by Ivy Grey
Davis Wright Tremaine, LLP; Portland, Ore.
When a client is willing and able to pay a hefty retainer up front, it is difficult to question the source. To keep that retainer, one must investigate any fact that could cause a reasonable person to question the client’s right to use the funds. Blindly accepting funds could lead to disgorgement, so inquire as to the source of the funds before accepting them in good faith. This duty to investigate is illustrated by In re Parklex Associates Inc. [1]
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by B. Keith Poston
Nelson Mullins Riley & Scarborough LLP; Columbia, S.C.
The following question was recently posed to the South Carolina Ethics Advisory Committee (the “committee”): As part of a confidential settlement agreement that does not require court approval, can the settling defendant require the plaintiff’s lawyer to not identify or use the defendant’s name for “commercial or commercially-related publicity purposes,” even if the matter is of public record and nothing was filed in the case under seal? [1] By these terms, the settling defendant essentially sought to “prevent…[plaintiff's lawyer] from advertising for clients in cases involving alleged similar conduct by this defendant.” [2] In Opinion 10-04, the committee found that such a condition placed an unfair restriction on a lawyer’s right to practice and his or her First Amendment right to advertise and solicit clients. [3]
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by Henry S. David
Snell & Wilmer LLP; Los Angeles
“Bad facts make [for] bad law.” [1] The flip side is that sometimes, easy facts make for easy decisions, but serve as a reminder of some basic rules. In In re Muscle Improvement Inc., [2] one of Judge Samuel L. Bufford’s (ret.) last decisions, presents an example of the latter.
In Muscle Improvement, the debtors had substantial disputes with Allstate Financial Group Inc., their primary creditor, which possessed the debtors’ funds and key records. [3] The debtors had been recommended to consult with attorney Haleh Naimi. Naimi, the debtors and John Michael, an Allstate representative, met for two hours. [4] After this first meeting, Naimi sent the debtors an engagement letter, but the debtors did not sign or return it. [5]
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by William J. Rameker
Murphy Desmond S.C.; Madison, Wis.
Erin A. West
Murphy Desmond S.C.; Madison, Wis.
Upon a chapter 11 filing, that fictional entity, the debtor in possession (DIP), is born. Distinct from the debtor itself, the DIP has duties, obligations and rights akin to the chapter 7 trustee. [1] All of the debtor’s property passes to the bankruptcy estate, with the DIP becoming a fiduciary of the estate, with a duty to creditors of the estate and a duty not to waste the estate’s assets. The DIP’s actions, including the DIP’s selection of counsel, are overseen by a bankruptcy court. [2] Typically, the DIP’s counsel is the same attorney who both prepared the petition and represents the Debtor in the bankruptcy. In most cases, attorneys face no real conflict of interest issues in representing both a debtor and the DIP. However, the line dividing the representation of the two is sometimes not so clear. This is especially the case in an individual chapter 11 filing.
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by Marta Alfonso
Morrison Brown Argiz & Farra LLP; Miami
The Federal District Court of New Jersey recently examined the reasonableness of professional fees to a prevailing party arising from lengthy litigation involving clean-up cost allocations of a New Jersey Superfund site. In reducing the prevailing party’s fee application, the District Court of New Jersey applied bankruptcy-court precedent [1] to establish billing increments of six minutes (e.g., a one-tenth of an hour). While noting that the district court allowed the use of block billing as long “as the listed activities reasonably corresponded to the number of hours billed,” [2] the court saw it appropriate to reduce the requested professional fees as they were hard to “pin down by task” and thus, difficult for the district court to perform a review of their reasonableness. Since the professional’s billing practices were confusing and had caused the need for the hearing, the court disallowed professional fees incurred in preparation of the application itself. [3] This article surveys bankruptcy-court precedent concerning the reasonableness of fee applications by bankruptcy professionals.
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