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*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
E.D. Cal. 1989)(counsel for trustee wrongfully carrying out "scorched earth attrition" policy in Chapter 7 case; sanctions awarded even though each document objectively reasonable and not frivolous); In re Bonneville Pacific Corp., 147 B.R. 803 (Bankr. D. Utah 1992), rev'd. in part Hansen, Jones & Leta P.C. v. Segal, 220 B.R. 434 (D. Utah 1998) (all fees disgorged for dereliction in duty to estate in order to protect principals); In re Rusty Jones, Inc., 134 B.R. 321 (Bankr. N.D. Ill. 1991). See n. 62.
110In re Humble Place Joint Venture, 936 F.2d 814 (5th Cir. 1991); In re Kendavis Industries International, Inc., 91 B.R. 742 (Bankr. N.D. Tex. 1988); In re Downtown Investment Club III, 89 B.R. 59 (9th Cir. B.A.P. 1988); In re Global International Airways Corp., 82 B.R. 520 (Bankr. W.D. Mo. 1988); In re Golden Recipe Chicken, Inc., 109 B.R. 692 (Bankr. W.D. Pa. 1990)(DIP's counsel, using estate assets, secured release of shareholder's personal liability); In re Rusty Jones, Inc., 134 B.R. 321 (Bankr. N.D. Ill. 1991); In re Bonneville Pacific Corp., 147 B.R. 803 (Bankr. D. Utah 1992) rev'd. in part Hansen, Jones & Leta P.C. v. Segal, 220 B.R. 434 (D. Utah 1998).
111A DIP's attorney or other agent also may not purchase or self-deal in estate assets, even at a fair price. 18 U.S.C. § 154; In re Lowry Graphics, Inc., 86 B.R. 74 (Bankr. S.D. Tex. 1988); In re Q.P.S., Inc., 99 B.R. 843 (Bankr. W.D. Tenn. 1989)(DIP's accountant prohibited from buying estate car); In re Exennium, 23 B.R. 782 (9th Cir. BAP 1982), rev'd. on other grounds 715 F.2d 1401 (9th Cir. 1993)(former DIP counsel barred from purchasing lease from trustee after conversion). See n. 81.
112In re JLM, Inc., 210 B.R. 19 (2d Cir. BAP 1997)(explaining findings needed to justify fee denial on basis that services were not reasonably likely to benefit estate); In re Hampton Hotel Investors, L.P., 289
B.R. 563 (Bankr. S.D.N.Y. 2003) (Chapter 7 trustee suit against former DIP counsel for breach of fiduciary duties and aiding and abetting DIP officers' breach of fiduciary duties by not "blowing the whistle" on their improper secret agreements and misconduct); In re Rancourt, 207 B.R. 338 (Bankr. D.N.H. 1997); In re Cent. Florida Metal Fabrication, Inc., 207 B.R. 742 (Bankr. N.D. Fla. 1997); In re Wilde Horse Enterprises, Inc., 136 B.R. 830 (Bankr. C.D. Cal. 1991); In re Granite Sheet Metal Works, Inc., 159 B.R. 840 (Bankr. S.D. Ill. 1993) ; See In re Seeburg Products Corp., 215 B.R. 175 (Bankr. N.D. Ill. 1997)(attorney incompetently handled questionable chapter 11 case).
113In re Big Rivers Elec. Corp., 233 B.R. 768 (Bankr. W.D. Ky. 1999) 114See cases cited at notes 60-63. 115See cases cited at note 64. 116 See In re Perez, 30 F.3d 1209 (9th Cir. 1209); In re Luarks, 301 B.R. 352 (Bankr. D. Kan. 2003). 117In re JLM, Inc., 210 B.R. 19 (2d Cir. BAP 1997); In re Rancourt, 207 B.R. 338 (Bankr. D.N.H.
1997)(decision on abandonment versus remediation of contaminated property should have prompted disclosure of diverging interests).
118CFTC v. Weintraub, 471 U.S. 343, 355, 105 S. Ct. 1986, 1994 (1985); Pepper v. Litton, 308 U.S. 295, 306 (1939); In re Perez, 30 F.3d 1209 (9th Cir. 1994); Hansen, Jones & Leta P.C. v. Segal, 220 B.R. 434 (D. Utah 1998); In re Brennan, 187 B.R. 135 (Bankr. D.N.J. 1995); In re Silver Oak Homes, Ltd., 167
B.R. 389 (Bankr. D. Md. 1994); In re Sky Valley, Inc., 135 B.R. 925 (Bankr. N.D. Ga. 1992); In re Wilde Horse Enterprises, Inc., 136 B.R. 830 (Bankr. C.D. Cal. 1991); In re Consupak, Inc., 87 B.R. 529 (Bankr.
N.D. Ill. 1988); In re Plaza Hotel Corp., 111 B.R. 882 (Bankr. E.D. Cal. 1990). See n. 27 re obligation to be proactive and provide unsolicited advice.
119In re Brennan, 187 B.R. 135 (Bankr. D.N.J. 1995); In re Whitney Place Partners, 123 B.R. 117 (Bankr. N.D. Ga. 1992); See also Model Rule 2.1 ("In representing a client, a lawyer shall exercise independent professional judgment and render candid advice."); Model Rule 1.2(e)(When a lawyer knows that a client expects assistance not permitted by the Rules of Professional Conduct or other law, the lawyer shall consult with the client regarding the relevant limitations on the lawyer's conduct.").
120Model Rule 1.13; See In re McNar, Inc., 116 B.R. 746 (Bankr. S.D. Cal. 1990), affirmed and
