THE ETHICS OF REPRESENTING DEBTORS AND CREDITORS IN BANKRUPTCY

among related estates); In re EZ Links Golf, LLC, 317 B.R. 858 (Bankr. D. Colo. 2004) (declaration that firm would not sue creditor raises inferences that potential claims against creditor have not been raised); In re Premier Farms, L.C., 305 B.R. 717 (Bankr. N.D. Iowa 2003) (bank was one of most significant creditors); In re Granite Partners, L.P., 219 B.R. 22 (Bankr. S.D.N.Y. 1998); In re Envirodyne Industries, Inc., 150 B.R. 1008 (Bankr. N.D. Ill. 1993); In re American Printers & Lithographers, Inc., 148 B.R. 862 (Bankr. N.D. Ill. 1992); In re Amdura, 121 B.R. 862 (Bankr. D. Colo. 1990) and 139 B.R. 963 (Bankr. D. Colo. 1992)(creditor may play such a key role in the case, and represent such an important part of the law firm's fees, that even having separate counsel for the creditor in the bankruptcy case would be an inadequate solution to the conflict); Matter of Status Game Corp., 102 B.R. 19 (Bankr. D. Conn. 1989) (law firm that represented undersecured creditor holding substantial claim was disqualified as counsel for debtor, even though representation of creditor was on matters unrelated to case); but see In re Marvel Entertainment Group, Inc., 140 F.3d 463 (3d Cir. 1998)(representation on minor, unrelated matter not disqualifying); In re Dynamark, Ltd., 137 B.R. 380 (Bankr. S.D. Cal. 1992)(DIP counsel's firm vigorously represented DIP while representing major secured creditor on unrelated matters); see In re W.T. Grant Co., 699 F.2d 599, 613 (2d Cir. 1983)(5 days of representing creditors de minimus, and does not require disqualification of trustee's counsel); In re Fondiller, 15 B.R. 890, 892 (9th Cir. BAP 1981) (pre1984 version of § 327(c), court finds conflict if general counsel for DIP and creditors on unrelated matters, but permissible if special counsel for DIP).

²⁰⁰One county bar ethics committee has opined that an attorney can never ethically represent a debtor when one of that debtor's creditors is a firm client, even when the attorney has not and will not represent the creditor in connection with that debt. Suffolk, New York Bar Ethics Opinion 91-1. The Arizona Supreme Court has ruled that Code § 327(c) does not release an attorney from state law ethical requirements, and sanctioned an attorney for, inter alia, filing a bankruptcy case for one client adverse to a former client creditor, Matter of Breen, 171 Ariz. 250, 830 P.2d 462 (1992), and held that a creditor client's consent to representation of a debtor client must be freely given, without pressure by the attorney. Matter of Neville, 147 Ariz. 106, 708 P.2d 1297 (1985). But see In re Peck, 112 B.R. 485 (Bankr. D.Conn. 1990) (court refused to disqualify DIP counsel due to prior representation of a creditor in connection with documenting a loan to the debtor, where the integrity and validity of the loan documents were not being challenged, although a preference claim might be aserted for payments on the loan).

²⁰¹ 11 U.S.C. § 101(13)(A).

²⁰² 11 U.S.C. § 101(30). An insider also includes the law firm in which a debtor lawyer is a partner. In re McGinty, 119 B.R. 289 (Bankr. M.D. Fla. 1990).

²⁰³ Matter of Federated Department Stores, Inc., 20 B.C.D. 973 (Bankr. S.D. Ohio 1989)(investment banker owned $104,000 debt securities and 20,343 equity securities, deemed minimal in light of its $16.3 billion securities portfolio; per internal policies, banker precluded from continuing to buy or sell debtor's securities for its own account); In re O'Connor, 52 B.R. 892 (Bankr. W.D. Okla. 1985) (firm members owned less than 1,000 shares of 12,969,626 outstanding DIP stock). See also In re Microdisk, Inc., 33