Columbia, S.C.), co-chairs of the newly combined Ethics and Professional Compensation Committee, announce the new leadership team for the committee. Richard Carmody (Adams & Reese LLP; Birmingham, Ala.) is serving as Newsletter Editor with assistance from Peter Bergan of Miller Canfield. Listserve Facilitator is Val Venable (SABIC Innovative Plastics; Huntersville, N.C). The Special Projects Leader is Theresa Brown-Edwards (Potter Anderson Coroon LLP; Wilmington, Del.). John Weiss (Alston & Bird LLP; New York) will serve as Member Relations Director. The duties of the Education Director will be shared by Kelly Beaudin Stapleton (MorrisAnderson & Associates; New York) and Steven Schwaber (Law Office of Steven A. Schwaber; San Marino, Calif.).
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ABI's 7th Annual Complex Financial Restructuring Program will be held September 20 at the Fordham University School of Law in New York. This program offers a unique opportunity to gain an understanding of the various roles played by investment bankers, financial advisors and others representing stakeholders in today's complex cases. This year's hypothetical case of "Vandelay Industries Inc." will be dramatized by parties-in-interest as they examine strategic alternatives and seek the highest value for a troubled company. Throughout the one-day program, experienced professionals from the fields of finance, investment banking, accounting, law and turnaround play the roles of the constituents - company board, management, secured debt, trade creditors, attorneys and advisors, the government and others. From the decision concerning whether to file for bankruptcy through the exit strategy, the parties grapple with the real-world problems in real-time. Their positions frequently conflict and the debates can be heated, just as in today's cases.
This year will also mark the First Annual Anthony H.N. Schnelling Lecture in Commercial Bankruptcy. The lecture will feature a leading figure in the restructuring world, as a tribute to the memory of Tony Schnelling, a former ABI Vice President-Development. The first lecturer will be Hon. Burton R. Lifland, who, like Tony, is an alumnus of Fordham University School of Law.
Don't miss this unique, interactive event. Register today!
The ABI is pleased to join the New York University School of Law and the NYU Center for Law & Business to present this year's 36th Annual Lawrence P. King and Charles Seligson Workshop on Bankruptcy and Business Reorganization on September 22-23 in New York. This two day-long workshop includes a Basic Program designed for entry-level business bankruptcy lawyers, general practitioners and business professionals, as well as an Advanced Program for experienced practitioners and financial professionals. The program will again address the topics that practitioners need - fundamental business bankruptcy as well as advanced panels covering current issues. Click here to register today.
