THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

C. Fiduciary Duties of Creditors' Committee Members.

1. Committees have fiduciary duties to the constituent creditors or equity they represent, with obligations of fidelity, undivided loyalty, and impartial service in the interests of all their constituents.³⁵² They are not fiduciaries for the debtor or the bankruptcy estate in general.³⁵³ Committees do not owe duties to particular creditors, and may take action adverse to certain creditors.³⁵⁴
2. In the event of a conflict between a committee member's own interests and the interests of its constituent group, most courts have held that the creditors' committee member's obligation to all creditors need not take priority over its own claim, as long as the member is not taking advantage of inside information learned as a committee member or violating court orders.³⁵⁵ Committee members do not enjoy absolute immunity for their actions, and may be liable for actions outside the scope of committee authority, or for willful misconduct, which may include actions taken without honest care to be accurate.³⁵⁶ Some courts may allow committee members to trade in the debtor's securities while serving on the committee, but only upon a detached factual record of the specific factual circumstances surrounding the request, including with respect to screening confidential information.³⁵⁷ A committee member seeking to deal with nonestate property that could impact positively or negatively the creditors' recovery should notify the committee and declare to proceed unless disinterested committee members approve the transaction.³⁵⁸ A committee member's counsel cannot represent another client with interests adverse to the constituents of the committee.³⁵⁹
3. Committee members must be able to comply with their fiduciary duties, or they will be disqualified; the committee may be reconstituted if the members cannot meet their obligations to their constituents as the case develops.³⁶⁰ Several courts have allowed creditors with conflicting interests to serve on committees, however, if the conflict was speculative and there was no specific evidence they had not breached or were likely to breach their fiduciary