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Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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My company filed for Chapter 11 and as Debtor-in-Possession,

Customer Question

My company filed for Chapter 11 and as Debtor-in-Possession, was represented by a by a particular attorney. When the creditor exercised its rights to seize the stock of my company, this attorney was discharged and I paid him $47,000 for the work he had done while I was the DIP. This attorney has now agreed to act as "special counsel" to the Chapter 7 Trustee (it's now a chap 7) to investigate and determine the feasibility of the Trustee recovering potential claims and/or causes of actions relating to preferential and/or fraudulant transfers. The Trustee has requested a hearing to approve this employment citing 11 USC 327 (a). I feel this is a gross conflict of interest and potential breach of confidentiality. I have drafted a Gen Aff to record my objection to the employment. What are my options? Do you think he is in direct violation of 11 USC 327(e)? What code can I cite in my defense?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 8 years ago.

Hello,

Thank you for your question. I am happy to assist you.

It does not appear to violate 11 USC 327 but does appear to be a clear violation of the lawyer's ethical duties.

Here is 11 USC 327 (e) - blue highlights added.


11 USC 327 -Employment of professional persons

(e) The trustee, with the courts approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if in the best interest of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed.


Thus there appears to be no direct violation of the statute as the trustee is not retaining the attorney to represent him in conducting the case. The trustee is retaining the attorney for a specific special purpose: "to investigate and determine the feasibility of the Trustee recovering potential claims and/or causes of actions relating to preferential and/or fraudulent transfers."

However, this appears to be a clear conflict of interest and breach of the attorney's fiduciary responsibility to you. You will want to object to the appointment of the attorney on this basis. You can also consider filing a bar association complaint against the attorney with the Florida Bar.


I hope that the information which I provided was helpful to you.

Best wishes for a successful outcome. If you have additional questions, please do not hesitate to submit them to me directly.

Thank you,
FLAandNYLAWYER


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THIS IS FOR INFORMATION ONLY. NO ATTORNEY-CLIENT RELATIONSHIP EXISTS. PLEASE CONSULT A LAWYER IN YOUR STATE FOR LEGAL ADVICE