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require disqualification of counsel under certain circumstances." Here, however, the Court found that the record did not support such a finding. Although A&R had advised the debtors on how to treat the payments received by GCA in exchange for the 85% interest in the gas concessions (which payments were used to pay wages and benefits to the debtors' officers), and although such payments may have been avoidable in the debtors' bankruptcy, the Court found no evidence that A&R's advice on the treatment of these claims was clouded. Said the Court: "Instead, the record shows that A&R counseled against disputing these claims because, in its judgment, the potential benefit to the estate was outweighed by the expense of litigating the claims. Although obviously not ideal or best practice, A&R's previous relationship to the debtors is also insufficient to constitute a disqualifying interest." Despite the findings of no adverse interest, the Court nonetheless found that A&R had negligently (not intentionally) failed to adequately disclose the extent of its connections with the debtors and GCA. Accordingly, the court sanctioned A&R in the amount of $135,000 (20% of the total fees awarded) for this failure.
iii. In re Copenhaver, Inc., 506 B.R. 757, (Bankr. C.D. Ill. 2014).
Issue: Corporate Chapter 11 debtor applied for order approving its employment of its former president, who was also current director, as consultant and chief restructuring officer.
Holding: Court could not approve Chapter 11 debtor's employment of its former president as consultant and chief restructuring officer pursuant to statute which, when valid business justification existed, allowed for use of estate property that was in furtherance of operating debtor's business but out of ordinary course of business absent former president's acknowledgment that his fees were subject to court oversight and requirement that final fee application be filed and reviewed for reasonableness. Former president's voluntary promise to file periodic fee reports was insufficient to support approval of his employment.
iv. In re R.L. Adkins Corp., 505 B.R. 770 (Bankr. N.D. Tx. 2014).
Issue: Whether proponent of Chapter 11 plan that was ultimately confirmed by the court, which also was the purchaser of debtor's mineral assets, was entitled to approval of application requesting that its counsel be awarded a "substantial contribution" administrative expense claim of $575,519.47.
Holding: Factors generally considered in determining whether an applicant has made a substantial contribution include whether: (1) the services involved in the contribution provided a benefit to the estate, (2) the services were undertaken just for applicant alone or for the benefit of all parties in the case, (3) applicant would have undertaken the same approach absent the expectation of compensation from the bankruptcy estate, (4) the benefit conferred through applicant's contribution exceeds the cost which applicant seeks to assess against the estate, (5) the efforts of applicant were duplicative of efforts undertaken by statutory fiduciaries, (6)
©2014 William L. Norton III
