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*This outline is adapted from Chapter 27, Ethical Responsibilities,
Norton Bankruptcy Law & Practice 2d (Thomson-West 2005)
remanded, 133 B.R. 561 (9th Cir. BAP 1991)(attorney failed to act properly upon deadlock of corporation's two shareholders).
121Model Rule 1.13.
122In re Perez, 30 F.3d 1209, 1219 (9th Cir. 1994); In re Berg, 268 B.R. 250 (Bankr. D. Mont. 2001); In re Start the Engines, Inc., 219 B.R. 264 (Bankr. C.D. Cal. 1998). In the terminology of the Model Rules, if a client is insistent on an action that "is clearly a violation of law and is likely to result in substantial injury to the organization," the lawyer may withdraw. Model Rule 1.13; see also Model Rule 1.16; but see In re SIDCO, Inc., 173 B.R. 194 (E.D. Cal. 1994)(DIP attorney's fiduciary duty is to DIP client, not creditors and shareholders whose interests may be adverse to DIP).
123In re JLM, Inc., 210 B.R. 19 (2d Cir. BAP 1997); In re North Star Management, LP, 305 B.R. 312 (Bankr. D.N.D. 2003) (act affirmatively to investigate and halt misappropriation of funds, and report to court or U.S. Trustee), rev'd, 308 B.R. 906 (8th Cir. BAP 2004) (professional took appropriate steps but was undermined by wrongdoer); In re Hampton Hotel Investors, L.P., 289 B.R. 563 (Bankr. S.D.N.Y. 2003); In re Brennan, 187 B.R. 135 (Bankr. D.N.J. 1995)(in serious cases such as conversion of estate property, the professionals will sometimes be obligated to report the debtor's breach to others); In re Rivers, 167 B.R. 288 (Bankr. N.D. Ga. 1994)(highest allegiance of DIP counsel is to estate and court, not client); In re Swansea Consolidated Resources, Inc., 155 B.R. 28 (Bankr. D. R.I. 1993); In re United Utensils Corp., 141 B.R. 306 (Bankr. W.D. Pa. 1992); In re Wilde Horse Enterprises, Inc., 136 B.R. 830 (Bankr. C.D. Cal. 1991); In re Saturley, 131 B.R. 509 (Bankr. D.Me. 1991); In re Granite Sheet Metal Works, Inc., 159 B.R. 840 (Bankr. S.D. Ill. 1993); Model Rule 1.6 Comment; ABA Formal Opinion 92366 (August 8, 1992)(duty of "noisy withdrawal" from representation).
124Model Rules 1.2, 1.13, 2.1, 3.1.
125In re The Phoenix Group Corp., 305 B.R. 447 (Bankr. N.D. Tex. 2003) (attorney properly refused to file documents requested by client that would violate client's and lawyer's ethical duties), see In re Universal Factoring Co., Inc., 329 B.R. 62 (Bankr. N.D. Okla. 2005) (attorney obliged to take direction from Trustee client, not act to file plan perceived to be in interest of debtor at debtor's officer's request).
126See, e.g., In re Humble Place Joint Venture, 936 F.2d 814 (5th Cir. 1991); In re Gregory, 214 B.R. 570 (S.D. Tex. 1997); In re Mercury, 280 B.R. 35 (Bankr. S.D.N.Y. 2002); In re Berg, 268 B.R. 250 (Bankr. D. Mont. 2001); In re Rancourt, 207 B.R. 338 (Bankr. D.N.H. 1997); In re Bonneville Pacific Corp., 147 B.R. 803 (Bankr. D. Utah 1992) rev'd in part Hansen, Jones & Leta v. Segal, 220 B.R. 434 (D. Utah 1998); In re Diamond Mortgage Corp. of Illinois, 135 B.R. 78 (Bankr. N.D. Ill. 1990); In re Wilde Horse Enterprises, Inc., 136 B.R. 830 (Bankr. C.D. Cal. 1991); In re Thompson, 54 B.R. 311, 318 (Bankr.
N.D. Ohio 1985). In Kendavis, over $2 million was required to be repaid. 91 B.R. at 746, 762. See section III I, and section IIB. 127220 B.R. 434 (D. Utah 1998).
128 In re Water's Edge Ltd. Partnership, 251 B.R. 250 (Bankr. D. Mass. 2000); ICM Notes, Ltd. v. Andrews & Kurth, L.L.P., 278 B.R. 117 (S.D.Tex. 2002), aff'd. 2003 WL 956231 (5th Cir. 2003) (DIP counsel does not owe fiduciary duties to any individual creditor, and is not subject to a creditor cause of action for breach of fiduciary duty).
129See Michel v. Eagle-Picher Industries,Inc. (In re Eagle-Picher Industries, Inc.), 999 F.2d 969 (6th Cir. 1993)(§ 1107(b) exception narrow); In re Martin, 817 F.2d 175 (1st Cir. 1987); But see In re Howard Smith, Inc., 207 B.R. 236 (Bankr. W.D. Okl. 1997)(§ 1107(b) exception allows employment of creditor accountant without waiver of de minimus claim); Matter of Federated Department Stores, Inc., 20 B.C.D. 973 (Bankr. S.D. Ohio 1989) (court appointed investment banker for debtor despite failure to meet strict disinterestedness standards, holding DIP has more leeway to do so than trustee, and debtor has compelling need for professional with its qualifications; most if not all comparably qualified investment bankers have
