2006 NORTON BANKRUPTCY LAW SEMINAR MATERIALS
THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY
By Susan M. Freeman
*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
duties to their constituents.361 A member should be disqualified, however, upon evidence that it has breached or is likely to breach fiduciary duties through litigation that would have a substantial negative impact on the prospects of a distribution to unsecured creditors.362 One Court has held that an appearance of a breach of fiduciary duty should likewise mandate disqualification, and further that as a matter of public policy, former officers and directors should not serve on committees because their actions as fiduciaries will be analyzed by the committee.363 Courts were divided with respect to the bankruptcy court's power to review the U.S. Trustee's decisions on committee membership, but the 2005 amendments to the Bankruptcy Code expressly authorize the bankruptcy court to order changes to committee membership.364
4. Even if the creditor's conflicts with other committee members are insufficient to disqualify her, she may be excluded from some discussions.365 If proposed committee action affects a member, she should disclose her interest and abstain from voting.
D. Committee Counsel's Fiduciary Duties.
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Professionals for a committee are bound by the same fiduciary responsibilities as committee members.366 Committee counsel must use due care in the performance of duties assumed, seeing to it that creditors' interests are considered fairly.367 Committee counsel undertakes to represent the interests of the entire class, not just the committee members.368 Committee counsel may pursue litigation against a constituent individual creditor, as long as counsel acquires no confidential information from that creditor nor takes any improper advantage through representation of the committee.369 Committee counsel may in some cases object to a plan even though the majority of the class members voting on the plan voted for it.370
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Committee counsel, like DIP counsel, is to meet its responsibilities in a manner that will not waste estate assets through excessive and inefficient work. For example, efforts should be directed toward facilitating discussion and resolution of plan issues instead of preparing numerous committee draft plans and objections to debtor plans and disclosures.371 When a debtor is aggressive or deleterious, committee counsel may need to file competing plans to negotiate better treatment for committee constituents, however.372 Generally, the committee's
